December 17, 2020 | 08:50
BMO Business Activity Index (November 2020) — Holding Pattern
BMO's Canadian Business Activity Index inched up 0.1% in November, based on available data and some preliminary estimates. That follows a like-sized gain in the prior month, as the economy gears down from a strong run through the summer. Indeed, the slowdown in BAI growth roughly matches the cooling in monthly real GDP growth, with StatsCan's flash reading for October slowing to +0.2%. Hours worked rose firmly in November along with a lower jobless rate, but we've penciled in modest declines in wholesale, manufacturing and retail sales. Home sales and housing starts also backed off in the month, though the former remain at very elevated levels.
Declines in those indicators would presage what will likely be an even tougher December, with COVID-related lockdown measures becoming stricter and/or more widespread. That is especially true in parts of Ontario, Quebec, Manitoba and Alberta. As a result, the turn of the year will be challenging for business activity and real GDP growth, but activity should again rebound firmly early next year.
The Bottom Line: The summer momentum was clearly fading into the end of the year, with some stiff near-term challenges in industries like food services, entertainment and leisure and hospitality. Business activity is stuck in an odd holding pattern, between the strong mid-2020 rebound and what will likely be a more permanent re-opening later in 2021.
Endnote: BMO’s Canadian Business Activity Index is compiled from ten monthly indicators, with supporting information from Statistics Canada’s preliminary estimates of some indicators, as well as high-frequency data on retail mobility and internal credit card transactions. For more details see, https://economics.bmo.com/en/publications/detail/82f74b6c-fabf-4733-b4d4-33c50adf0d3b/
Re-estimation of the component weights led to an upward revision of the index level in the October 2020 release.