Improvements in building permits and employment insurance claims point to stronger economic outlook

The Conference Board of Canada’s Composite Leading Index increased by 0.9 points to 109.1 in June, suggesting a slight acceleration in economic growth six months from now.

“The best news in June was the pickup in industrial and commercial building permits, which bodes well for building construction in the closing months of the year, and could signal the long awaited turnaround in business investment,” said Pedro Antunes, deputy chief economist, The Conference Board of Canada. “However, the good news was partially offset by more apprehensive credit lenders and a modest decline in consumer confidence.”

HIGHLIGHTS

• The Composite Leading Index increased by 0.9 points in June.
• Four of the index’s nine components improved, while two deteriorated and three saw little change.
• Industrial and commercial building permits increased for the first time since February.

In addition to the increase in industrial and commercial building permits, employment insurance claims fell sharply in June suggesting an improved labour market. The energy price index also showed another improvement in the month as crude oil prices continued their slow and steady climb in June from the sub-US$30 levels seen earlier this year. Meanwhile new orders for durable manufactured goods also experienced decent gains.

On the other hand, the interest rate spread widened in June after narrowing in two consecutive months, suggesting apprehension in credit markets. The Conference Board of Canada’s Index of Consumer Confidence also saw a halt in its momentum, falling two points. In June, consumers were more pessimistic regarding future financial conditions than they had been in May, which could hurt consumption spending in the coming months.

Meanwhile, the stock market, average work week and U.S. Leading Indicator were little changed in the month. The S&P/TSX Composite Index, a combination of the equity prices of the largest companies in Canada, was virtually unchanged in June but faring well. The average workweek also flattened in June, following its largest monthly decline in over two years. This component has remained below its 2014 average throughout much of the last year, a sign of the weak employment numbers seen since the collapse in oil prices. The New York-based Conference Board, Inc.’s Leading Economic Index for the United States remains at an elevated level of 123.7, which is auspicious for Canada’s exports.