U.S. counterpart also shows growth to bode well for Canadian economy
OTTAWA, Oct. 30. 2012 – The Canadian economy continued to show growth in September after several sluggish months of economic activity, according to a composite index newly developed by the Macdonald Laurier Institute.
The MLI Leading Indicator showed growth of 0.2% in September. That was the second straight month of improvement after the index decelerated steadily in the first half of the year.
Four of the nine components in the index advanced in September, while three were unchanged and two declined.
"The MLI indicator shows there is still life in the Canadian economy and Canada will finish the year in a growth position as we predicted some weeks ago," said Philip Cross, Research and Editorial Coordinator at the Macdonald-Laurier Institute.
Financial components outpaced the others in September. The money supply posted steady gains of 0.6%. The spread in the interest rate between public and private borrowers fell to its lowest level in two years. Commodity prices firmed up after five consecutive declines, and that helped the Toronto Stock Exchange firm up after a summer of steady losses.
Both the components related to manufacturing in Canada leveled off in September, after small declines the previous month. The average work week in factories was 37.4 hours while new orders for durable goods were at their second highest level in 2012.
Weakest component in the MLI Indicator was housing. It fell 2.5% in September. Lower housing starts and existing home sales both contributed to this decline.
New and continuing Employment Insurance claims edged down 0.3% - their sixth straight decline.
Meantime, the leading indicator for the United States rose 0.1% in September to reverse a dip the previous month.
It was notable that U.S. building permits led the advance, a sign that the housing sector there is beginning to recover, Mr. Cross said.
The extended slump in the housing sector has been a significant drag on the U.S. recovery from the 2008-2009 recession. Existing home sales and housing starts in August both rose to their highest level in more than two years in August.
U.S. auto sales in September accelerated to a four-year high of 14.9 million units – something that bodes for Canadian exports.
"All in all, the latest MLI Leading Indicator shows the Canadian economy may be in better shape than some people realize.'' Mr. Cross added.
The MLI Leading Indicator series was developed by the Macdonald-Laurier Institute to fill the gap left by cancellation of the Statistics Canada Leading Composite Indicator last May. The MLI index tracks monthly activity in nine components of the Canadian economy to provide early warning of advance or recession.
Next release of the MLI Leading Indicator will be on Nov. 28.
The Macdonald-Laurier Institute is an independent non-partisan Ottawa-based national think tank devoted to the development of Canadian public policy.
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