Fourth straight month of weak growth reveals economic challenges after the “hot” start in 2017
OTTAWA, Oct. 2, 2017 – Canadian economic growth slowed for a fourth straight month in August.
The Macdonald-Laurier Institute’s Leading Economic Indicator, a tool designed to predict changes in the Canadian business cycle, rose by 0.2 percent in August. That matched (or exceeded) the increase from the previous three months.
“The marked slowdown in the growth of the index since the turn of the year underscores the unsustainability of the acceleration in the Canadian economy in the first half of the year,” wrote Munk Senior Fellow Philip Cross, the author of the LEI.
Four of the ten components expanded, four declined while two were unchanged.
The slowdown has been most concentrated in housing and in manufacturing, two sectors that buoyed growth in the first half. Governments took several steps in the spring to cool the housing market, which have slowed sales.
Manufacturing is being restrained by cutbacks in the auto industry, which began as long-planned model changeovers but more recently reflect slower sales in the US.
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 Munk 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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