Reports point to slowing economy

Thu Nov 6, 2008 1:44pm EST
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By Ka Yan Ng

TORONTO (Reuters) - Details in a pair of reports on Thursday suggest the Canadian economy is softening, with purchasing activity increasing at a more moderate pace, while a surprise jump in building permits was due mostly to the volatile non-residential sector.

The reports are not seen as major indicators, and so reaction by the Canadian dollar and bond markets were muted, particularly ahead of Friday's employment report.

But the numbers point to two sectors that have been key pillars of the Canadian economy during its expansion.

The value of building permits jumped unexpectedly in September, rising 13.4 percent and defying expectations of a 1 percent decline.

"Tighter credit conditions point to an increasingly conservative operating environment for the construction sector, which was reflected in the forecast for a continued contraction in building permits," said Stewart Hall, an economist at HSBC Securities.

"As such, the significant rise in building permits seems out of context with the prevailing economic environment."

The underlying details show that record institutional permits, mostly because of planned medical and educational buildings, are propping up the building activity.

Meanwhile, the data showed weakness in the residential building sector for a second straight month.   Continued...