OTTAWA (Reuters) - Canada’s economic recovery is unfolding slowly but surely, new data showed on Thursday, and the housing market in particular appears headed back to growth levels not seen since before the recession started.
Permits for housing construction in Canada surged 9.4 percent to their highest since September 2008, offsetting a decline in nonresidential permits to drive up overall building permits in the month by 1.6 percent, Statistics Canada said.
The upbeat report came as the federal government housing agency, CMHC, forecast a 26 percent rise in housing starts next year in Toronto, Canada’s most populous city. Existing home sales, however, are expected to dip.
Housing has been a rare bright spot in the Canadian economy, helped by record low interest rates and a pledge by the Bank of Canada to keep its benchmark rate at rock-bottom until mid-2010.
In another sign the recovery is under way, the Ivey Purchasing Managers Index fell to 61.2 in October from 61.7 in September. A reading higher than 50 indicates an increase in activity from the preceding month.
“This is the second business survey in as many days ... that suggests the economic recovery is building on itself at the start of the fourth quarter -- and fits with our rising trajectory for Canadian GDP in the second half of this year,” said Credit Suisse economist Jonathan Basile.
But the news was not uniformly positive and the employment index of the Ivey was disappointing.
“Net net, the index tends to suggest that Canada is on the cusp of robust economic recovery.... Reality, as is often the case, is some what less warm and less fuzzy,” said Stewart Hall, markets strategist at HSBC Canada.
The economy has stabilized after a deep recession lasting at least three quarters but is still sputtering. The Bank of Canada and most economists expected growth to return in the third quarter of this year but a 0.1 percent economic contraction in August has cast doubt on that prediction.
Most agree that the jobless rate will remain high throughout 2010 even after growth bounces back.
A survey by Canadian Manufacturers and Exporters (CME) in October, also released on Thursday, showed businesses were more optimistic on the sales outlook. But they were wary of the strong Canadian dollar and difficulties obtaining credit, which could cause high unemployment rates to linger.
“The manufacturing sector has lost more than 200,000 jobs so far this year and still, almost one-quarter (of companies) are still planning to shed jobs in the next three months,” said Jayson Myers, head of the CME.
Statistics Canada will release employment data for October on Friday at 7 a.m. (1200 GMT).
Analysts surveyed by Reuters forecast a net employment gain of 10,000 in the month and expect the jobless rate to rise to 8.5 percent from 8.4 percent in September.
($1 = $1.06 Canadian)
Additional reporting by Ka Yan Ng in Toronto; Editing by Frank McGurty and Kenneth Barry