LEI author Philip Cross forecasts a rebound for the Canadian economy in the second half of 2016
OTTAWA, August 2, 2016 – The Macdonald-Laurier Institute’s Leading Economic Indicator rose by 0.7 per cent in June, its largest monthly advance since a 0.5 percent gain in July 2015. However, May’s 0.4 percent increase was revised down to 0.2 percent, a reminder that these are preliminary estimates subject to revision.
“The composite index suggests that the spring dip in Canada’s GDP was due to temporary factors, and the economy is poised to quickly rebound in the second half of the year”, writes Philip Cross, an MLI Munk Senior Fellow.
“However, the rate of growth will be limited by the fragility of the international economy and weak business investment”.
Established in October 2012 by Philip Cross, former chief economic analyst at Statistics Canada, the LEI extends Statcan's now discontinued but extremely important work in this area. In a video accompanying the release of the index, Cross explains, “now that I am no longer no longer in government, I can take a little more risk”, noting that Statcan’s indicator was very cautious which “doesn’t lead to a very interesting leading index.” Cross has extended the lead time of the indicator to six months, while maintaining the accuracy of Statcan’s index.
To learn more about the leading economic indicator, click here.
The leading index is designed to signal an upcoming turn in the business cycle, either from growth to recession or from recession to recovery, six months in advance, with an error rate of less than five percent. It does so by monitoring what businesses and households have actually committed to in terms of future spending and production in the most cyclically-sensitive sectors of the economy. It also incorporates global influences such as the direction of the US economy and the broad thrust of monetary policy.
The index is available on Bloomberg and is intended for journalists and analysts who follow the macro performance of the Canadian economy. Quarterly economic analyses by Cross, based on the results of the indicator, will appear on the MLI website.
Philip Cross is a Senior Fellow with the Macdonald-Laurier Institute. He previously served as the Chief Economic Analyst for Statistics Canada, part of a 36-year career with the agency.
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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