Housing led the way with a three per cent gain as the Statistics Canada Composite Index of Leading Indicators rose 1.5 per cent in December – the largest monthly advance since February of 1983 and the seventh straight monthly increase to end off 2009. All of the index components posted increases in December.

Economic recovery in Canada to date has been driven by household spending, so it is no surprise to see strong gains posted in the housing and retail components of the index. What was even more important, however, were the gains in index categories related to goods production and export to the United States.

New orders for manufactured durable goods increased by eight per cent in December while the US Index of Leading Indicators edged higher. A return to sustained economic growth in Canada will require a recovery in the country’s manufacturing and natural resource sectors. This recovery will depend on renewed demand for Canadian goods and services south of the border.

Increased US demand will depend on US consumer spending over the next two years because 70 per cent of the US economy is driven by personal expenditure. It will be important to monitor the state of the US consumer, in terms of employment, income growth and confidence, in order to gauge how strong Canada’s economic growth will be moving forward.

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Jason Mercer – TREB Senior Manager of Market Analysis

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