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 May. While this is a slower rate of growth than what was reported for April, this update represents the third consecutive month of LEI growth.
Since March, the LEI has risen by a total of 0.8 percent. Although this does not point to radically optimistic GDP growth, it is a stark contrast to the near-recession figures that characterized late 2018.
“It appears as though some growth may be taking hold in the economy,” says LEI author and Munk Senior Fellow Philip Cross. “While it is perhaps too early to break out champagne glasses, these numbers are certainly positive for Canada.”
Lately, Canada’s economic growth has been linked closely linked with the state of the global economy. This explains both the rise in April and the slowdown in May as reflected in commodity prices and new orders.
“An improving global economy had driven the recovery of the leading index in recent months, but this optimism has been dampened by increasing concerns about trade tensions between the US and China and slower growth in Europe,” explains Cross.
Domestically, the economy has enjoyed improved conditions in both the labour and housing markets. These positive trends have led to the first gain in consumer confidence in over a year – a sign that economic growth may be somewhat more broad-based than in previous months.
What does this all mean? According to Cross, the second half of 2019 could prove to be a positive departure from past few months.
“While the economy may still be somewhat vulnerable, the LEI is now consistently pointing to modest growth in Canada’s near economic future.”
To learn more about the leading economic indicator, click here.
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