-Doug Porter, economist at Bank of Montreal
In Canada, Ivey's purchasing managers' index unexpectedly dropped to the lowest level in almost four years in the beginning of the year, adding to concerns over the nation's economic outlook. The gauge plunged to 45.4 in January, compared with the December's reading of 55.4. Analysts, however, had expected a modest drop to 54.0 in the reported month.
Canadians grew concerned over the nation's economic outlook, particularly after the recent surprise decision of the Bank of Canada to slash interest rates. The number of Canadians who anticipates the country's economy will slow down over the next six months climbed to 41.5% last week, the highest level since the 2009 recession and up from 36.1% a week earlier, according to Nanos Research. The BoC cut benchmark interest rate to 0.75% on January 21, citing the economic effects, including lower business investment, that will probably result from the more than 50% plunge in oil prices since the summer. While a quarter point rate cut is unlikely to bolster the economy to a substantial extent, it might in fact increase the level of anxiety among Canadians about the economic outlook and prompt consumers to limit their spending plans. The Canadian economy started the year on a softer footing and is expected to slow in 2015, driven by high consumer debt as a share of GDP as well as overvalued house prices.
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