Leading Indicator Shows Canada Economy on New Recovery Track

  • Index sees advances in stocks and commodities components
  • Cross: underlying trend excluding fires ‘remains positive’

An index that detects early trends in Canada’s economy advanced for a fourth month in July, the longest string of gains since 2014, bolstering the outlook for a second-half rebound.

The Macdonald Laurier Institute’s Leading Indicator rose 0.6 percent in July from a month earlier, according to data Thursday from the Ottawa-based policy group. That follows a revised June reading of 0.8 percent, the biggest increase since 2011. Compared with a year earlier, the measure climbed 1.4 percent in July, the most since March 2015.

Canada’s economy will expand 3.3 percent in the third quarter, according to the median forecast in a Bloomberg survey. Output grew at the fastest pace in three years in June, or 0.6 percent, regaining momentum after Alberta wildfires led to the biggest quarterly contraction since 2009, Statistics Canada reported Wednesday.

“The underlying trend of the Canadian economy remains positive, once the impact of the fires on second-quarter GDP is removed,” said Philip Cross, research analyst with the Macdonald-Laurier Institute. He added the pace of the recovery “remains subdued.”

That was borne out by the MLI data, which showed the average manufacturing workweek and housing components fell 0.8 and 0.3 percent. Gains in the stocks, commodities and consumer confidence segments, however, drove the broader measure higher.

The extent to which these green shoots translate into a boost to the ailing export sector will be seen Friday, when Statistics Canada releases its trade report in Ottawa.