Canada’s Ivey PMI Index Rises

08 August 2012 05:30am - Florence Fullalove

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Canada’s Ivey PMI Index Rises

According to the Ivey Purchasing Managers Index, the measure of purchasing activity in Canada’s economy rose last month to its highest level since March.  The data, released yesterday, showed the seasonally adjusted index grew to 62.8 in July, a massive leap from 49.0 in June. The figure was well above many expectations as economists had forecasted a reading of just 53.0, and was also considerably above the 50 mark that separates contraction from expansion.  The Canadian Ivey PMI is based on end of the month data and covers the complete Canadian economy, including both the private and public sectors.

While this figure suggests business activity in Canada picked up in July, the Employment Index fell to 54.3 from 59.3, suggesting a slowdown in labor market growth. However, the inventory index rose to 55.0 from 53.9. Furthermore, thanks to expansions in Canada’s manufacturing and export industries due to a strengthening American economy, the price index reached 64.8 from 42.9. Price pressures also saw an increase as a result of the continuing strength of the Canadian dollar.

Despite lots of positive results the data failed to ignite market reaction as economists and strategists suggested that Canada’s growth picture is still susceptible to a fragile US economic recovery as well as Europe’s debt situation.  The Ivey PMI also showed that as well as employment falling slightly, supplier deliveries fell to 50.3 in July from 51.1 in June. Peter Buchanan, senior economist at CIBC World Markets said, “We do think Canada is facing some growth headwinds here. The saying is one swallow does not make a spring. I think I would want to see a few more data points on this.”

Last week’s RBC Canadian Manufacturing Purchasing Index showed manufacturing slowed significantly in July as worsening global economic conditions cooled activity and this has been a cause for concern. The RBC PMI, which focuses on the manufacturing index, fell from 54.8 in June to 53.1 in July. This figure is below the historical average of 54.2 and is the lowest level on record since March. The RBC report came after government data showed that Canada’s economy grew to a less than expected 0.1% in May from April, mainly because of a weakness in the manufacturing sector. Recent data releases could cause the Bank of Canada to remain on the sidelines in terms of raising interest rates until 2013 at the earliest as uncertainty remains as to the state of economic growth.

 

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