Canada Ivey PMI To Ease From March Highs

May 7, 2019

By Orbex

Canada’s Ivey PMI report will be coming out later today. Economists forecast that the index will ease to 51.5 in April. This follows a strong performance in March where the index rose to 54.3.

This marked a rebound in activity as the index bounced back from a five-month low. But compared to 2018, the PMI reading was still quite low. In March 2018, Ivey PMI stood at 59.8.

Data showed that that on a seasonally adjusted basis, the pace of purchasing activity in Canada rose to 54.3. This beat estimates of an increase to 51.1 and activity advanced from 51.5 in the month before.

On an unadjusted basis, Canada’s Ivey PMI rose to 57.6 in March, up from 48.9 in February. The Ivey PMI was in a steady decline since January this year, adequately reflecting the weak patch of growth during the same period.


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After rising strongly in March from a 5-month low and with expectations of a modest headline print for April, the data could start to show a modest pickup in growth. While this might be the case in the short term, the overall long term trend shows that activity has been falling.

The chart below shows the Ivey PMI trend since April 2018 when the index hit a high of 71.5

Canada Ivey PMI
Canada Ivey PMI, Historical Chart

Impact of Canada’s Ivey PMI

The Ivey PMI data comes out ahead of a somewhat busy week. In the following days, Canada’s trade balance figures will be coming out. On Friday, the monthly jobs report data is also due.

As far as the impact of the Ivey PMI is concerned, a pick up in the monthly readings could potentially foretell how Canada’s GDP could perform. The economy was contracting by 0.1% in February. But given the uptick in the Ivey PMI report for March, we expect the GDP growth to rebound.

Business sentiment, however, remains the outlier. In a recent business sentiment report from the Bank of Canada, data showed that the composite gauge of sentiment turned negative, dropping to the lowest levels since 2016.

The data underlined a mix of both domestic and global headwinds. The economy is yet to recover from the decline in oil prices last year. But given the recent uptick, this could potentially change in the coming months.

The impact of the trade tensions is also weighing on Canadian businesses. According to the BoC’s survey,firms reported negative sales growth in the past 12 months. Future expectations of sales were also unsurprisingly pessimistic.

Companies were seen falling short of meeting the increase in demand due to labor shortages. This potentially paves the way to a backlog of orders which could eventually dent the sentiment further.

But there is scope for a pick-up, especially going by the Ivey PMI report for March.

In the near term, today’s Ivey PMI report is unlikely to make a big impact on the Canadian dollar. The major high ticket events due later in the week will clearly overshadow today’s release.

Short Term Outlook for CAD 

The Canadian dollar has been weakening steadily for the past three months. This follows the strong surge in the Loonie in January this year which reversed the declines from December 2018.

Price action has remained muted as a result, trading within C$1.365 – C$1.3116 level over the past five months. But the lack of proper momentum has kept the USDCAD drifting within the range. There is scope for the Canadian dollar to potentially break to the downside, especially if the monthly trend line is breached.

This could bring the CAD back to the January 2019 lows of C$1.13116.

A lot will, of course, depend on how the USD will fare in the coming months. But as the BoC notes, growth could see some improvements in the months ahead which could see the same being validated in the USDCAD rates.

By Orbex