Economic analysis

The top economic indicators to watch before October’s election

It’s the economy, stupid. Here’s Mike Moffatt’s four key metrics you should keep an eye on as we countdown to an election

Stephen Harper and fans 1600x900

With the talk of a possible recession and a federal budget that may have moved from surplus to deficit, voters and pundits will be paying close attention to the Canadian economy between now and Oct. 19. But with so many releases each month, what, in particular, should they be watching? They could simply view Statistics Canada’s running summary of the latest economic data or StatCan’s release schedule, though they do not necessarily reflect which series are the most important. What follows are the releases I believe are worth watching in the run-up to the fall election.

Related: How Canada fell into recession so quickly

Real GDP

The Sept. 1 Gross Domestic Product release will be the one that will let us know whether or not we are in a recession, at least by the semi-official definition of “a period of at least two consecutive quarters of negative growth in real gross domestic product for Canada, as reported by Statistics Canada under the Statistics Act.” found in the Federal Balanced Budget Act.

The first-quarter data, released on May 29, showed a decrease 0.1 per cent. This was followed up by a further decline in April (the first month of the second quarter), which was the fifth decline in six months. We will find out if the declines will stretch to six in seven months on July 31. The next quarterly release on Sept. 1 is particularly important, as it will not just contain the data for the final month of the quarter (June), but may also contain significant revisions to past releases.

Real GDP release dates: July 31 (May data), Sept. 1 (June and second-quarter data), Sept. 30 (July data). The August data will not be released until after the election (Oct. 30).

Interest rates

Specifically, the target for the overnight rate: The content of the Bank of Canada’s July Monetary Policy Report and associated rate cut were indications that the economy is much weaker than the Bank of Canada previously forecast. The Bank of Canada will likely stand pat during its next key interest rate decision on Sept. 9, so a further cut would suggest extreme weakness in the Canadian economy.

Overnight rate decision dates: Sep. 9. Oct. 21, just two days after the election, will see the release of the next Monetary Policy Report, along with another interest rate announcement.

Darren Calabrese/CP

Darren Calabrese/CP


Changes in employment tend to lag the economy; that is, job losses tend to happen a few months after an economic contraction. Political strategists will be closely watching employment data to see if the economic slowdown is being felt by families in job losses or wage cuts. There are three monthly employment surveys I would advise paying close attention to.

The Survey of Employment, Payrolls and Hours (SEPH) provides data on number of persons employed, number of hours per employee, and wages and earnings. Unfortunately, the data have a roughly two-month lag; for example, May’s data will not be released until the end of July. The SEPH data have been relatively strong over the last year, with hourly earnings up 2.5 per cent, average hours worked each week for non-farm payroll employees rising from 32.9 to 33.1, and a 216,000 year-over-year increase in non-farm payroll employees.

SEPH release dates: July 30 (May data), Aug. 28 (June data), Sept. 24 (July data). The August data will not be released until after the election (Oct. 29).

The most well-known employment release in Canada is the Labour Force Survey (LFS). The LFS differs from the SEPH in a number of key respects: It considers non-payroll employees, data are made available at the census metropolitan area (CMA) level and, perhaps most important, the information is more timely than that found in SEPH. According to Statistics Canada, “[w]ith the release of the survey results only 10 days after the completion of data collection, the LFS estimates are the first of the major monthly economic data series to be released.” This timeliness and detail comes at a cost, however, as the small sample sizes of the LFS cause the estimates to have substantial standard errors (which can lead to some peculiar results at the provincial and CMA levels). The Guide to the Labour Force Survey explains:

[L]et us say that one month the published estimate for total employment rose by 16,000 to reach 17,800,000. The associated standard error for the movement estimate is 28,800. Using the standard error to build the confidence intervals, we can say that:

  1. There are approximately two chances in three (68 per cent) that the real value of the movement between the two months falls within the range -12,800 to +44,800 (16,000 + or – one standard error).
  2. There are approximately nine chances in ten (90 per cent) that the real value of the movement between the two months falls within the range -30,100 to +62,100 (16,000 + or – 1.6 times the standard error).
  3. There are approximately 19 chances in 20 (95 per cent) that the real value of the movement between the two months falls within the range -41,600 to +73,600 (16,000 + or – two standard errors).

