Leading Economic Indicator demonstrates a mixed performance for the Canadian economy as 2016 nears a close, writes author Philip Cross
OTTAWA, Jan. 4, 2017 – The Macdonald-Laurier Institute leading index rose by 0.3 percent in November after back-to-back gains of 0.4 percent.
Five of the ten components increased and five declined. The increases originated in financial conditions and the household sector. The weakness was concentrated in housing and in manufacturing, which has not benefitted from either a pick-up in the US economy or a lower exchange rate.
“Overall, the mixed performance of the composite index points to continued slow steady growth in the Canadian economy into 2017”, writes Cross.
Established in October 2012 by Cross, former chief economic analyst at Statistics Canada, the LEI extends Statcan’s now discontinued but extremely important work in this area. In a video accompanying the release of the index, Cross explains, “now that I am no longer in government, I can take a little more risk”, noting that Statcan’s indicator was very cautious which “doesn’t lead to a very interesting leading index.” Cross has extended the lead time of the indicator to six months, while maintaining the accuracy of Statcan’s index.
To learn more about the leading economic indicator, click here.
The leading index is designed to signal an upcoming turn in the business cycle, either from growth to recession or from recession to recovery, six months in advance, with an error rate of less than five percent. It does so by monitoring what businesses and households have actually committed to in terms of future spending and production in the most cyclically-sensitive sectors of the economy. It also incorporates global influences such as the direction of the US economy and the broad thrust of monetary policy.
The index is available on Bloomberg and is intended for journalists and analysts who follow the macro performance of the Canadian economy. Quarterly economic analyses by Cross, based on the results of the indicator, will appear on the MLI website.
Philip Cross is a Munk Senior Fellow with the Macdonald-Laurier Institute. He previously served as the Chief Economic Analyst for Statistics Canada, part of a 36-year career with the agency.
The Macdonald-Laurier Institute is the only non-partisan, independent national public policy think tank in Ottawa focusing on the full range of issues that fall under the jurisdiction of the federal government.
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