Canadian home-building activity took a hit in April but stayed strong overall, and purchasing activity rebounded sharply in May, reports showed on Tuesday, pointing to continued brisk economic growth.
Neither report is likely to alter the Bank of Canada's bias toward holding interest rates steady at 4.25 percent in July, when the bank next sets policy, after raising rates seven straight times.
The value of Canadian building permits plunged 10.6 percent in April, a far bigger drop than expected, as both residential and non-residential construction activity slowed after March's second-strongest showing on record.
But year-on-year housing permits were up 8.5 percent and economists said the month-on-month setback did not signal a bursting of the housing market bubble.
"It's really quite normal to expect quite a bit of a decline after seeing gains in the last few months, in some cases exceeding 20 percent," said Carolyn Kwan, senior economist at Scotia Capital in Toronto.
Analysts in a Reuters poll had forecast a 3.6 percent monthly drop in permits amid an overall upward trend that began last year.
"It was the lowest level for permits since November 2005 and 1.5 percent below the average monthly level for last year as a whole," Statistics Canada said.
The non-residential sector took the biggest hit in April, with building approvals down 18.4 percent, compared with March when big hospital projects figured prominently.
Housing permits dropped 5.7 percent in value as single-family housing permits slipped for the third straight month and permits for multiple-family dwellings fell 8.7 percent after two months of gains.
Separate data on Tuesday showed purchasing activity in the Canadian economy was much more brisk in May than it was in April.
The Ivey Purchasing Managers Index, which looks at private and public sector purchases, rose to 75.0 in May from 55.7 in April.
That was the highest reading since the index was introduced and suggests that some manufacturers are adjusting to the recent rapid appreciation of the Canadian currency, economists said.
A reading of 50.0 indicates that activity remained flat from the preceding month, while a higher reading indicates an increase and a lower reading reflects a slowing or decrease. The Ivey employment index rose to 64.4 from 63.3, while the prices index eased to 70.3 from 72.0.