OTTAWA, ON (January 8, 2019) Canada’s economy continues to send negative signals, boding poorly for the year to come.
The Macdonald-Laurier Institute’s Leading Economic Indicator (LEI), a tool designed to predict changes in the Canadian business cycle, dipped by 0.1 percent in November. This is on the heels of a 0.2 percent decline in October, representing the first consecutive two-month decline recorded by the index in over two years.
Weakness was widespread in November, with seven of the ten components retreating. The biggest declines of the month were felt in commodities and equities.
Since March 2018, the Index has consistently indicated sluggishness, weakness, and decline in the Canadian economy. Much of the year saw paltry increases of 0.1 percent, with September indicating no change, and decreases in October and November.
As the LEI is designed to track trends and turns in the business cycle (either from growth to recession or from recession to recovery) six months in advance, the decrease in the index indicates that 2019 will likely have a slow start or may even experience a slight contraction. The LEI is designed to have an error rate of less than 5 percent.
“We can say with some confidence that 2019 may be set for a poor start,” says LEI report author Philip Cross. “With several months of weak signals and two straight months of declines, the LEI is indicating that the Canadian economy may be faltering.”
One reason for the poor performance in the economy overall has been the uncharacteristically weak housing market in Canada. In 2017, this sector performed well, but 2018 saw slowness in the housing component throughout much of the year.
“With weak commodities – including oil – and the housing market failing to pick up the slack, declines in the index can be expected,” explains Cross. “The real problem on the horizon may be that a weak Canadian economy may have trouble enduring a volatile global economy.”
To learn more about the leading economic indicator, click here.
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