This is a post from Alex Carrick's blog that covers the Canadian construction industry.

Since 1985, Mr. Carrick has held the position of Canadian Chief Economist with Reed Construction Data's CanaData, the leading supplier of statistics and forecasting information for the Canadian construction industry.

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Notes from Alex Carrick - Mar 21, 2012

Alex Carrick
Leading Indicator Series Add to Good News about the U.S. and Canadian Economies

Canada’s leading indicator index recorded a month-to-month increase for the sixth straight period in February, according to Statistics Canada.

The latest increase of 0.6% was faster than January’s +0.4%, the same as December’s +0.6% and lower than November’s +0.9%.

Prior to November, the increases were more modest going back to June of last year, which was flat.

Long-term, +0.4% month to month is quite respectable. That was the average from January 2003 through June 2007. Therefore, +0.6% is good news.

During Canada’s recession, which lasted from October 2008 to June 2009, the average was -0.8%.

Within the overall leading indicator index are 10 sub-indices. In February, six of the 10 recorded improvement, led by financials and manufacturing.

With respect to the former, the money supply increased 0.5% and the S&P/TSX stock price index climbed +1.7%. 

As for the latter, the shipments-to-inventories ratio improved (+0.03) and both durable goods orders in manufacturing (+1.4%) and other-durables retail sales (+0.2%) picked up.

The housing market indicators worsened, with the housing index (an amalgam of new home starts and resales) down 0.2% and furniture and appliance sales lower by 0.3%.

Consistent with recent labour market reports, two of the employment series remained unchanged – the average workweek (in hours) in manufacturing and the number of jobs in business and personal services.

It’s often observed that the Canadian economy is closely tied to the American economy.

Should you harbor any doubt about the matter, consider that the U.S. leading indicator from the Conference Board is included as one of the 10 sub-indices in the composite series calculated by Statistics Canada.

In February, the American leading indicator index rose 0.2% month to month, mainly as a result of better manufacturing activity and good numbers from the financial sector.

On the subject of the relationship between the Canadian and U.S. economies, the recently-released January foreign trade statistics offer more insight.

Canada’s foreign trade surplus with the world declined from $34.3 billion Canadian annualized in December to $25.1 billion in January. That still made it the second highest number since the month that began the recession in Canada, October 2008.

That alone is good news. Even better, our merchandise trade surplus with the U.S. in January increased to $72.9 billion Canadian from $70.8 billion in December. Both those levels are much closer to what we were accustomed to experiencing before the recession.

Canada’s worst trade position with the U.S. came in September 2010 when a surplus of only $18.9 billion Canadian was recorded.

Similar to the overall surplus, the +$72.9 billion figure for our trade position with the U.S. in January was the highest since October 2008.

The U.S. economic giant is awakening and it’s causing important parts of Canada’s economy to stir as well.

Confirmation of the better U.S. economy can be found in an unusual source, the larger foreign trade deficit.

On the surface, the logic is somewhat non-intuitive. However, a look at the numbers historically will confirm that a fully functioning U.S. economy is coincident with a larger deficit in the goods and services foreign trade balance.

In January, the U.S. foreign trade deficit worsened to $631 billion U.S. annualized. During the best of times in 2005 through mid-2008, the U.S. trade deficit sometimes touched down at -$800 billion.

In the heart of the recession in early 2009, the U.S. trade deficit was only -$300 billion.

When the U.S. economy is flexing its muscles, oil imports rise and more consumer goods are imported from outside the country.

The U.S. still awaits a significant improvement in its housing markets. On that note, the National Association of Realtors has announced February existing home sales were -0.9% versus an upwardly revised January figure, but were +8.8% compared with February 2011.

The median level of home prices was +0.3% year over year in February. There are strong indications the U.S. housing market has at least stabilized at the bottom and may be starting an upward sprint.

As a final comment, Statistics Canada recently published Q4 2011 population estimates for the nation and the provinces. As of January 1, 2012, there were 34. 67 million people living in the country. At the current rate of increase (+0.2% per quarter), Canada will reach 35 million by the spring of next year.

Regionally, the fastest rates of population growth in Q4 occurred in the three Prairie Provinces with Alberta (+0.5%) as the leader, followed by Saskatchewan (+0.4%) and Manitoba (+0.3%).

Population growth comes from three sources: births minus deaths; foreign net immigration; and interprovincial migration. The resource wealth of the West acts as a magnet to individuals seeking better job prospects.

It’s interesting to note that, with respect to interprovincial migration, Alberta acquired most of its new residents from Ontario.

Alex Carrick

Find Canadian construction-related economic articles in Canadian Construction Market News and in the Economic Outlook section of Daily Commercial News.


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Read Other Recent Alex Carrick Posts

05/14 - Economic Nuggets - May 15, 2012
05/11 - Canada Rode a Second Consecutive Month of Strong Job Gains in April
05/04 - U.S. Employment Rose by a Mediocre 115,000 in April
04/27 - U.S. GDP +2.2% in Q1 2012 and Alberta led Canadian Provinces in 2011
04/18 - U.S. Inflation Low in March; Canada’s Central Bank Looking to Raise Rates
04/12 - Canada’s Trade Surplus in February Declined but Business is Optimistic
04/03 - A Tale of Two Budgets
03/29 - A strong year for new construction investment intentions in 2012
03/06 - Three key trends, more forays into high-tech and the importance for construction
02/29 - Two important sources of strength: share prices and non-residential construction
02/22 - Home resale market may be picking up in the U.S. while flattening in Canada
02/16 - Good news on U.S. housing and employment is positive for Canada as well
02/08 - Home starts and job levels diverge in Canada and the U.S.
02/03 - Canada’s labour market flat in January but U.S. on a roll
01/23 - Canada’s leading indicator series continued to charge ahead in December
01/12 - 2012 holds promise but there’s no denying the uncertainty (part 2)
01/11 - 2012 holds promise but there’s no denying the uncertainty (part 1)
01/04 - How stock prices have performed depends on the timing of the data points
12/22 - Canada stands firmly in the middle of the road as it enters 2012
12/14 - Trade issues climb the agenda in both Canada and the U.S.

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