The monthly Ivey PMI report for Canada is scheduled for release today. Forecasts point to a recovery in the purchasing manager’s index for July, rising to 55.0.
This would mark a recovery from June’s reading where activity hit a four-month low. The index fell to 52.4 in June, down from 55.9 in May. It was the lowest level seen since February this year when PMI touched a low of 50.6.
This was the only second-lowest level since September 2018, when the index fell to 50.4.
The decline in the index came on the back of weaker employment figures amid falling supplier deliveries.
The gauge of the employment index eased to 52.7 from 55.1 in May, while the adjusted supplier deliveries index contracted, falling to 48.9 from 52.4 in May. June’s figures were dismal.
This was the lowest level since February when the employment index was down at 51.8.
Aptly, the labor market indicators for June were weak. Canada’s economy shed 2,200 jobs during the month while the unemployment rate held steady. The data came out ahead of the BoC meeting in early July.
The Bank of Canada is currently on the sidelines as it waits to assess more incoming economic data. So far, preliminary reports showed that the economy is on track to rebound in the second half of the year.
While most of the central banks are shifting to an easing bias, the Bank of Canada is likely to keep interest rates on hold for now.
Canada’s Economic Landscape in July
In the first half, Canada’s economy slowed sharply amid global turbulence.
In June, Canada’s GDP slowed, following an increase of 0.5% and 0.3% respectively in March and April. The advance GDP report showed that Canada’s economy grew by 0.2%. This was slightly better than the expectations of a 0.1% increase.
The global economic conditions were relatively stable for the most part. The US and China resumed trade talks only closer to the end of the month. The impending Fed rate cut is also something that has been positive for the US.
As such, businesses in the Ivey PMI could show some optimism in the data for July.
But with the weakening in China, some of the Canadian firms could also experience a slowdown. This could potentially impact the Ivey PMI data in July. The impact of the US-China trade wars could be limited in scope for the moment.
The energy sector is also something that could impact the readings. The energy sector could also see a slowdown after a rebound earlier this year. With consumer debt rising, the spending could also decrease considerably.
On Friday last week, Markit released the data for Canada’s manufacturing PMI. The data showed that the manufacturing activity slightly picked up pace in July, rising to 52.6 from 49.2 in June.
But manufacturers signaled another decline in production during the reporting month. This came due to a substantial decrease in new orders. The uptick in business optimism offset the declines.
Meanwhile, business outlook and staffing levels picked up for the third month in a row.
Will Ivey PMI Beat Estimates?
The prospects for a beat on estimates are slim. However, looking at the ground conditions, it is possible to see an increase in the purchasing manager’s index from June’s lows.
The question remains whether this increase will be sustainable in the longer-term or not.
For the moment, the impact of the Ivey PMI will be seen in the upcoming economic indicators. This includes the Canadian jobs report due this Friday.