Household demand not enough to sustain growth, writes LEI author Philip Cross
OTTAWA, Nov. 1, 2016 – The outlook for the Canadian economy during the rest of 2016 remains weak, the latest leading index from the Macdonald-Laurier Institute shows.
The Macdonald-Laurier Institute’s composite leading index rose 0.3 percent in September, matching its gain the month before. The index had surged by 0.7 percent in June as the economy recovered from the shock of the wildfires in northern Alberta.
“However, the outlook for exports of manufactured goods and business investment remains weak, leaving the economy largely dependent on household demand for growth”, writes Philip Cross, the author of the Leading Economic Indicator and a Munk Senior Fellow with the Macdonald-Laurier Institute.
Established in October 2012 by Cross, former chief economic analyst at Statistics Canada, the LEI extends Statcan’s now discontinued but extremely important work in this area. In a video accompanying the release of the index, Cross explains, “now that I am no longer in government, I can take a little more risk”, noting that Statcan’s indicator was very cautious which “doesn’t lead to a very interesting leading index.” Cross has extended the lead time of the indicator to six months, while maintaining the accuracy of Statcan’s index.
“The outlook for exports of manufactured goods and business investment remains weak” -Philip Cross
To learn more about the leading economic indicator, click here.
The leading index is designed to signal an upcoming turn in the business cycle, either from growth to recession or from recession to recovery, six months in advance, with an error rate of less than five percent. It does so by monitoring what businesses and households have actually committed to in terms of future spending and production in the most cyclically-sensitive sectors of the economy. It also incorporates global influences such as the direction of the US economy and the broad thrust of monetary policy.
The index is available on Bloomberg and is intended for journalists and analysts who follow the macro performance of the Canadian economy. Quarterly economic analyses by Cross, based on the results of the indicator, will appear on the MLI website.
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Philip Cross is a Munk Senior Fellow with the Macdonald-Laurier Institute. He previously served as the Chief Economic Analyst for Statistics Canada, part of a 36-year career with the agency.
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.
For more information, please contact Mark Brownlee, communications manager, at 613-482-8327 x105 or email at mark.brownlee@macdonaldlaurier.ca
