Heading into 2011 Canadian and US leading economic indicators are flashing green

Posted by Rumin Mann
January 27th, 2011

Although there are persisting, major risks to the near term outlook, Canada’s economic prospects appear to have significantly improved over the past month.

This brighter outlook is, in large part, the result of a gradual steady strengthening in the prospects for the United States, the market for over seventy percent of Canada’s exports.

Moreover, there are also signs that domestic demand in Canada is gaining strength as the economy enters 2011.

Regarding the U.S. economy, throughout the fourth quarter there was evidence, in the form of a stronger than expected increase in the U.S. Institute of Supply Management’s Manufacturing Index, a strengthening of consumer confidence and an improvement in hiring plans, that the U.S. economy was picking up speed.

The stronger than expected jump in U.S. retail sales in November appears, in part, to be due to an increase in the number of consumers who anticipated that the Bush tax cuts would be extended through 2011. Finally, driven by increases in nine of its ten constituent series, the U.S. Economic Indicator recorded its strongest monthly increase since March of this year.

Turning to indicators of economic activity in Canada, after hitting a fifteen month low in July of this year, there are signs of a pickup in housing demand, as reflected by a sustained pattern of stronger existing home sales.

More recently, in November, the Conference Board in Canada’s Help Wanted Index increased by 2.5% to its highest level since September of this year.

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