December 24, 2013

2013 is definitely ending on a brighter note

Crossing the threshold into a new year, the forward-looking indicators of global economic activity in general and for North America in particular have definitely become more positive.

From a global perspective, based on the >International Monetary Fund’s (IMF) latest (Oct) World Economic Outlook, although, “global growth is in low gear” and there are downside risks, activity is expected to strengthen over the near term primarily driven by stronger growth in the advanced economies.

The IMF’s more positive outlook for global growth was reinforced by the >Organization of Economic Cooperation and Development’s (OECD) just-released Composite Leading Indicators report which focuses attention on an improving economic outlook in most major economies.

Specifically, the OECD highlighted that its composite leading indicator pointed to above-trend growth in Japan, firming growth in the United Kingdom and a positive change in momentum in Canada.

Turning to North America, although the >Conference Board’s Leading Economic Indicator (LEI) for the U.S. increased by a relatively modest 0.2 percent in October, over the previous two months it exhibited very solid gains of 0.9% in September and 0.7% in August.

In its November report the Conference Board noted that the recent strong gains in the LEI support its view that growth will be stronger in 2014 at 2.4% versus 2013’s 1.6%.

The Conference Board’s more optimistic outlook for the U.S. is seconded by the >Institute of Supply Management (ISM) which reported that its PMI increased by 0.9 percent points in November. This gain brought the index to 57.3, its highest level since March of 2011.

Moreover, according to the ISM, the increase in purchasing intentions was broadly based with 15 of the 18 manufacturing industries reporting growth in November.

Given the strong economic ties between Canada and the U.S., it’s not surprising that the recent pattern of forward-looking indicators of Canadian growth are quite similar to those south of the border.

This observation is strongly reinforced by the most recent >RBC Canadian Manufacturing PMI. Also, although the >Macdonald Laurier Leading Indicator eased slightly in October, it has exhibited strong gains over the past several months due to a sustained increase in new orders together with steady gains in housing and stock prices.

In addition to positive signals from the RBC PMI and the >CFIB’s Business Barometer, the >BlackRock Investment Institute’s Economic Cycle Survey reported that 100% of the economists surveyed in November expected the economy to get a little stronger over the next twelve months, up from 56% during the previous survey.

Given the improvement in both the global and U.S. outlooks and barring a major international political/fiscal shock, economic activity in Canada should steadily improve over the course of 2014 and into 2015.

Leading Indicators for Canada and United States

Data Sources: Macdonald-Laurier Institute (MLI) and U.S. Conference Board/Chart: ReedConstruction Data, CanaData.

Print | Comment