03/21/2012 08:40 EDT | Updated 05/21/2012 05:12 EDT

Canada Leading Economic Indicators Up In February, But Housing Slumps

OTTAWA - Gains on the Toronto Stock Exchange in February helped push Statistics Canada's composite leading index higher last month, pointing toward a likely pickup in the economy over the coming months.

The agency said Wednesday the index, which was up 0.6 per cent, rose for the eighth consecutive month in February. It was up 0.4 per cent in January.

The largest gains in the index came from the financial sectors, including the Toronto Stock Exchange which posted a strong start to the year.

Manufacturing also supported the gains with an increase in new orders and the ratio of inventories to sales rose for the fourth consecutive month.

Overall, six of the 10 components to the index were higher in February.

Auto sales helped boost household demand for durable goods, while a rosier outlook for the U.S. economy saw the U.S. leading indicator also rise on increases in the financial and manufacturing sectors south of the border.

The housing component edged down following five monthly gains while sales of furniture and appliances were also down.

The increase in the leading index comes as the Canadian economy appears to be picking up steam as concerns about global economic growth and European sovereign debt have eased and the U.S. economy appears to be improving.

The Bank of Montreal said Wednesday that its commodity price index — a key measure of many of Canada's biggest exports — advanced 1.9 per cent in February, with gains across the board.

Metals and minerals as well as agricultural products posted strong increases while those for oil and gas and forest products were more modest.

"Base metals rose further amid increasingly positive economic data, liquidity injections by some central banks, and production cuts," the report by BMO Capital Markets said.

"Precious metals moved higher on U.S. dollar weakness, with large gains in gold and silver."

The Royal Bank predicted Tuesday that Canada's real gross domestic product will rise by 2.6 per cent in both 2012 and 2013, while TD Bank increased its outlook for the Canadian economy for the first time in a year to 2.2 per cent for this year.

Royal Bank said strength in the U.S. economy, low interest rates, solid corporate balance sheets and elevated commodity prices are setting the stage for continued expansion.

High commodity prices and strong balance sheets are expected to boost business investment's overall contribution to growth by just under one percentage point this year and next.

However TD has cautioned that household debt remains high and governments are looking to reduce spending, a move that will weigh on economic growth.

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