Prime Minister Stephen Harper’s primary economic policy is to break Canada’s dependence on the U.S. market. It’s a noble initiative. It also distracts slightly from the fact that Canada’s dependence on the U.S. market is helping to keep the economy afloat.
Monday is PMI day. Markit, in collaboration with various partners, including HSBC and Royal Bank of Canada, released the latest results of surveys of purchasing managers at factories in 20 countries and the euro zone. In the United States, the Institute of Supply Management also released its closely watched purchasing managers index for manufacturing.
Taken together, the reports – including Chinese data from the weekend – shows global factory production is sputtering. However, there were two notable exceptions: the United States and Canada.
The ISM reading for September was 51.5, signalling an expansion after three consecutive months of contraction. (Readings above 50 suggest increased activity, while readings below suggest contraction.) New orders increased to 52.3 from 47.1 in August, and the employment measure jumped to 54.7 from 51.6.
RBC’s Canadian manufacturing PMI, compiled in association with Markit, was 52.4 in September, compared with 53 in August. That suggests momentum in Canada’s manufacturing industry is slowing. Still, “within the context of the relatively weak global economic and manufacturing data, the fact that Canada’s manufacturing sector continues to expand is noteworthy,” Craig Wright, chief economist at Royal Bank, said in a press release.
To be sure, factory production in Canada and the U.S. isn’t exactly vigorous. According to Capital Economics, an ISM reading of 51.5 corresponds with an annual growth rate of at most 2 per cent. That’s not going to put many unemployed factory workers back on the shop floors.
But it sure beats contraction. And given the integrated nature of manufacturing in North America, so long as the U.S. is expanding, Canada’s factory production should at least remain buoyant.
That’s better than Australia, which has tied its economy closely to those Asian markets that Mr. Harper now is trying to crack. Australia’s PMI dropped to 44.1 in September, as new orders contracted for a seventh consecutive month.