OTTAWA, ON (June 11, 2021): The Macdonald-Laurier Institute’s Leading Economic Indicator (LEI) posted continued growth, representing the 10th consecutive LEI increase in as many months. While the pace of recovery remains uneven, the trajectory of the economy appears positive for the second half of 2021.
“While not without its hiccups, the economy appears to be getting back on track,” argues LEI author and MLI Munk Senior Fellow Philip Cross.
“Though preliminary GDP estimates and employment statistics from April suggest a setback due to re-instigated lockdown measures, the LEI indicates that this reversal will be temporary, and growth is expected to resume over the summer.”
Composed of 10 components, the LEI is a tool designed to predict Canada’s future economic growth and track changes within Canada’s business cycle. Keeping pace at 1.2 percent growth, this latest LEI update reflects data from April. When taken together, March and April have seen the LEI grow by 2.5 percent, which is a significant improvement on the modest increases observed earlier in the year.
Of the 10 components, eight increased, two were unchanged, and none declined. This indicates that growth was broadly-based. However, a surging housing market appears to be a crucial underlying factor facilitating this projected growth. In fact, during the first quarter of 2021, housing contributed nearly two-thirds of growth. According to Cross, the strength of the housing market and strong performances in the stock market have also helped bolster consumer confidence.
Other robust sectors of the economy include a high-performing commodity sector. With metals and lumber hitting record highs and oil recovering its losses from 2020, the high prices in commodities are being driven by global growth.
“With lockdowns appearing to be winding down and the economy poised for growth, there appear to be few if any barriers to growth as the Canadian economy enters the second half of the year,” notes Cross.
However, the economy is not without its challenges. According to Cross, inflation appears to have surpassed expectations, and may in fact be higher than policy-makers presently appreciate due to supply shortages.
“Consumer price inflation in April blew by the consensus forecast of economists, rising by 3.4 percent in April – the highest reading since late 2011. The cost of this inflation will, of course, ultimately be borne by consumers.”
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