Canada's Ivey Purchasing Managers Index (PMI) surprised on the upside in July, as it rose to 55.8, its highest level in a year, beating even the most optimistic forecast of 55.2 in an Econoday survey. The PMI points to ongoing economic growth reflecting the resilience of the Canadian economy.

The survey showed that 33.7 percent of respondents reported higher purchases compared with June, but a bigger percentage, 41.7 percent, reported steady sales.

The employment index rose to 51.2 in July after dipping below 50.0 in June. The supplier deliveries index increased to 50.2, breaking above the 50.0 threshold for the first time since March 2024.

By contrast, the inventories index edged down to 48.7 after four months above 50.0. The prices index went down to 68.5 from 70.2, with still 39.4 percent of respondents reporting that prices were higher than the previous month.

The Ivey PMI unadjusted index was unchanged at 54.6.

Under its current scenario, where Canada and China retaliatory tariffs are assumed to be permanent, while other countries are assumed to not retaliate, the Bank of Canada expects GDP to contract about 1.5 percent in the second quarter, mostly due to a sharp reversal in exports and lower U.S. demand. Growth recovers about 1 percent in the second half of this year, with exports stabilizing and household spending recovering.

Under the escalation scenario, Canada and China double the value of U.S. goods subject to retaliatory tariffs, with other countries also increasing their tariffs on the U.S. Growth contracts through the end of 2025.

The most recent developments have gone in the escalation direction even as Canada's minister responsible for Canada-U.S. trade cites constructive discussions with the U.S. The Trump administration increased its tariffs just last week for goods not covered by the United States-Mexico-Canada Agreement. However, we are still far from Canada doubling the value of goods subject to retaliatory tariffs.

The consensus sees the index remaining in expansion at 53.5 from 53.3 in June.

The Ivey purchasing Managers' Index (PMI) measures purchasing activity as indicated by a panel of purchasing managers selected geographically and by sector of activity to match the Canadian economy as a whole. The PMI includes both the public and private sectors and is based on month-end data. Five categories are covered in the survey: purchases, employment, inventories, supplier deliveries and prices. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) activity versus the previous month and the closer to 100 (zero) the faster is activity growing (contracting).

The Ivey PMI is provided in two formats -- unadjusted and seasonally adjusted. The index shows responses to one question:"Were your purchases last month in dollars higher, the same, or lower than the previous month?" A figure above 50 shows an increase while below 50 shows a decrease.

The index measures the month to month variation in economic activity as indicated by a panel of purchasing managers. The index uses end of the month data and it covers all sections of Canada's economy. The PMI includes both the public and private sectors and is based on month end data Ivey PMI panel members indicate whether their organizations activity is higher than, the same as, or lower than the previous month across the following five categories: purchases, employment, inventories, supplier deliveries and prices.