With the end to Iraq related uncertainties, RBC Financial Group says it is expecting further gains in purchasing activity over coming months.

In a new report, Derek Holt, assistant chief economist, notes that after three consecutive monthly increases over January through March, the Ivey purchasing managers’ index plunged to 54.2. This was down sharply from the previous month’s reading of 65.9, and below consensus expectations for a reading of 59.5.

“Nevertheless, while the trend is moderately worrisome, the fact that the index came in over the critical 50 threshold indicates continued expansion in purchasing activity albeit at a slower than previously reported pace,” Holt says.

RBC reports that the employment index increased to 57.7. But that “inventories took it on the chin as lower inventory levels were signaled with an index reading of 49.4”.

“There are weaknesses to this survey that point to caution in interpreting the results, including that it is not seasonally adjusted so it typically displays more volatility than its comparable U.S. indicators provided by the Institute for Supply Management. Also, it does not adjust for inflation such that it distorts interpretations of price versus quantity changes. Its strengths as a measure include its timeliness since the survey is conducted at the end of the month and released one week later, and its fair representation of regions and industries across Canada including private and public purchasing managers,” RBC says.

In the U.S., it was reported that wholesale trade increased by 1.0% in March, well above consensus expectations for a 0.2% gain. Inventories also grew, but at a more moderate pace of 0.5%. The inventory-to-sales ratio fell to a new record low of 1.21. RBC says. “This closes out a very good quarter for wholesalers marked by the best of all worlds as they sailed through various challenges and posted strong sales gains, healthy inventory investment, and very manageable inventory buffers.”