The Macdonald-Laurier Institute’s Leading Economic Indicator (LEI), a tool designed to predict changes in the Canadian business cycle, rose by 0.3 percent in July. This is the third month in a row in which the LEI has risen by roughly the same amount, and it represents the fifth consecutive month of LEI growth.
Gaining 1.5 percent in total since March, the LEI currently is pointing to a better conclusion to 2019 than what was experienced in 2018.
“Growth is continuing to consolidate,” says LEI author and Munk Senior Fellow Philip Cross. “Though largely led by strong performances in the housing index, July’s numbers signal fairly broad gains.”
Of the 10 indices measured, seven saw an increase, two were unchanged, and one declined. Once again, the housing index continued to rally, posting a 4.4 percent gain, representing the largest such increase since late 2017.
That being said, there still exist risks. Economic growth is rising and falling on the fortunes of the housing market, meaning that if the housing index were to slow down, the Canadian economy would likely lag along similar lines.
Moreover, the modestly positive numbers posted in July will likely be challenged in future LEI updates by problems facing international markets.
“The turmoil that engulfed global financial markets over the summer was just beginning to affect commodity prices, stock markets and exports in Canada in July,” warns Cross. “We have yet to see the full effect of the turbulent global economy on Canada’s economic outlook.”
Nonetheless, whatever the caveats, Canada’s economy seems poised to post respectable gains heading into the fall of 2019.
To learn more about the leading economic indicator, click here.
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