Economy well-positioned to accelerate in second half of the year despite disruptions, composite indicator shows
OTTAWA, July 31, 2013 — The Macdonald-Laurier composite leading index advanced by 0.2% in June, continuing the pattern of gradual improvement in recent months from the 0.1% gains posted early in the new year.
The increase in June was only slightly below the 0.3% gain in May, despite the impact of flooding in Calgary and a strike that shut down the construction industry in Quebec.
“The ability of the economy to shrug off these disruptions leaves it well-positioned to accelerate in the second half of the year,” said Philip Cross, Macdonald-Laurier Institute (MLI) Research Co-ordinator and former chief economic analyst at Statistics Canada.
Six of the nine components increased, one was unchanged and two declined.
The housing index registered a 2.7% gain, the most of any component.
“This is a remarkable turnaround for housing, which was the weakest sector of the economy in the first quarter,” Mr. Cross said. Both existing home sales and housing starts contributed to the upturn.
Manufacturing continued to slowly recover from declines early in the year. The average workweek was unchanged in June, after declines in four of the previous five months. New orders for durable goods fell 0.8%, after a 2.1% decline the month before.
“The stabilizing of manufacturing sales in recent months largely originates in rising US demand for our auto and lumber industries,” Mr. Cross said.
“The outlook for US demand remains positive, as the US leading indicator continued its steady advance with a 0.2% hike in June,” he said.
Commodity prices increased 0.7% in June, their fourth straight gain.
Mr. Cross said this increase understates the improvement for Canadian resource producers, since the Bank of Canada index of commodity prices uses the US dollar price of commodities.
The Canadian dollar price of oil has risen faster than the US dollar price, reflecting the increased flow of Canadian exports of bitumen to the United States.
Despite the lower discount for Canadian oil prices, the stock market retreated by 0.9%, its first decline of the year. Lower prices for metals weighed heavily on the Toronto market.
The other two financial market components both edged up in the month.
The MLI monthly Leading Economic Indicator series provides unique and valuable insights into the future course of the Canadian economy – giving advance warning of recessions and upturns. The next release date is August 30, 2013.
The Macdonald-Laurier Institute is the only non-partisan, independent national public policy think tank in Ottawa focusing on the full range of issues that fall under the jurisdiction of the federal government.
