OTTAWA, ON (August 1, 2019): With the 2019 federal election fast-approaching, Canadians are likely to be paying closer attention to a whole host of issues, including the state of the economy. Fortunately, a somewhat stronger economy seems to be in the cards for Canada.
The Macdonald-Laurier Institute’s Leading Economic Indicator (LEI), a tool designed to predict changes in the Canadian business cycle, rose by 0.3 percent in June. This is a slight uptick from May and it represents the fourth consecutive month of LEI growth.
Rising by 1.2 percent in total since March, the LEI’s pattern of slow and steady growth seems to indicate that the economy may be on track to continue its recovery from a dismal end to 2018.
“Slow growth is taking hold in the economy,” says LEI author and Munk Senior Fellow Philip Cross. “While the economy is not as dynamic as that of the US economy, any improvement in Canada’s economic fortunes should rightfully be applauded.”
Of the 10 indices measured, the majority were somewhat positive. By far the largest increase was in the housing index, which posted a 2.3 percent gain. This was also the largest gain in the housing index since mortgage regulations were tightened in 2018, potentially pointing to some return to market normalcy. This likely contributed to the 0.9 percent rise in consumer confidence. Furthermore, rising stock prices helped push the LEI into the black.
However, there were some problems which Cross identified. Namely, a lagging global economy seems to be dampening the Canadian economy.
“The impacts of a slow global economy are reflected through a downtown in both manufacturing and a dip in commodity price indices,” Cross explains.
Furthermore, with growth concentrated in the housing index, there may be cause for concern that the economy at large may not be performing as well as it seems.
Although the index is pointing to an improving economic situation, the LEI is rising slower than it had risen in the early months of 2019. “This means that GDP growth will likely stabilize, locking in the trend of slow growth for the second half of the year,” says Cross.
“All this is to say that Canadians can be happy with the prospect of some economic growth for 2019, although it is still slow. It will be important to watch how this trend develops as we inch closer to the federal election.”
To learn more about the leading economic indicator, click here.
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