Latest Canada economic data weak but not dire

Thu Mar 5, 2009 4:48pm EST
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By Ka Yan Ng

TORONTO (Reuters) - Purchasing activity in the Canadian economy contracted at a slower pace in February for the first time in five months, while the number of building permits taken out in January fell for a fourth straight month but not as much as expected, reports showed on Thursday.

Meanwhile, the Bank of Canada repeated its forecast for a sharp economic recovery in the second half of the year, but said more bad news would come before then.

Purchasing activity contracted in February at a slower pace than in the three previous months for the first time since September, when the financial crisis started to pick up steam, according to the Ivey Purchasing Managers Index.

The index, which reflects purchases in the manufacturing and services sectors, stood at 45.2 in February, well ahead of market expectations of 38, and up from 36.1 in January.

A reading of 50 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 employment, prices, supplier deliveries and inventories subindexes were all below 50 last month.

"This does not represent a major turn in Canada's economic fortunes," Millan Mulraine, economics strategist at TD Securities, cautioned in a research note.

The value of Canadian building permits fell 4.6 percent in January from December, slightly ahead of the 5 percent decline expected by analysts polled by Reuters.   Continued...