WRAPUP 1-Canadian economy powering ahead, latest data show

* Leading indicator posts 12th straight monthly gain

* Hard-hit manufacturing sector shows signs of recovery

* Finance minister repeats recovery still fragile

By David Ljunggren

OTTAWA, June 18 (BestGrowthStock) – Canada’s composite leading
indicator, a broad measure of how the economy is performing,
rose for a 12th consecutive month in May in another sign of how
well the country is recovering from the global financial
crisis.

The indicator advanced by 0.9 percent from April,
Statistics Canada said on Friday, a larger move than the 0.7
percent increase expected by market operators.

Of particular note was the relatively strong performance by
the hard-hit manufacturing sector, which has had trouble
dealing with the high Canadian dollar, weak U.S. markets and
greater foreign competition.

All three manufacturing indicators rose. New orders were up
by 4 percent, the fourth consecutive monthly increase, the
average work week posted its first increase since September
2009, while the ratio of shipments to inventories posted its
10th gain in a row.

“The indicator has been firmly in expansionary territory
since early last summer. That is supportive for second-quarter
GDP growth,” said Derek Holt and Gorica Djeric of Scotia
Capital Economics.

The Canadian dollar strengthened slightly and by 11:05 am
(1450 GMT) was at 1.0246 to the U.S. dollar, or 97.60 U.S.
cents, up from C$1.0290, or 97.18 U.S. cents, before the
figures were released.

Bank of Canada Governor Mark Carney said in a speech on
Friday that Canadian economic growth would most likely be the
strongest among the Group of Seven leading industrialized
nations over the next two years.

The central bank raised its key interest rate from record
lows on June 1 but this week it warned markets against
expecting another hike on July 20, citing the unpredictable
global economy.

That said, yields on overnight index swaps, which trade
based on expectations for the central bank’s key policy rate,
now suggest there is a 82.1 percent chance of a 25 basis point
hike next month. (BOCWATCH: )

Finance Minister Jim Flaherty, testifying to the Senate’s
finance committee late on Thursday, repeated Ottawa’s line that
the recovery is still fragile.

Statscan noted the housing index dropped by 1.2 percent in
May — its first decline since April 2009 — in another sign
that Canada’s recently hot market for homes is starting to
cool.

In another sign of confidence in Canada’s economic
performance, Statscan said foreigners resumed their substantial
purchases of Canadian securities in April, increasing their
holdings by C$12.4 billion ($12.2 billion).

Foreigners had sold C$638 million worth of Canadian
holdings in March.

Investing Analysis

($1=$1.02 Canadian)
(Reporting by David Ljunggren; editing by Peter Galloway)

WRAPUP 1-Canadian economy powering ahead, latest data show