The Macdonald-Laurier Institute’s Leading Economic Indicator (LEI), a tool designed to predict changes in the Canadian business cycle, rose by 0.4 percent in April, representing the LEI’s largest gain since December 2017.
April’s positive numbers build on a 0.2 percent increase in March. While the past two LEI reports have been a stark contrast to the contraction and stagnation observed in late 2018 and early 2019, LEI author and Munk Senior Fellow Philip Cross warns that signs of weakness still remain.
“While positive numbers should always be celebrated, growth was narrowly-based in April,” says Cross. Of ten components measured in the LEI, five increased and five decreased, suggesting that while Canadians might be able to expect strong growth for the second half of 2019, some industries may be set to benefit more than others.
“Higher prices for commodities and the stock market led the advance,” explains Cross. Indeed, high commodity prices and a strong stock market were also standouts in the March LEI update.
Nonetheless, a 0.4 percent increase in April is best understood as a very positive signal. Cross argues that this data strongly suggests “that the slowdown of Canada’s GDP growth to 0.1 percent in each of the last two quarters will be followed by higher growth over the rest of the year.”
“A trend is beginning to take shape,” Cross says. “And, regardless of the causes, for the first time in too long, Canadians may have reason for some real optimism when it comes to economic growth.”
To learn more about the leading economic indicator, click here.
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