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 August and is the first significant gain in the LEI since the introduction of COVID-19 lockdown measures.
“This is the most positive news for the Canadian economy in quite some time,” explains LEI author and MLI Munk Senior Fellow Philip Cross. He tempers that optimism by noting that “this large gain is unfortunately still narrowly-based.”
The rise in the LEI was once again primarily driven by a surge in the housing market. Jumping by 10.2 percent, the housing index component of the LEI remained the strongest of the indices, followed by gains in the financial and commodity markets. Overall, only six of the 10 components of the LEI saw increases, suggesting that the recovery remains uneven.
Cross argues that the gains posted in August were largely reflective of unprecedented monetary and fiscal stimulus that governments in Canada have been pouring into the economy. While certainly helpful at buoying otherwise stagnant growth, this stimulus has failed to improve real outputs or Canada’s lagging employment situation.
“We should celebrate growth, while remaining cautious that the recovery is quite fragile,” notes Cross. “Any lasting recovery will need to be able to sustain itself across a wide range of industries without relying so much on stimulus.”
Although the economic damage wrought by COVID-19 and our pandemic response has affected industries and individuals unequally, and although the recovery remains persistently uneven, Cross does find that, on a gendered basis, men and women have been impacted virtually equally.
He writes that “whether in aggregate or industry by industry, there is little to differentiate the terrible losses that both men and women have suffered this year.”
To learn more about the leading economic indicator, click here.
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