OTTAWA, ON (December 8, 2020): The Macdonald-Laurier Institute’s Leading Economic Indicator posted slowing growth in October. While Canada’s economy is still recovering from the COVID-19 pandemic, it is doing so with less momentum than in previous months.
Comprising of 10 components, the LEI is a tool designed to predict Canada’s future economic growth and track changes within Canada’s business cycle. Rising by 2.7 percent, this latest LEI update reflects data from October and is a slowdown from the accelerating trend witnessed over the past three months, particularly a 3.4 percent increase in September.
“Canada continues on its path to recovery, albeit more slowly than perhaps is necessary to reverse the long-term economic turmoil wrought in 2020,” explains LEI author and MLI Munk Senior Fellow Philip Cross. “Nonetheless, this positive growth is still a largely good sign.”
Though the housing market continues to be the largest single driver of economic growth, Canada’s economic growth was more broad-based than in previous month. Of 10 components, nine showed some improvement.
“Manufacturing continues to recover rapidly,” notes Cross. “Within manufacturing, the lumber industry is a particular standout.”
Despite some positive signs and broad-based growth, Canada’s recovery remains remarkably unequal. Indeed, industries such as tourism, hospitality, travel, entertainment, and more continue to face a bleak economic future. Moreover, as Cross noted in a recent labour market report, the federal government’s strategy to address the economic malaise facing Canada is fundamentally misguided, ineffective, and costly.
Furthermore, Cross warns that this slowdown occurred before new government-mandated shutdowns took effective in November. “This means that the economy was already slowing to some extent before entering into the second-wave.”
“With low fiscal capacity, sky-high deficits, and some storm clouds on the horizon, we should weigh October’s positive numbers against the uncertainty that lies ahead,” Cross explains.
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