Canadian Economic Recovery Continues: BMO's Business Activity Index (BAI)
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Canadian Economic Recovery Continues: BMO's Business Activity Index (BAI)

Canadian Economic Recovery Continues: BMO's Business Activity Index (BAI)

The BMO Economics' Canadian Business Activity Index (BAI), which tracks monthly business activity with information on jobs, spending, sentiment, and other indicators, rose 5.0 percent in July and is on pace for a 2.7 percent gain in August. That would mark four consecutive months of strong growth from the pandemic low set in April, leaving the index 4.7 percent below February's peak.

"Activity by this measure had sunk as much 24 percent at one point," said Robert Kavcic, Senior Economist, BMO Capital Markets. "Thinking of it another way, about 80 percent of the economic hole caused by the pandemic has been filled back up."

BMO Business Activity Index

Almost all indicators that make up the index continued to support the rebound in July and August. Hours worked posted solid gains as the job market recovers. The upside-surprise in housing has continued, with sales and starts both rising strongly in July and August. Meanwhile, sales measures in retail, wholesale and manufacturing are all still pushing higher. Sentiment measures from the Canadian Federation of Independent Business and equity market remain supportive. Credit growth is the lone soft spot, with business credit dipping again in July.

"The Canadian economic recovery continues, with business activity improving again in July and August," noted Kavcic. "That said, momentum is fading, and the work required to fill the last 20 percent or so of the COVID hole will be much, much tougher than it was to fill the first 80 percent."

NOTE: The BMO BAI is compiled from ten monthly indicators, with supporting information from Statistics Canada's preliminary estimates of a few monthly indicators and high-frequency data on retail mobility and internal credit card transactions.

The supplementary measure used to track monthly real GDP is calculated using the weight of public-sector GDP (19.1% in 2019 using constant 2012 dollars) and the average monthly change in public-sector GDP from 2011 to 2019 (0.11%).

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