In the last Snapshot, we looked at how the steady uptrend in self-employment in Canada is an indicator of economic recovery in third-quarter 2009. Despite this bit of good news, the fact is that Canada cannot recover without the help of our southern neighbour, because 84% of our exports are purchased in the United States.

That said, it is worthwhile to take a closer look at the so-called “green shoots” starting to sprout in the U.S. economy.

One of the most recent indicators of an impending turnaround in the U.S. is the Conference Board’s Employment Trends Index (ETI). Although it dipped slightly in April, the decline was much less negative than in prior months. According to the Conference Board, three of the indexes eight components increased and caused the Index to record its smallest decline since June 2008.

So, while no single indicator is showing signs of strength, the fact that so many indicators are showing signs of improvement reinforces the view of an impending U.S. recovery.

For example, the National Association of Realtors’ Pending Home Sale Index jumped by a much-stronger-than-expected 3.2% in March and that suggests that first-time home buyers are taking advantage of record levels of affordability and the $8,000 tax
credit.

The Reuters/University of Michigan index of consumer sentiment reached 65.1 in April 2009, its second consecutive monthly increase and its highest level in two years. The increase was accompanied by strength in consumers’ assessment of their conditions and expectations about future economic activity levels.

Finally, the Institute of Supply Managers Purchasing Managers Index remained below the critical 50 level in April 2009, which suggests that the manufacturing sector is still contracting. However, it did increase from 36.3 to 40.1 in the month, its highest value since September 2008.

Canada Gross Domestic Product vs U.S. Purchasing Managers Manufacturing Index

Data source: Institute of Supply Management and Statistics Canada.
Chart: Reed Construction Data – CanaData.