Canada’s economic growth is poised to end 2021 with a positive tone: MLI’s leading economic indicator

OTTAWA, DEN (November 2, 2021): After another rocky year, the Macdonald-Laurier Institute’s Leading Economic Indicator has once again shown growth. This is based on a trend towards LEI growth from earlier this year, which points to a positive end to 2021 and a somewhat optimistic start to 2022.

“While Canadian households may feel the pinch, Canada’s economy is benefiting from significantly higher commodity and energy prices,” said LEI author and MLI Munk Senior Fellow Philip Cross. “The quarterly decline appears to have been temporary and tied to efforts to alleviate the pandemic. With a strong vaccination picture and a low overall number of cases of COVID-19, there is reason for optimism that this growth in LEI may continue.”

The LEI consists of 10 components and is a tool designed to predict Canada’s future economic growth and track changes within Canada’s business cycle. This latest LEI update rises to 0.7 per cent growth and reflects data from September and is a bump from the slower growth of 0.3 per cent in August’s LEI figures. However, this is significantly lower than the several months with 1.0 percent LEI growth experienced through large parts of Q1 2021.

Most of the LEI components showed growth in September figures, with commodity prices and the stock market again leading. This was most notable in the energy sector, where global energy markets struggled to meet demand and Canada’s industry enjoyed significantly high prices. Likewise, with fewer Canadians requiring employment insurance, Canada’s weak unemployment rates are likely to continue to improve.

“Although growth has returned, this will be of limited importance to Canadians if other economic trends take root,” warns Cross. “Even these positive numbers are still modest, and given Canada’s worryingly high inflation and slow wage growth, there is reason to remain concerned about the economy as a whole.” In addition, inflation is likely to be much higher than official targets suggest, as there is a shortage of supply in a large number of industries.

If Canada is to break out of its long-term pattern of dying economic growth, provide the wealth needed to improve Canadians’ prosperity, fund the transition needed to meet climate goals, and more, the federal government should set up concrete economic growth targets. A recent MLI paper by Cross suggests that Ottawa sets the goal of doubling Canada’s GDP by 2050.

“A key tenet of the proposal to double GDP by 2050 is that acceptance of slow growth as our economy’s ‘new normal’ underestimates the importance of bad policies in curbing growth in recent years.”

For more information, the media are encouraged to contact:

Brett Byers
Communication and Digital Media Manager
613-482-8327 x105
brett.byers@macdonaldlaurier.ca

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