OTTAWA, ON (August 6, 2020): According to the Macdonald-Laurier Institute’s Leading Economic Indicator (LEI), the Canadian economy continues to slowdown, despite a deceleration in the rate of decline.
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. Dropping 1.4 percent, this latest LEI update reflects data from June and is lower than the 1.9 percent drop measured in May and the 2.3 percent decline in April
“We may be seeing some stability returning to the economy, although we are stabilizing at low levels of activity,” explains LEI author and MLI Munk Senior Fellow Philip Cross. “While policy-makers might be happy to see that the worst is behind us, Canada’s economy is still on a trajectory of a long, deep, and costly recession.”
The cooling of the LEI’s slowdown trend was largely due to a levelling off in conditions in the housing and financial markets. However, labour market conditions have been slower to improve while the weak outlook for the US economy continues to restrain manufacturing. As a result of these checks on the recovery, Statistics Canada estimates that by June real GDP had recovered less than half its 50 percent (the actual number is 43 percent) loss in March and April.
The LEI has tracked a 7.3 percent decline since the introduction of lockdown measures in Canada, erasing months of weak economic growth that preceded the COVID-19 crisis. With such a significant drop, and given underlying unfavourable economic conditions predating the recession, MLI’s LEI suggests that Canada’s economy is likely headed towards a difficult path to recovery.
To learn more about the leading economic indicator, click here.
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