The underlying numbers suggest a positive-but-subdued recovery, says LEI author Philip Cross

OTTAWA, Sept. 1, 2016 – The Macdonald-Laurier Institute composite leading index rose by 0.6 per cent in July, continuing its recovery from three straight declines at the turn of the year and the impact of forest fires in Northern Alberta in May.

The stock market and commodity prices led the growth, according to composite leading index author and MLI Munk Senior Fellow Philip Cross.

“The growth of the index suggests that the underlying trend of the Canadian economy remains positive, once the impact of the fires on second-quarter GDP is removed, but the underlying pace of the recovery remains subdued”, says Cross.

Philip CrossWeak business investment continues to hamper growth in both Canada and the United States, says Cross. This not only slows growth in the short-term, but dampens longer-run productivity growth.

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 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.

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Philip Cross is a 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.

For more information, please contact Mark Brownlee, communications manager, at 613-482-8327 x105 or email at mark.brownlee@macdonaldlaurier.ca

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