January 15, 2014
The DLI edges up again—the economy should follow suit
The recent trend in the Desjardins Leading Index (DLI) is very encouraging for the Quebec economy (graph 1). The DLI
continued to firm up in November, rising 0.7%. Improvement in the “business” component is primarily responsible for
this positive result. Even with a risk of cooling growth in private sector investment in 2014, international trade will drive
real GDP growth at an accelerated 1.8% compared with 1.2% last year. While some uncertainties about the strength of
the economy linger, the DLI is sending a clear positive signal for the coming months.
Business
Acceleration in the “business” component results from the
more convincing increase in the U.S. economy’s leading
indicator. Like the DLI, this indicator gradually firmed up
in the last several months. Real U.S. GDP also picked up
steam, reflecting positively on international exports from
Quebec (graph 2). The winds seem to have shifted for international trade, which has resumed stimulating economic
growth. As real GDP growth was dampened by the balance
of trade eroding between 2002 and 2012, this change of
course is welcome.
Graph 1 – The rise by the Desjardins Leading Index (DLI)
should impact real GDP
% mthly change
In 2007 $B
310
305
300
4.0
November 2013 = 0.7%
October 2013 = 0.5%
September 2013 = 0.5%
3.0
Construction strike
in June
295
0.0
285
-1.0
280
-2.0
DLI (right)
275
Real GDP (left)
2007
-3.0
-4.0
265
% qrtly ann. change
1.0
290
270
Graph 2 – Accelerating real U.S. GDP impacts
Quebec’s international exports
2.0
-5.0
2008
2009
2010
2011
2012
2013
2014
Sources: Institut de la statistique du Québec and Desjardins, Economic Studies
In 2007 $B
90
5
88
4
86
3
84
2
82
1
80
0
Real U.S. GDP (left)
-1
78
Quebec's international exports (right)
-2
76
2011
2012
2013
The IQ-30 stock index grew 3.2% in November, strengthening the “business” component of the DLI. Despite shares
of the key companies headquartered in Quebec performing
strongly, profits for companies across the province shrank
in 2013. SME confidence has also diminished recently,
confirming that investments will not be able to sustain last
year’s quick pace.
2014
Sources: Bureau of Economic Analysis and Desjardins, Economic Studies
François Dupuis
Vice-President and Chief Economist
Yves St-Maurice
Senior Director and Deputy Chief Economist
Hélène Bégin
Senior Economist
Chantal Routhier
Economist
418-835-2450 or 1 866 835-8444, ext. 2450
E-mail: [email protected]
Note to readers: The letters k, M and B are used in texts and tables to refer to thousands, millions and billions respectively.
Important: This document is based on public information and may under no circumstances be used or construed as a commitment by Desjardins Group. While the information provided has been determined on the basis of data obtained from sources that
are deemed to be reliable, Desjardins Group in no way warrants that the information is accurate or complete. The document is provided solely for information purposes and does not constitute an offer or solicitation for purchase or sale. Desjardins Group
takes no responsibility for the consequences of any decision whatsoever made on the basis of the data contained herein and does not hereby undertake to provide any advice, notably in the area of investment services. The data on prices or margins are
provided for information purposes and may be modified at any time, based on factors such as market conditions. The past performances and projections expressed herein are no guarantee of future performance. The opinions and forecasts contained
herein are, unless otherwise indicated, those of the document’s authors and do not represent the opinions of any other person or the official position of Desjardins Group. Copyright © 2014, Desjardins Group. All rights reserved.
January 15, 2014
Desjardins Leading Index
Housing
Plummeting residential housing starts and existing home
sales gave way to some stabilization, setting the stage for
2014. As recent results suggest (graph 3), new construction
activity should hold steady for both single-family homes
and multi-unit housing. Even though housing inventory
was significantly depleted over the last year, demand is
not yet strong enough to trigger additional construction. It
will be next year before we see a turnaround in housing
starts. After a roughly 20% decline in 2013, new housing
construction should be fairly stable this year.
www.desjardins.com/economics
Households are having a hard time being optimistic, particularly due to their high debt levels and a sluggish labour
market that shed 10,200 jobs from November to December.
The weak annual gain of 2,100 jobs reflects both the massive addition of jobs at the end of 2012 and the see-saw trend
that followed in 2013. From December 2012 to December
2013, 45,800 part-time workers were added in total, while
43,800 full-time jobs were lost. This certainly provides a
partial explanation for the recent hike in personal bankruptcies in Quebec (graph 5).
Graph 5 – Personal bankruptcies on the rise of late
Graph 3 – Housing starts* stabilize after falling sharply
In thousands
In thousands
50
20
45
18
40
16
35
14
30
12
25
10
20
8
15
In thousands
40
In thousands
40
35
35
30
30
25
25
20
20
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
6
2007
2008
2009
Total (left)
2010
2011
Multi-unit housing (left)
2012
2013
2014
Single-family homes (right)
Sources: The Office of the Superintendent of Bankruptcy Canada and Desjardins, Economic Studies
* Urban areas with more than 10,000 inhabitants.
Sources: Canada Mortgage and Housing Corporation and Desjardins, Economic Studies
Consumers
Growth in the “consumers” component of the DLI paused
in November, indicating some vulnerability with their situation. The consumer confidence index also weakened recently, slipping back below the historical average (graph 4).
Graph 4 – Household confidence struggles to rise
above its historic average
Index
Index
100
100
90
90
80
80
70
Hélène Bégin
Senior Economist
70
Historic average
60
60
50
50
40
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
40
Sources: Conference Board of Canada and Desjardins, Economic Studies
“Indice Québec-30”, “Indice Québec-120”, “Indice IQ-30”, “Indice IQ-120” and “Indice Québec” are trademarks of the Institut de recherche en économie
contemporaine (IRÉC), or as the case may be, are intellectual property of IREC, which has filed trademark applications in this regard.
2