Canada purchasing, building plans soar unexpectedly

Tue Jul 7, 2009 12:26pm EDT
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By Louise Egan

OTTAWA (Reuters) - Canadian purchasing activity and building intentions leapt back to life in June and May, respectively, soaring past expectations and suggesting the pace of economic contraction is slowing.

However, bankruptcies by companies and individuals jumped 31 percent in May from a year earlier, though they were down nearly 10 percent from the previous month, according to official statistics.

The Ivey Purchasing Managers Index rose to 58.2 in June from 48.4 in May, while markets had expected a rise to just 50.3. 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.

June and April have been the only months since last November in which the index was above the 50 mark.

The strongest components of the index in June were supplier deliveries, at 51.9 from 42.5 in May and prices at 60.4 from 54.4. Employment was unchanged at 50 and inventories were lower at 43 from 44.7.

Millan Mulraine, economics strategist at TD Securities emphasized that on a seasonally adjusted basis, the Ivey index remained below the 50 threshold.

"It suggests the Canadian economy is continuing to contract, even though at a diminishing pace," he said.

A separate report by Statistics Canada pointed to a possible increase in housing starts in coming months. The value of permits obtained by builders jumped 14.8 percent in May from April on a comeback in both the housing and nonresidential sectors. Analysts had forecast an increase of 0.7 percent.   Continued...

<p>Buildings are shrouded in fog in the financial district of Toronto April 3, 2009. REUTERS/Jumana El Heloueh</p>