The MLI index showed continuing signs of economic growth for Canada in January as components related to export demand in the United States showed the most improvement. This is in marked contrast with the leading indicator for Canada posted by the Organisation for Economic Co-operation and Development (OECD). Click here to read the MLI index and read the full Financial Post article below.
By Gordon Isfeld, Financial Post, February 26, 2013
OTTAWA — Despite indications to the contrary, Canada’s economy may actually be chugging along at a steady — if not stellar — pace.
Signs of growth are continuing to appear, according to a leading Canada indicator, and much of that strength is the product of an improving U.S. environment.
The Macdonald-Laurier composite leading index advanced 0.2% in January, following a 0.3% gain in December but still matching increases in the previous three months.
Five of the nine index components were up in January, with Canadian durable goods orders rising 1.5%, the biggest increase since June.
“Components related to export demand showed the most improvement, reflecting the upturn in the U.S. markets for autos and housing,” the Ottawa-based Macdonald-Laurier Institute said Tuesday.
Contrast that with a similar leading indicator by the Organization for Economic Co-operation and Development has provided a much more downbeat reading on the Canadian economy.
The Paris-based OECD index has posted just one monthly increase since February 2011.
“Despite the OECD index’s persistent pessimism, the Canadian economy recorded slow but steady growth in both gross domestic product and employment over the last two years,” said Philip Cross, MLI’s research co-ordinator.
“The trends have been entirely in line with what MLI’s leading index has forecast,” said Mr. Cross, formerly chief economic analyst at Statistics Canada.
The leading MLI indicator for the U.S. increased 0.3% last month, mainly the result of a upturn in that country’s manufacturing sector.
“This suggests that the sudden drop in manufacturing shipments in Canada in December, notably in the auto industry, was due to temporary factors that will be reversed early in the new year,” Mr. Cross said.
The housing component, however, “remained the largest drag on overall growth,” falling 2.1%, he said.
“All of the drop originated in a sharp decline in housing starts in January, as the slow retrenchment in building since last summer was compounded by the coldest weather in several winters.”
Still, the index for sales of existing homes edged up slightly in January — the first advance since tighter mortgage-lending rules were introduced by the Finance Department in July.
As well, the MLI index showed employment insurance claims declined 0.5% last month.
Canada’s labour market has been see-sawing in the past year.
The unemployment rate eased to 7% in January, even as the economy lost 21,900 jobs during the month. That came after 31,200 jobs were created in December and following a jump of 56,300 new hires a month earlier.
Exports have also been dragging and business investment has yet to fill the slack expected from a levelling off of consumer spending and the cooling housing market.
On Monday, Bank of Canada governor Mark Carney acknowledged the economy was not growing as quickly as expected.
As recent as January, Mr. Carney and his policy team estimated 1.9% growth for all of 2012. Many economists also feel that is overly optimistic.
The final tally on December’s economic growth, and for the fourth quarter of last year, will be released Friday by Statistics Canada.