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WRAPUP 1-Canadian economic data flashes mixed signals
May 5, 2011 / 5:25 PM / 6 years ago

WRAPUP 1-Canadian economic data flashes mixed signals

* Building permit value soars 17.2 pct in March

* Permits issued for multifamily dwellings double

* Residential permits hit highest level in 12 months

* Ivey seasonally adjusted index at 57.8, down from 73.2

By Solarina Ho

TORONTO, May 5 (Reuters) - Canadian economic data flashed mixed signals on Thursday as the value of Canadian building permits issued in March soared past expectations, but purchasing activity in April fell short of forecasts.

Building permit value jumped 17.2 percent from February to the highest level in almost four years as permits issued for multifamily dwellings, mainly condominiums, more than doubled, Statistics Canada said. [ID:nN0796933]

Analysts in a Reuters poll had predicted a 4.0 percent slide in March following February’s surprise 9.8 percent jump.

“While the headline is a positive, the details are more mixed, suggesting that these gains may not continue into April,” said Derek Holt, vice president of economics at Scotia Capital, in a research note.

Residential permits soared 33.9 percent as municipalities approved C$1.9 billion ($2.0 billion) in permits for condominiums and apartments after two straight months of declines. Permits issued for single-family homes rose 2.5 percent.

The residential permit gain suggested there could be a rise in April housing starts data to be released on Monday, Holt said.

“Given that almost all of the growth in the residential sector was in the multiples component, this could be a last effort by consumers to get in before the tighter mortgage regulations come into effect, suggesting that the gain may be temporary,” he said.

There was a 0.4 percent slide from February in nonresidential sector as fewer permits were issued for industrial and commercial buildings, offsetting record high permits for institutional buildings.

Compared with a year earlier, total building permits were up 9.7 percent, with residential permits down 1.4 percent and nonresidential permits up 30.3 percent.

Analysts said the data could herald a rise in employment in the construction sector, which could give Friday’s April employment report a lift.

IVEY DROPS SHARPLY

Less bullish for the economy, the Ivey Purchasing Managers Index -- which measures purchasing activity in the Canadian economy -- fell to 57.8 in April on a seasonally adjusted basis from 73.2 in March, a record high for the month. The unadjusted index was 57.7, down from 73.2.

Analysts largely expected a decline following supply constraints from Japan after the devastating earthquake and tsunami in March, but the figures still came in much lower than the forecast unadjusted reading of 65 and the forecast 65.5 seasonally adjusted reading.

“Ivey PMI collapsed from March’s reading ... And while this frustrated street forecasts looking for a more moderate decline ... it is nonetheless in keeping with the seasonal norms for the number set,” HSBC market strategist Stewart Hall said in a research note.

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 index, a joint project of the Purchasing Management Association of Canada and the Richard Ivey School of Business, also showed that the employment index dropped to 55 from 58 in March. A Reuters survey of analysts has forecast that April’s unemployment rate, to be released on Friday, remained unchanged.

“There is a tendency for foreign participants in the Canadian market space to attach a level of gravitas to the Ivey that is unwarranted by the narrow nature of the survey,” Hall said.

“From a practical standpoint, the Ivey index has not provided a lot of good guidance in terms of economic performance.”

$1=$0.97 Canadian Reporting by Howaida Sorour, Louise Egan and Solarina Ho; editing by Peter Galloway

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