Upbeat Canada economic figures greeted cautiously

Tue Oct 6, 2009 12:51pm EDT
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By Ka Yan Ng

TORONTO (Reuters) - More evidence emerged on Tuesday that the Canadian economy is pulling out of recession but economists were guarded in their enthusiasm, saying that September jobs figures due out on Friday will offer a better test.

Data showed that business purchasing activity in the economy rose in September and that the value of building permits increased in August.

That helped the Canadian dollar rally to its highest level against the U.S. currency in a year, but most of the currency's thrust came from soaring commodity and equity prices and a decision by Australia's central bank to raise interest rates, which was interpreted as a sign of confidence in economic recovery.

Building permits in August recovered most of the ground lost in July, when the city of Toronto was unable to issue permits because of a strike by its workers.

Statistics Canada said August permits were up 7.2 percent from July, but up by only 0.8 percent if Toronto were excluded. July's decline was revised to 10.0 percent from 11.4 percent.

"The key here is that if not for the end to the latest strike by Toronto's municipal workers that had shut down permit approvals in July, permits would have only risen by 0.8 percent in August," said Derek Holt, economist at Scotia Capital. "That's a far cry from the headline pop that was largely expected, after controlling for prior month revisions."

The value of permits in the residential sector rose by 11.2 percent, including 15.1 percent in single-family dwellings and 2.6 percent in multifamily dwellings. Nonresidential permits rose by 2.2 percent. The figures are seasonally adjusted.

Purchasing by Canadian businesses expanded for a fourth straight month in September, and at a faster pace than had been expected, according to the Ivey Purchasing Managers Index.   Continued...