As such, all data in the LFS should be treated as rough estimates. Despite the data’s imprecise nature, each month’s LFS is worth paying attention to, as it contains a wealth of data, from the unemployment rate to the number of persons employed in each CMA. Over the last year, the LFS reports that the number of employed persons has risen by 176,000 and the unemployment rate has fallen from seven per cent to 6.8 per cent.

LFS release dates: Aug. 7 (July data), Sept. 4 (August data), Oct. 9 (September data)

The last of my three, the Employment Insurance (EI) series, contains data on the number of persons collecting EI and the number of new EI claimants. Due to the number of seasonal workers in Canada, there is, naturally, a great deal of seasonality in the data, so it is helpful to look at year-over-year numbers. The latest release contains data for May 2015 and shows the number of beneficiaries has risen by 15,400 and the number of claimants has risen by 24,090 over the last 12 months. A large decline or surge in EI claimants right before an election would have significant political ramifications.

EI release dates: There are only two more releases until the next election on Aug. 20 (June data) and Sept. 17 (July data). The August release will be on Oct. 22, three days after the election.

 Production and trade

There has been a great deal of hope that increased manufacturing production can help offset to the economic decline from lower oil prices. The Monthly Survey of Manufacturing (MSM) provides detailed data on the production and sale of manufactured goods. These data is particularly important politically, as they show if the economic pain is being isolated to Canadian resource sectors. The most recent release was one of the more positive ones in recent memory, though sales volumes did decline by 0.5 per cent from the previous month.

MSM release dates: Aug. 14 (June data), Sept. 16 (July data), Oct. 16 (August data)

The monthly Wholesale Trade Survey (MWTS) provides a snapshot of the wholesale sector, including sales and inventory, which gives insight into the willingness of companies to both produce and purchase new inventory. The latest release saw sales volume decline by one per cent between April and May, though there has been a great deal of volatility in this measure over the past few months, so it would not be surprising to see a reversal next month.

MWTS release dates: Aug. 20 (June data), Sept. 21 (July data), Oct. 20 (August data)

The companion to the Wholesale Trade Survey is the Retail Trade Survey (MRTS), whose data provide a useful barometer on consumer confidence. If consumers reduce their spending, this may be a sign that they are worried about their job security and the overall state of the economy. Furthermore, economy watchers will be looking at this measure closely to see if the release of UCCB cheques in July translated into increased consumer spending. Total retail sales, measured in dollars, have bounced back from a nasty fall in late 2014. The news is not all positive, however, as much of the increase is due to higher consumer prices on imported goods, thanks to a lower dollar.

MRTS Release Dates: Aug. 21 (June data), Sept. 23 (July data). The August data will not be released until after the election (Oct. 22).

Statistics Canada’s Building Permits Survey (BPS) contains data on both residential and non-residentialbuilding permits. I will be paying particular attention to the non-residential data, which provides insight on capacity building by firms and has been particularly volatile as of late.

BPS release dates: Aug. 7 (June data), Sept. 9 (July data), Oct. 7 (August data)

Finally, we have the all-important Canadian International Merchandise Trade (CIMT) releases. Of all the data in the release, the merchandise trade deficit (or surplus) receives the most attention, though both the export and import data in isolation are worth paying attention to. Canada exported $42 billion in merchandise in May 2015, down $3 billion from the previous May, partly due to falling oil prices. Further declines would likely lead to reduced firm expansion and job creation. Imports, on the other hand, were up from $0.9 billion to $45.3 billion. Import spending is a decent barometer of consumer confidence, so a sudden drop in imports could reflect a decline in consumer sentiment.

CIMT release dates: Aug. 5 (June data), Sept. 3 (July data), Oct. 6 (August data)

Surprisingly, this list just scratches the surface of the economic releases that come out each month. But these are the ones worth watching, if you believe, as I do, that the economic and pocketbook issues will be a core theme of the upcoming election.

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