October 6, 2011 / 2:18 PM / 6 years ago

Purchasing activity slows, still positive

OTTAWA (Reuters) - Growth in purchasing activity in Canada slowed modestly in September but remained positive, adding to evidence that the economy is still expanding after shrinking in the second quarter.

The Ivey Purchasing Managers Index slipped to 55.7 in the month on a seasonally adjusted basis from 56.4 in August, a report showed on Thursday. This was still above market expectations of 54.

A reading of 50 indicates that activity remained flat from the preceding month, while a higher reading indicates an increase and a lower reading reflects a slowing or decrease.

The unadjusted Ivey index was 63.4 in September.

“Although the Ivey PMI tends to be quite volatile and has only a mild correlation with GDP figures in Canada, the data are nonetheless encouraging as they point to a positive business outlook,” said Emanuella Enenajor, analyst with CIBC World Markets.

After contracting in the second quarter, the Canadian economy is expected to show growth in the second half of the year, but only at a muted pace as the weak U.S. economy and European sovereign debt crisis take their toll.

The uncertainty was reflected in the Ivey employment index, which fell to 47.2, dipping below the 50-point mark for the first time since mid-2010.

“The speed of the deterioration in the employment index the past two months (-8.6 points) is the second worst two-month span in the history of the survey,” noted Jonathan Basile, director of economics at Credit Suisse Securities.

Statistics Canada will release September employment data on Friday at 7 a.m. EDT. The economy is seen adding just 10,000 jobs in the month following an unexpected job loss in August.

Meanwhile, for the earlier month of August, the Conference Board of Canada said its help-wanted index had declined to 121.2 from a record 127.3 in July.

Pointing out that the index is still 21 points higher than December, the board said: “Despite the August decline, the numbers suggest moderate employment gains are still possible in the short term.”

Reporting by Louise Egan and Randall Palmer; Editing by Jeffrey Hodgson

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