Consumers, home buyers boost economy

Thursday, May 20th, 2004

Statistics Canada’s leading index extends a string of healthy gains

Eric Beauchesne

OTTAWA — The outlook for the Canadian economy continues to brighten, thanks to a rebound in home sales, increased consumer spending and a robust U.S. economy.

Statistics Canada‘s leading index, a barometer of the short-term outlook for the economy, rose by 0.6 per cent in April, extending a string of healthy monthly increases, it said Wednesday.

That and other evidence of economic strength helped boost the dollar nearly three quarters of a cent to a close of 72.64 cents US (up from 71.92 on Tuesday), while Bay Street’s benchmark S&P/TSX stock index closed up more than 30 points.

“Housing returned to the lead, after being a pillar of growth last September and October,” Statistics Canada said. “The housing index, after snapping out of a three-month slide in March, jumped 1.4 per cent in April, its largest gain in six months.”

Also boosting the leading index was the continued strength in the U.S. economy, it said.

The areas of weakness were centred in manufacturing, where demand for workers remained flat as factories cut back on the number of hours being worked and continued reducing inventories.

However, in a separate report there was good news from retailers.

“After a slight dip in February, consumers returned to shop at large retailers with a vengeance in March,” Statistics Canada said. “Consumers stocked up on staple products at large retailers in March, filling up their cupboards and renewing their wardrobes.

“Consumers may have decided to add some extra touches around the house and yard, as hardware, lawn and garden products posted a significant increase for large retailers in March. Home improvement projects may be planned as well, as hardware and home renovation product sales increased.”

The report, combined with the healthy increase in auto sales, suggests overall retail sales in March were stronger than expected, said Merrill Lynch economist Robert Spector. It also sets the stage for an acceleration in economic growth in the second quarter of the year.

Meanwhile, Canadian bond and stock markets got a healthy infusion of cash during the month from foreigners, who added $6.2 billion worth of Canadian securities to their portfolios.

Foreign investors bought $3.6 billion in Canadian stocks in March, the largest purchase since June 2002, and added $2.3 billion to their holdings of Canadian bonds, Statistics Canada also reported.

Canadians, meanwhile, added a modest $100 million to their foreign equity holdings, and $1.0 billion to their foreign bond holdings.

Statistics Canada also released evidence that Canadian travellers have recovered from the shock of the Sept. 11, 2001 terrorist attacks, albeit with what RBC economist Derek Holt noted was some help from a stronger currency.

“More Canadians travelled abroad in March than any other month since August 2001,” Holt noted. “As such, foreign travel by Canadians has fully recovered from the post-9/11 shock effect on foreign travel.”

Visits here by foreigners, however, fell, led by a drop in same-day trips by Americans.

© The Vancouver Sun 2004

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