The Ivey Purchasing Managers Index (PMI) in Canada experienced a noticeable decline, easing to 57.6 in July 2024 from 62.5 in the previous month. This downturn fell short of forecasts, which predicted the index to be at 60. Despite this slowdown, the index still marks the 12th consecutive month of solid economic growth.
Key Highlights from July 2024
- Prices Index: The prices index fell to 59.2, its lowest since March 2024, down from June’s 62.3. This decline indicates a reduction in price pressures within the economy.
- Employment Index: On a positive note, the employment gauge rose by 3.2 points from June, reaching 56.1. This increase suggests that businesses are still hiring, albeit at a slower pace than in previous months.
- Inventories Index: The inventories index saw a rise of 2.1 points to 54.8, indicating an accumulation of stock by businesses, possibly in anticipation of future demand.
- Deliveries Index: Conversely, the deliveries index fell by 2.2 points to 46.4, suggesting delays in supplier deliveries, which could be a sign of supply chain disruptions or logistical challenges.
Unadjusted PMI
The unadjusted PMI also showed a decrease, dropping to 55.3 in July from 62.4 in June. This metric provides a raw view of the economic conditions without seasonal adjustments, highlighting a more pronounced slowdown.
Business Confidence
Business confidence in Canada mirrored the PMI’s decline, decreasing to 57.60 points in July from 62.50 points in June 2024. Historically, business confidence in Canada has averaged 56.76 points since 1999, reaching an all-time high of 75.00 points in May 2006 and a record low of 22.80 points in April 2020 during the height of the COVID-19 pandemic.
Forecast and Long-term Predictions
According to Trading Economics global macro models and analysts’ expectations, business confidence in Canada is projected to continue its downward trend, with an expected value of 54.50 points by the end of this quarter. In the long-term, the Canada Ivey Purchasing Managers Index is forecasted to trend around 55.00 points in 2025.
Conclusion
While the Canadian economy continues to show signs of growth, the easing of the Ivey PMI and the decline in business confidence indicate a slowing pace. The reduction in the prices index could provide some relief from inflationary pressures, but the drop in the deliveries index points to ongoing supply chain issues. Businesses are still hiring, as evidenced by the rise in the employment index, and are stocking up inventories, which might buffer against future uncertainties. The economic outlook suggests a cautious approach as Canada navigates through these moderate growth phases.
Source: Ivey Business School
