Gains in the MLI Leading Indicator show Canada's economic prospects continue to improve.

The Macdonald-Laurier composite leading index rose 0.2% in May, after an upward revised 0.3% gain in April.

Seven of the nine components expanded, the most so far this year.

The increases in the leading indicator confirm that economic forecasters would be well advised to revise upward their growth projections for the second half of the year, said Philip Cross, Macdonald-Laurier Institute (MLI) Research Co-ordinator and former chief economic analyst at Statistics Canada.

He said the MLI index anticipated the gains in its release for December 2012, which said economic growth in Canada was "positioned to strengthen as the year unfolds."

Housing posted the most notable turnaround of the nine components, as the housing index increased 1.2% in May.

"This is an encouraging sign that housing in Canada is achieving a 'soft landing' after 10 straight declines," Mr. Cross said.

"Both housing starts and existing home sales strengthened in tandem for the first time in nearly a year. The recovery of demand for big-ticket items also saw auto sales improve again in May."

Mr. Cross said the US leading indicator continued to expand by 0.3%, buoyed by the recovery in its housing and auto markets.

He said these gains have been slow to be reflected in Canada's manufacturing sector, where the average workweek fell for a fifth consecutive month and new orders edged down for the third month in a row.

However, the purchasing manager index for manufacturing in Canada hit an 11-month high in May.

"Exports also will receive a boost from the opening of the Kearle oil sands plant this summer, with its capacity of producing 110,000 barrels a day," Mr. Cross said.

All three financial market indicators strengthened. The money supply and the Toronto stock market rose steadily, while interest rate spreads narrowed, signalling rising investor confidence.

The MLI monthly Leading Economic Indicator series provides unique and valuable insights into the future course of the Canadian economy – giving advance warning of recessions and upturns. The next release date is July 30, 2013.