By Ketki Saxena
Investing.com -- Today’s Ivey Purchasing Managers Index (PMI) data showed Canadian economic activity for June expanding at its slowest pace in four months in June as prices cooled.
The seasonally adjusted index fell to 62.2 from 72.0 in May, its lowest level since February, while the unadjusted PMI fell to 57.8 from 66.7 in May.
Any reading above 50 indicates an increase in activity, but the marked slowdown in the Canadian economy further stokes fears of an incoming recession.
Analysts at RBC (TSX:RY) became the latest to warn of a recession today, forecasting domestic economic growth to average 0.8% next year, compared with 3.7% this year.
Sub-indicators such as the gauge of employment was unchanged from May at 67.9, while the prices index dipped to 77.9 from 82.4, the second straight month that the prices index has fallen, and the lowest level since last December.
The Ivey PMI measures the month-to-month variation in economic activity as indicated by a panel of purchasing managers from across Canada. Traders watch these surveys closely as purchasing managers usually have early access to data about their company’s performance, which can be a leading indicator of overall economic performance.
Today’s lower than expected reading can also be taken as a bearish indicator for the CAD.
Despite the marked slowdown, today’s data is unlikely to deter the Bank of Canada from its aggressive path of policy tightening to tackle out-of-control inflation.
As noted by the analysts at RBC, “Though higher rates will technically push Canada toward a contraction, the Bank of Canada now has little choice but to act.”