Building permits sag, purchasing contracts

Thu Dec 4, 2008 12:37pm EST
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By Ka Yan Ng

TORONTO (Reuters) - Purchasing activity in Canada contracted to its lowest level ever last month, while building permits fell sharply in October, two reports showed on Thursday, providing the first strong indications of a slower fourth-quarter economy.

The Ivey Purchasing Managers Index fell to 40.2 in November from 52.2 in October, and marked the first time activity had contracted since December 2007. Analysts surveyed by Reuters had expected a reading of 50.5.

It was also the lowest reading since the data series began in December 2000.

"History suggests that the November Ivey comes in around 58.0. The fact that it has broken free of its seasonal patterns suggest that, indeed, something untoward is working its way into the Canadian economy," said Stewart Hall, an economist at HSBC Securities.

A reading of 50.0 indicates that activity remained flat from the preceding month, while a higher reading indicates an increase and a lower reading reflects a slowing or decrease.

The Ivey employment index showed a contraction for a third straight month, while the prices component fell sharply. Supplier deliveries and inventories are declined.

The Canadian dollar slipped to session lows versus the U.S. dollar following the Ivey report, but reclaimed the losses by midday.

The index is not seasonally adjusted and there is no distinction between manufacturing and services.   Continued...