MLI economic indicator points to modestly positive finish to 2019

OTTAWA — As Canada’s economy continues to post slow but steady gains heading into the tail end of the year, the economic outlook remains modestly positive, according to the Macdonald-Laurier Institute’s Leading Economic Indicator (LEI).

The the Ottawa-based public policy think tank’s Leading Economic Indicator (LEI), a tool designed to predict changes in the Canadian business cycle, rose by 0.3% in July. This is the third month in a row the LEI has risen by roughly the same amount, and it represents the fifth consecutive month of LEI growth.

Gaining 1.5% since March, the indicator is pointing to a better conclusion to 2019 than 2018.

“Growth is continuing to consolidate,” says Philip Cross, LEI author and Munk Senior Fellow. “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. The housing index continued to rally, posting a 4.4% gain, representing the largest such increase since late 2017.

But there are still 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.

And the Macdonald-Laurier Institute warned July’s modestly positive numbers will likely be challenged in future 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, the Macdonald-Laurier Institute says Canada’s economy appears to be poised to post respectable gains heading into the fall of 2019.