Leading indicators on rise despite sluggish export demand
Ottawa, ON -- Statistics Canada's composite leading index grew 0.5% in January, 2006, almost matching its 17-month ...
Ottawa, ON — Statistics Canada’s composite leading index grew 0.5% in January, 2006, almost matching its 17-month high gain of 0.6% in December. Very strong gains in the stock market and housing starts at the start of the year gave a boost to the overall index. These increases offset continued sluggish export demand for manufactured goods.
Financial market conditions were buoyant to start the new year, with the stock market hitting a record high in January. Since then prices have retreated slightly, in line with a dip in prices for metals and energy. Strong demand for business services kept the services employment component expanding.
Manufacturing remained lacklustre. Durable goods orders slowed sharply, especially for exports, even before the exchange rate with the United States moved sharply higher early in 2006. One encouraging sign for manufacturers is that they have reined-in inventories over the last two months, despite sluggish shipments growth. Factories also have boosted productivity sharply by slashing payrolls and freezing the workweek.
The U.S. leading indicator continued to grow at a steady pace of 0.2%. While Canada’s exports of manufactured goods to the United States have retreated, total exports south of the border have continued to rise, largely thanks to record demand for our energy products.
The upturn in Statistics Canada’s leading indicator at the turn of the year is consistent with the recent improvement in the Organisation of Economic Co-operation and Development’s (OECD) leading indicator for Canada. However, for most of 2005, the two indices diverged significantly, with sustained growth in our index while the OECD’s trended down for most of the year even as the economy grew steadily.