Canada’s lineup of economic data came in on the upside today, with stronger building permits and an improving Business Conditions Index.

Statistics Canada reports that in October 34% of manufacturers stated they would increase production in the fourth quarter, while 16% expected to decrease production, leaving the balance of opinion at +18. This represents a 17-point rise from July and is the highest positive balance since April 2000.

With 14% of manufacturers stating a higher than normal backlog and 25% expressing a lower than normal backlog, the balance of opinion concerning the current level of unfilled orders stood at -11 in October. Producers in the primary metal, transportation equipment, fabricated metal product and wood product industries contributed to the 18 point improvement in the balance.

The voluntary survey, to which almost 4,000 manufacturers responded, requests opinions on production impediments, finished product inventory levels, new and unfilled order levels, production and employment prospects in the coming three months.

“Add Canada to the list of countries reporting surveys of expanding manufacturing activity. Following the robust purchasing managers’ reports out of the U.S., Europe, and Japan, our Business Conditions Index for manufacturers jumped by a better-than-expected 6 points in Q4 to 51.2,” reports BMO Nesbitt Burns. “This is back above the key boom-bust 50 level, and is the highest reading in over a year.”

Nesbitt says that nearly all components indicated that activity is percolating again. “Importantly, the production index led, rising to its highest level since the spring of 2000 — that is, right at the peak of the last cycle. Honourable mention goes to the employment index, which hit its highest level in almost three years, and is also above the key 50 line – a good omen for Friday’s jobs report for October.”

“The survey generally exceeded market expectations and suggests that while the higher dollar is an issue for some, it is clearly not the primary focus for all manufacturers,” RBC Financial sayhs. “A Bank of Canada rate cut on December 2 is looking particularly unlikely.”

In a separate report, StatsCan says that builders took out another monthly record in residential building permits in September, as the demand for single- and multi-family dwellings maintained its torrid pace. The value of housing permits rose 10% to a record $2.9 billion, surpassing the previous record of $2.86 billion set in July. The value of building permits, an early indicator of construction activity, points to a busy winter for residential builders.

“Construction was the one sector of the Canadian economy that never flagged during this year’s many trials and tribulations, and it remains a pillar of support. B.C. was exceptionally strong in the month,” says Nesbitt.

Low mortgage rates can take most of the credit for the August RBC says. “While these numbers are partly a rebound from blackout-affected August, the real focus should be on the exceptional strength seen throughout 2003.”