Canada’s economy showed mixed signals in May, as the Ivey Purchasing Managers Index (PMI) ticked up to 48.9, up from April’s 47.9 — but still below the neutral 50 mark, indicating continued contraction for the second time since January.

Interestingly, this reading beat market expectations of 48.3, suggesting a slightly more resilient backdrop than anticipated.

Key May PMI Components

What’s the Ivey PMI?

The Ivey PMI offers a broad snapshot of Canadian economic activity, covering manufacturing, services, and construction — not just manufacturing, like some other PMIs.

• 📈 A reading above 50 indicates expansion
• 📉 A reading below 50 suggests contraction

The index is closely watched for early signs of economic shifts, especially through subcomponents like employment and prices.

What This Data Tells Us

The May numbers paint a dual narrative:

✅ Positives:

• Employment jumped above 50, indicating improving labor demand — a hopeful sign for wage stability and consumer spending.
• Prices are cooling, with the index falling from 70.0 to 66.9 — still high, but moving in the right direction. This could ease pressure on the Bank of Canada to stay hawkish.

⚠️ Concerns:

• Despite the uptick, the headline index remains below 50, signaling that overall economic activity is still contracting, albeit mildly.
• Inventory build-up and ongoing supplier delays may reflect sluggish demand expectations and supply chain friction.
• Trade uncertainty — particularly due to erratic US tariff policies — continues to cast a shadow over Canada’s export-driven economy.

Read More: Bank of Canada Holds Rate at 2.75% Amid Trade Uncertainty

Final Take

May’s Ivey PMI reading reflects an economy walking a tightrope between stabilization and stagnation.

• 📉 Economic activity remains subdued
• 📈 Labor market resilience is encouraging
• 🧊 Cooling prices could give the BoC breathing room
• 🌐 Trade uncertainty remains a key headwind

With the Bank of Canada already on pause after a series of rate cuts, these numbers reinforce the case for continued policy caution.

Moving forward, all eyes will be on consumer sentiment, export performance, and inflation dynamics as key determinants of Canada’s path in the second half of 2025.

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