* PMI at 52.7 in April vs 63.5 in March
* Weaker than market expectation of 61
* Hits weakest level since July 2011
* Analysts question influence, track record of data
By Jennifer Kwan
TORONTO, May 4 The pace of purchasing activity
in the Canadian economy w eakened in April from March by more
than expectations, suggesting the second quarter may have gotten
off to a soggy start, according to Ive y Purchasing Managers
Index data released on Friday.
The data showed the seasonally adjusted index fell to 52.7
in April from 63.5 in March. Analysts polled by Reuters had
forecast a reading of 61. The unadjusted index slipped to 52.2
from 65 a month earlier.
Any reading above 50 on the PMI index indicates that
activity increased from the preceding month. The latest
seasonally adjusted number was still the weakest reading since
But analysts were divided on whether the one indictor points
to broader weakness for April and the second quarter. A separate
manufacturing PMI report released May 1 had showed the pace of
growth in that sector advanced at its strongest rate of the year
Mazen Issa, macro strategist at TD Securities, said despite
the April slip he still expects growth to pick up following a
sluggish start to the year.
"The rise in the inventory component speaks to the theme of
ongoing build-up of inventories and will be growth positive,"
Issa said in a note.
Avery Shenfeld, chief economist at CIBC World Markets,
characterized the reading as a "big drop in a typically
not-too-useful purchasing managers report".
"The index isn't constructed like a typical PMI, in that it
combines goods, services and government purchasers into a single
measure, which is based only on whether their purchases were up
or down relative to the prior month," said Shenfeld.
"We've seen similar dips in the past two years with no
relationship to GDP."
Analysts have fretted about Canada's growth outlook after
data showed the economy unexpectedly shrank in February,
disappointing markets and cooling talk that the Bank of Canada
could start raising interest rates in the near future.
The central bank warned last month that higher interest
rates may be necessary to deal with a recovering economy and
firmer underlying inflation.