January 7, 2013 / 3:13 PM / in 5 years

Canada's Ivey PMI rises in December, but worries persist

TORONTO (Reuters) - Purchasing activity in Canada rose modestly in December, according to Ivey Purchasing Managers Index data released on Monday, but the reading failed to impress economists as Canada’s economy struggles to grow.

The seasonally adjusted index rose to 52.8 in December from 47.5 in November. Analysts polled by Reuters had expected a reading of 49.5.

That was a modest uptick to close out the fourth quarter, but coupled with falls in Ivey’s employment, inventories and prices data, painted a less than rosy economic picture.

“Overall, if you look at the sub-indices, the results are not that impressive, especially the employment number, which went below 50 for the first time in seven months,” said Krishen Rangasamy, a senior economist at National Bank Financial in Montreal.

The Ivey employment index fell to 49.2, its lowest reading since May last year, from 55.1 in the previous month.

A reading below 50 on the index data indicates that the pace of activity fell from the previous month.

Statistics Canada surprised investors last week with a robust jobs report for December that was at odds with other figures pointing to sluggish growth.

The seasonally unadjusted Ivey PMI index dropped to 43.1 from 46.4, marking its lowest point since January 2011.

The weakness was in line with the RBC Canadian Manufacturing PMI report, which last week showed Canadian manufacturing growth stuck at a two-year low.

The composite leading indicator for Canada rose 0.1 percent in November, slowing from October on a housing market downturn and weak manufacturing as the economy hits a soft patch.

Statscan said on December 21 that the economy grew just 0.1 percent in October. The Bank of Canada’s latest forecast said fourth-quarter growth would be 2.5 percent annualized, although that estimate now looks very optimistic.

National’s Rangasamy said GDP would likely not reach 2 percent in the fourth quarter. “The signals are that growth was pretty slow,” he said.

Reporting by Alastair Sharp; Editing by James Dalgleish and Maureen Bavdek

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