The Ivey Purchasing Managers' Index rocketed up to a 69.6 reading in June from the May figure of 62.5, confounding economists' expectations of a pullback to 62.3. The previous reading was 62.5. The Ivey employment index for June stood at 58.2, down from May's showing of 59.3.

"It seems that purchasing managers are having some inventory accumulation problems, as the inventory index rose to 61.9 from 55.2 in May. These inventories will eventually have to be liquidated in coming months," noted Charmaine Buskas, senior economics strategist at TD Securities. She also noted that the prices paid index rose to an all-time high of 84.1 in June. "This is consistent with what we have been seeing in other PMI indices from around the world. Canadian manufacturing is not immune to the rise in oil and other commodities."

Other Canadian data released today included bankruptcy figures from the Office of the Superintendent of Bankruptcy Canada, which showed that 7,364 individuals filed for bankruptcy in May, down 8.4% from April's 8,035. Compared with May of last year, consumer bankruptcies were down 1.5%.

A total of 554 businesses declared bankruptcy in May, down 6.4% from April's 592 and an increase of 4.1% from May of 2007.

According to data released from Finance Canada on Friday morning, holdings of international reserve in Canada increased by US$267 million to US$43,855 million as of June 30. Securities accounted for US$37,754 million, with deposit reserves at US$4,177 million.

It wasn't so quiet in Europe, where German factory orders surprised to the downside and markets received plenty of commentary from central bank officials following the European Central Bank's decision on Thursday to raise its key refinancing rate 25 basis points to 4.25%.

The Bundesbank reported that in seasonally adjusted terms, German factory orders declined further by 0.9% month-over-month in May, deepening the 1.7% fall recorded in April. Economists had expected a slight recovery of a 0.8% gain for the month. Meanwhile, April's figure was revised up from -1.8%. Without adjusting for calendar effects, factory orders fell 2.0% in June. Economists had expected orders to rise 2.0% following April's 15.2% gain, revised up from 15.0%.

Speaking to reporters in Vienna, Austria, ECB Governing Council member Klaus Liebscher said the ECB has to "do everything" it can to ensure price stability. Liebscher emphasized that economic fundamentals in the euro zone are "healthy" and that the ECB's rate increase will not harm growth in the monetary union. With oil and food prices contributing to upside inflation pressures and expected to remain at high levels over the long-term, Liebscher refused to rule out even further rate increases.

Also speaking about the ECB rate decision, Governing Council member Axel Weber was quoted by the German newspaper Südkurier as saying the rate hike was not preventive, but was in response to materializing medium-term inflation risks. Weber stressed that the ECB had no exchange rate target. He added that the central bank is focused on price stability and said the increase in the interest rate would help ensure stable prices in the medium term.

Speaking with the Luxembourg newspaper Tageblatt on Friday, European Central Bank Governing Council member Yves Mersch stressed that the ECB "takes seriously" the task of ensuring price stability. Referring to the ECB's rate increase on July 3, Mersch said it would dampen inflation expectations. He called rising inflation expectations "dangerous." "Better to suffer a little pain today," Mersch was quoted as saying, suggesting that, if nothing was done now, the cost to bring down inflation later on would be even greater.

In another interview with Luxembourg newspaper d'Wort on Friday, Mersch dismissed the notion that the euro area was entering into a period of stagflation and called use to the term "hype."

Speaking with Dutch television channel RTLZ, ECB President Jean-Claude Trichet said inflation risks were seen "at the present moment" and that the rate increase would help to counter them.

Speaking to journalists, ECB Governing Council member Athanasios Orphanides said that oil and food prices are aggravating inflation pressures. "Yesterday's decision of the European Central Bank to increase its basic interest rate by 25 basis points was to prevent a broad manifestation of second round effects and deal with risks to price stability in the medium term," Orpahnides said.

In an interview with German economic newspaper Handelsblatt published on Friday, German Finance Minister Peer Steinbrueck said that despite higher interest rates possibly leading to an even stronger economic downturn, he would defend the independence of the European Central Bank until his "last drop of blood."

By Stephen Huebl, This email address is being protected from spam bots, you need Javascript enabled to view it , with contributions from Geoff Matthews, This email address is being protected from spam bots, you need Javascript enabled to view it , Erik Kevin Franco, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Sarah Sussman, This email address is being protected from spam bots, you need Javascript enabled to view it

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