INDUSTRY PULSE: Leading indicator up but concern for Central Canada remains

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OTTAWA, Ont. The leading indicator for the Canadian economy posted a solid 0.5% gain in October, up from a 0.4% advance in September, but the month also further revealed the growing weakness of Central Canada.

Recent months have seen a shift in growth from household spending to investment demand. Housing was the only one of the ten components to decline, compared with two in September.

New orders for durable goods saw the largest increase since January, driven by Western Canada, Statistics Canada reported this week. Primary metals, metal fabricating, machinery and transportation equipment all hit their highs for the year in response to the investment boom in the oil patch. These orders have begun to show up in shipments, which turned up after trending down over the previous five months. This left the ratio of shipments to inventories unchanged for only the second time this year. The average workweek held on to its recent gains. The investment surge also continued to boost employment in business services.

Household demand softened after leading growth most of the year. The slowdown was concentrated in Central and Eastern Canada, areas hard-hit by the jump in gasoline prices. As a result, vehicle sales tumbled in these provinces, reining in slightly the overall growth of durable goods sales from a three-year high. The housing index registered its first drop since March, led by lower housing starts.

The US leading indicator eked out only a 0.1% gain, partly slowed by the effects of Hurricane Katrina. Excluding the interest rate spread, the US index has essentially been little changed all this year.

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