Wednesday's News Recap: Canadian Ivey PMI Slips, U.S. Crude Inventories Rise

News Recap | Written by CEP News | Aug 06 08 20:03 GMT |
(CEP News) - It was a relatively quiet morning Wednesday with most economic releases coming out of Canada, including a falling yet better-than-expected Ivey Purchasing Managers Index. The Conference Board of Canada said it expects Canadian GDP to grow just 1.7% in 2008 before accelerating in 2009, while weekly crude oil stockpiles in the U.S. grew more than expected.

Canada's Ivey Purchasing Managers Index released today dropped to 65.5 in July compared to June's 69.6 reading, showing Canadian companies are scaling back on their purchases. The consensus estimate of analysts was for a much steeper drop to 61.0.

The Ivey index surveys 175 purchasing managers from the public and private sectors across Canada who are asked whether their organizations are buying more or less than they did the previous month. The employment component of the index slipped to 46.3 from 58.2 in June, while inventories edged down to 60.8 in July from 61.9 in June.

"The data yielded generally few surprises," said Charmaine Buskas, senior economics strategist from TD Securities. "The overall headline number has shown some moderation from June, but generally remains strong. But the prices paid influence remains a troubling matter for Canadian manufacturers."

The Conference Board of Canada released its summer outlook report, which expects the slowing U.S. economy to hold back Canada's growth this year. A decline in exports, especially in the auto sector, will result in real GDP growth for Canada of only 1.7% this year, the board predicts. However, the downturn should be short-lived as economic growth is expected to accelerate to 2.7% in 2009, helped by a better trade performance and still strong domestic demand.

Canada's international reserves decreased by a smaller-than-expected $1.2 billion in July to US$42.7 billion, the Federal Department of Finance reported Wednesday. Analysts had expected the reserve to decline $1.9 billion. The total included a $366 million return on investments, which was more than offset by a $211 million loss through revaluation and $194 million in foreign currency debt charges.

In the U.S., crude oil stockpiles increased by 1614k barrels in the week ending Aug. 1, according to data released Wednesday from the Energy Information Administration. The Bloomberg consensus estimate of analysts was for a 200k decrease in supply.

Imports were perhaps responsible for the rise, as the EIA said imports increased to 10.2 million barrels per day, up 188k from the previous week. Gasoline inventories were expected to decline 1500k barrels on the week, but decreased by 4344k. Distillate inventories slightly overshot expectations for a 2000k build by increasing 2841k.

An auction of $17 billion 10-year Treasury notes drew a high yield of 4.075% allotted to 3.35% of bidders. The high yield was below the 'when issued' yield of 4.094% prior to the announcement. The median discount rate was 4.050% and the low yield was 3.950%. The bid-to-cover ratio was 2.61, with non-competitives taking $118,204,900.

Weekly mortgage applications in the United States rebounded in the week ending Aug. 1, according to data released from the Mortgage Bankers Association (MBA) on Wednesday, which reported a 2.8% week-over-week rise in applications. In the previous week, applications fell by 14.1%. The portion of fixed-rate mortgages rose 3.3% after declining 12.9% previously, while those opting for variable rates fell by 2.9% following the previous week's 26.3% decrease.

The International Monetary Fund report on the UK forecasts the economy will grow by 1.4% in 2008 and just 1.1% through next year. According to the IMF report, headline inflation was higher than anticipated, coming in at 3.8% in June. Rising food and fuel prices are the main culprits behind the rise. The report noted that credit conditions also deteriorated sharply in the second quarter, according to the Bank of England's credit conditions survey.

In overnight news, the Nationwide Building Society reported that consumer confidence in the UK continued to decline as it fell to 51 in July. Economists had expected a less severe fall to 57 after the sentiment indicator slipped to 62 in June.

The National Institute of Economic and Social Research (NIESR) estimated that the UK economy grew 0.1% in the three months to July, down from June's 0.2% growth rate. July's rate is the weakest seen since the three months to May 2005, NIESR said in a press release.

According to the Bundesbank, German factory orders fell 6.1% year-over-year in June, down from both the expected 4.7% contraction and the 2.5% drop seen in the previous month. May's decline was revised down from -2.0%. In monthly terms, factory orders in the country slipped 2.9%, deepening the 1.4% decline recorded in May. Economists had expected a 0.4% rebound.

By Stephen Huebl, shuebl@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , with contributions from Erik Kevin Franco, efranco@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , Geoff Matthews, gmatthews@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , Todd Wailoo, twailoo@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it and Adam Button, abutton@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Sarah Sussman, ssussman@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it

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