The Macdonald-Laurier Institute’s Leading Economic Indicator (LEI), a tool designed to predict changes in the Canadian business cycle, rose by 0.2 percent in September. The mild relative decrease in LEI growth from the previous month continued into September. This is the fifth month in a row that the LEI has risen roughly the same amount, and the eighth consecutive month of LEI growth.
With the LEI rising a total of 1.7 percent since March, Canadians can be hopeful of a continued recovery towards the end of 2019, reflecting a mild improvement from the dismal end to 2018.
“Meagre economic growth continues to be the norm,” says LEI author and Munk Senior Fellow Philip Cross. “While the leading index points to continuing growth in the second half of the year, it is a slow growth that is not likely to bring widespread benefit.”
While gains in the housing market were responsible for previous LEI growth, the housing index has slowed noticeably with fewer newbuild units. However, consumer sentiment remained buoyant, largely due to improvements in labour market conditions.
“There has been cause for concern that a drop in the housing market might cause a dip in the economic outlook,” says Cross. “However, it seems the economy has made some gains in other areas.”
Yet there are other causes of concern. External demand for commodities was weak heading into September, with commodity prices falling again. Overall, manufacturing remained sluggish.
What does this mean for the economy? According to Cross, despite a slowdown in important sectors of the economy, the end of 2019 should continue to show modestly positive economic growth overall.
“While the economic growth factors might be in flux, the LEI is consistently pointing to modest gains in Canada’s economic future.”
To learn more about the leading economic indicator, click here.
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