OTTAWA (Reuters) - The Canadian economic recovery remains on track as purchasing activity jumped more than expected in March and building intentions were near a 2007 peak despite cooling slightly in February, according to reports on Wednesday.
Statistics Canada said the overall value of building permits slid 0.5 percent in February versus market expectations of a 2 percent gain, due to a sharp decline in construction plans for apartment buildings.
But analysts were not perturbed by the 7.5 percent decline in the value of residential permits, saying that supply in the housing market remains strong despite an expected surge in demand in the spring ahead of widely forecast interest rate increases later in the year.
“For the broader economy, the permits data while having softened over the last four months and suggesting some cooling in the appetite for the new build sector, does not alter the overall profile of the Canadian economy, which continues to reflect a better than anticipated economic recovery,” said Stewart Hall, markets strategist at HSBC Canada.
Building permits were up 56.7 percent from a year earlier, when their value hit a record low, and hovered near the 2007 peak.
Building permits for single-family dwellings rose 3 percent to a record high. But multifamily units tumbled 28 percent.
The nonresidential sector climbed 16 percent, buoyed by commercial building intentions, which jumped 27 percent on plans for hotels and office buildings. Approvals of industrial buildings advanced 2.1 percent while those for institutional buildings fell 0.4 percent.
Following the housing data, the Canadian dollar retreated slightly from near a 21-month high against the greenback to C$1.0037 to the U.S. dollar, or 99.63 U.S. cents, from about 99.72 U.S. cents before the release.
The Canadian dollar’s rise past parity with the U.S. dollar on Tuesday has raised worries that recovery in this export-reliant economy could be thwarted.
Prime Minister Stephen Harper said his government’s main concern was not whether the currency stayed at parity or not, but whether businesses were able to cope with a higher dollar.
“It isn’t the level of the dollar that governments are principally concerned with, it is our competitiveness,” Harper told reporters in a televised news conference.
Bank of Canada Governor Mark Carney was monitoring the currency, Harper said. “The governor himself has said that he is concerned that if the Canadian dollar rises too quickly and too strongly, that can mitigate against Canada’s recovery.”
Harper also said there were some encouraging signs of job creation, saying there has been a net creation of almost 160,000 positions in the last six months.
Also on Wednesday, the Ivey Purchasing Managers Index rose to 57.8 in March from 51.9 in February, beating the average forecast of 55.0.
A reading of above 50.0 indicates an increase in activity.
The Ivey employment index jumped to 51.6 in March from 41.3 in February, while the inventory subcomponent rose to 55.2 from 47.9. The supplier deliveries index was at 44.3, down from 45.1, and the prices index at 61.5 from 55.9.
The Ivey index is based on figures from 175 members of the association. It is roughly equivalent to the U.S. Institute of Supply Management indexes, but is not seasonally adjusted.
Additional reporting by Jeffrey Hodgson; editing by Rob Wilson