Canadian economy on the upswing

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OTTAWA, Ont. — The composite leading index grew 0.5% in August, equalling its revised gain in July, Statistics Canada reports.

These were the two best increases in over a year and indicate a bounce back from the economic shocks of the second quarter SARS, Mad Cow, the blackout and B.C. fires.

Growth extended to seven of the ten components, the same number as in July. Manufacturing continued to weaken, notably as the workweek was reduced by the blackout in Ontario. Excluding this, the overall index rose 0.8%, the largest since May 2002 when both GDP and employment were growing strongly.

All the indicators of household demand accelerated further. Housing recorded a fourth straight advance when housing starts rose in response to strong demand in July. The upturn was most pronounced in Quebec, where vacancy rates in some markets hit 10-year lows.

The US leading indicator also contributed to the growth of the index, posting its largest advance (0.4%) in over a year. An acceleration in new orders for capital goods, up six months in a row, is particularly encouraging for business spending.

The financial market indicators in August continued their upturn. The stock market has risen 17% since April. Still, it contributed only one tenth of a point of the overall gain in August. The money supply made a similar contribution to growth.

Manufacturing continued to lag behind, with two of its three components declining. The workweek saw the largest drop, shaving 0.3 points off overall growth. New orders rose for a second straight month, a reflection of the improving trend of final demand.

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