The Macdonald-Laurier Institute’s Leading Economic Indicator (LEI), a tool designed to predict changes in the Canadian business cycle, rose by 0.2 percent in March. This follows a period of stagnation in early 2019 and contraction in late 2018.
“These numbers mark the first significant positive sign in roughly half a year,” explains LEI author and Munk Senior Fellow Philip Cross. “While the latest LEI figures bode well for the economy, they do not erase the recent trend of persistently slow growth.”
In general, the improvement in the index was broadly-based. Five of the ten components increased, three remained unchanged, and two declined. Overall though, the LEI’s increase was largely driven by improvements in the stock market and commodity prices.
This latest LEI update runs counter to an otherwise developing trend in the economy that has seen the economy largely stagnate. With lagging wage and GDP growth still a persistent issue, there is some hope that things may start improving by midyear.
“The increase in the leading indicator points to an improvement in the Canadian economy by the summer, after real GDP had eked out only a 0.1 percent gain over the six months ending in February.”
That said, there are still warning signs on the economic horizon for Canada. The Bank of Canada recently indicated that it will be holding off on increasing interest rates until much later in the year citing poor economic conditions, and there is reason to believe that the threat of recession remains a real possibility.
“The LEI may be cause for some sighs of relief,” Cross says. “Yet it is still to be seen as to whether this is a blip on the radar or the beginning of a reversal in trends for Canada.”
To learn more about the leading economic indicator, click here.
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