Index rises 0.4% for second straight month in September, pointing to a pick-up in economic activity extending into 2014

OTTAWA – The Macdonald-Laurier composite leading index increased 0.4% for the second consecutive month in September as all nine components contributed to the increase.  It was the first across-the-board advance since March 2011.

"These gains point to a pick-up in economic activity extending into 2014," said Philip Cross, a senior fellow with the Macdonald-Laurier Institute (MLI), who produces the index.

The housing index in September continued to lead growth with a 2.7% hike, the result of higher housing starts and existing home sales.

This was the fifth straight month of sizeable advances in housing, Mr. Cross said. However, the housing index remained below its peak reached in the summer of 2012.

The MLI Leading Economic Indicator, established in October 2012 by Cross, former chief economic analyst at Statistics Canada, extends StatsCan's now discontinued but extremely important work in this area, increasing the lead times while maintaining a low error rate. It provides unique and valuable insights into the future course of the Canadian economy. Leading indicators are vital for governments, businesses and individuals whose fortunes are tied to the twists and turns of the overall economy.

The two manufacturing components of the MLI Leading Indicator continued to strengthen in September. New orders rose 1.3%, their largest gain of the year, after declining in five of the previous seven months.

Among the financial components, prices on the Toronto stock exchange turned up by 0.5% after declining for most of the summer. Higher commodity prices boosted the stock market, with gains for energy outweighing further losses for metals.

"The interest rate gap between the private and public sectors dipped below 200 basis points for the first time since August 2010, reflecting higher investor confidence in the ability of the private sector to pay its debts," Mr. Cross said.

Claims for employment insurance resumed their decline. The improved tone of the labour market was evident in the unemployment rate, which fell below 7.0% for the first time since early in the recession in 2008.

The next release of MLI's leading economic indicator is Nov. 29, 2013.

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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