OTTAWA, ON (April 3, 2020): Canada’s economic trendline has continued its deceleration according to the latest update of the Macdonald-Laurier Institute’s Leading Economic Indicator (LEI). This marks the second straight month of a slowing trend and captures the first bit of information of the COVID-19 outbreak.
Comprising of ten components, the LEI is a tool designed to predict Canada’s future economic growth and track changes within Canada’s business cycle. These latest numbers show a decrease to 0.3 percent in February, with most of the slowdown likely attributed to the economy feeling the early impacts of COVID-19 at the end of February.
Of the components, LEI author and MLI Munk Senior Fellow Phillip Cross noted that commodities and the stock market experienced significant declines at the end of February. Most of the other components of the LEI had realized small gains, notably in housing and the US index.
“The small gains posted had pointed Canada’s economy in the direction of modest growth,” explains Cross. “However, this was completely derailed by the COVID-19 outbreak as it has disrupted all normal economy and financial activity in March.”
Canada’s economy has a great challenge ahead of it. While economists can predict how an economy will react if there has been a drop in the price of oil, the economic impact of a pandemic is difficult, if not impossible, to predict. Of course, other factors, such as the oil price war that Saudi Arabia and Russia are engaged in, will have impacts on the economy as well which will be tracked in the next LEI update.
Cross warns that “while we are beginning to see the economic impacts of COVID-19, there will be certainly more economic challenges as we face an unprecedented time in Canadian history.”
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