Strong housing market drives up Statscan's leading indicator.
June 22, 2004 - Statistics Canada's index of leading indicators, a key gauge of where the economy will be in six months, roared ahead in May thanks to a strong housing market.
The index rose by 1.2 per cent from April, its largest one-month gain since April 2002.
The consensus among analysts was for a much more modest rise of 0.6 per cent.
The index has averaged monthly gains of 0.6 per cent since the start of the year.
Statscan attributed the jump to the nation's housing market, which continues to steam ahead thanks to a solid labour market and low interest rates.
"Existing home sales in May hit their highest level ever," Statscan said in its Daily Bulletin. "As well, low vacancy rates encouraged a high level of housing starts."
However, not all of May's strength came from the housing sector. In total, nine of the 10 components that make up the index gained in May, compared with only seven in April.
The only component that declined last month was business and personal services employment.
"For the first time in two years, all three manufacturing indicators grew in unison, reflecting an upturn in both domestic and export demand," Statscan said.
"The increase in the average work week was the first since August 2002. New orders bounced back from a dip in April."
The manufacturers' ratio of shipments to inventories also gained, as manufacturers responded to increased demand by depleting their inventories, Statscan said.
Another of the 10 components is the U.S. index of leading indicators. A strong U.S. economy is usually good news for Canada since Americans consume more than 80 per cent of Canadian exports.
Earlier this month, the U.S. Conference Board reported that its index of leading indicators gained by 0.5 per cent in May, better than the 0.4 per cent expected by analysts.
© Copyright 2004 The Ottawa Business Journal