Canada's Ivey PMI Ends 2011 on a Positive Note

Canada's Purchasing Managers became a bit more optimistic at year end with the Ivey PMI rising from 47.5% in November to 52.8% in December. The improvement in their outlook was due largely to the expectation that inventories would be reduced. In November, the inventory component of the index was 55.6%, but in December it was down to 42.4%. The employment component fell from 55.1% in November to 49.2% in December. There were minor declines in the Prices and Supplier Deliveries components. There is another PMI for Canada in Haver's data bases. It is located in the Markit Purchasing Manager's Survey Data Base and refers to Manufacturing, only. The two are shown in the first chart. Both are above the 50%: the Markit PMI barely, but the Ivey PMI almost 3 points above the 50% mark. Growth in real GDP in Canada had averaged 1.7% at an annual rate in the first half of 2012, but was only 0.6% in the third quarter.

The Ivey PMI is sponsored by the Richard Ivey School of Business and the Purchasing Manager's Association of Canada (PMAC). It differs from the Institute of Supply Management's and Markit's PMIs in several respects. The Ivey PMI is based on data at the end of the month while ISM and Markit PMIs are based on data at the middle of the month. The Ivey PMI covers the whole economy, public and private while the Markit data for Canada refer only to manufacturing . The Ivey PMI asks only one question: Are purchases this month greater or smaller than, or equal to last month's? The ISM and Markit PMIs are based on the answers to five questions. The Ivey PMI tends to have wider swings those of the ISM PMIs, as can be seen in the second chart, which plots the Ivey PMI for Canada and the ISM Composite PMI for the United States. The Ivey PMI is calculated by subtracting the decreases from the increases, dividing the algebraic sum by two and adding it to or subtracting it from 50.