Philip CrossSecond straight month of tepid growth forecasts slow finish for Canadian economy in 2017

OTTAWA, Aug. 2, 2017 – Canadian economic growth, after shooting out of the gate to start the year, slowed for a second straight month in June.

The Macdonald-Laurier Institute’s Leading Economic Indicator, a tool designed to predict changes in the Canadian business cycle, rose by 0.2 percent in June. That matched the increase from the month before.

“These gains represent a substantial slowdown from growth of 0.8 percent at the turn of the year,” wrote Philip Cross, the author of the LEI.

Four of the ten components advanced this month, three were unchanged and three declined; as recently as two months ago, eight of the components posted gains.

Housing and manufacturing led the reversal after leading growth earlier this year. The housing index fell for a second straight month, while both new orders and the average workweek in manufacturing stopped growing.

Resource exports are unlikely to pick up the slack, as commodity prices fell, helping to pull down prices on the Toronto stock market.

None of this dampened consumer confidence, which remained the most buoyant of the components.

“Overall, the pronounced deceleration of the leading index suggests that the pick-up in Canada’s GDP in the first half of the year will not carry over into the second half,” wrote Cross.

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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