Conference Board economic index signals stronger economy ahead for Canada

OTTAWA, June 29, 2016 /CNW/ - The Conference Board of Canada's newly re-launched Composite Leading Index rose by 2.6 per cent in April, suggesting better times ahead for Canada's economy six months from now.

The Composite Leading Index (CLI) sums up the performance of nine components that track the short-term course of the economy and signals changes in the business cycle (periods of faster and slower economic growth) approximately six months in the future.

"The rise in the indicator suggests that the outlook for the Canadian economy has improved," said Matthew Stewart, Associate Director, National Forecasting with The Conference Board of Canada. "Oil prices continue to recover, financial markets and consumer confidence are rebounding, which are pointing to optimism on the part of investors and consumers. Canada's economy should finally be gaining momentum towards the final months of the year."

HIGHLIGHTS

• The Composite Leading Index rose another 2.6 points in April, pointing to a brighter outlook for Canada's economy in the months ahead.
• Most of the nine components included in the index saw improvements, with only employment insurance claims and industrial and commercial building permits deteriorating in April.
• The oil price recovery, stock market gains and a growing consumer confidence are fuelling the economic momentum.

The nine components included in the index are:

• The U.S. leading indicator;
• Building permits;
• The stock market;
• The spread between the interest rate for private versus government short-term borrowing;
• The average workweek in manufacturing;
• Energy price index;
• New orders for durable manufactured goods;
• The Conference Board of Canada's Index of Consumer Confidence; and
• Claims received for Employment Insurance.

Seven of the nine components improved in April, and two of them worsened. The Conference Board Inc.'s Leading Economic Index for the United States rose to an impressive 123.9, a level not seen in nearly 10 years. The U.S. index's high level should translate into increased trade activity in Canada over the next six months.

The Bank of Canada's energy price index posted a modest increase in April, as oil prices continued their recovery. The price of crude is still forecast to hover around $50 for much of this year, but its steady increase since its low in February is good news for energy companies. Meanwhile, the temporary shutdown of oil sands production in May due to the devastating Fort McMurray wildfires is only forecast to hurt second quarter economic growth. Because the price of oil had been trending up before the fires, the resource sector as a whole is expected to improve in the second half of the year.

The S&P/TSX index advanced by over 3 per cent in April, suggesting that the effects of rising resource prices are continuing to trickle into financial markets. Lenders are also feeling more optimistic as the interest rate charged by chartered banks narrowed relative to the yield on Treasury bills.

The Conference Board of Canada's Index of Consumer Confidence also rose in April, leading the way to increases in consumer spending, especially with respect to purchasing big-ticket items. However, news from the labour market was mixed. The average workweek -- the mean number of hours worked per week across all industries -- increased for the second consecutive month, but the number employment insurance claims rose as well.

Industrial and commercial building permits slumped for the second consecutive month in April. The decline in building intentions signals apprehension about the Canadian real estate market, which could limit economic growth in the latter part of this year.

The CLI will be published on the second last Friday of every month by The Conference Board of Canada. It is available to subscribers of the e-Library.

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SOURCE Conference Board of Canada

Yvonne Squires, Media Relations, The Conference Board of Canada, Tel.: [phone] ext. 221, E-mail: [email protected]; or Juline Ranger, Director of Communications, The Conference Board of Canada, Tel.: [phone] ext. 431, E-mail: [email protected]