There were only minor economic releases out today, nothing to move economists away from their belief that the economy’s strong performance is slowing a little.

“Net foreign investment in Canadian securities exceeded net Canadian investment abroad to the tune of $1.6 billion in August,” reports BMO Nesbitt Burns. Non-residents unexpectedly increased their holdings of Canadian securities by $1.5 billion. “The bulk of the buying was in outstanding Canadian bonds, no doubt attracted by the width of Canadian/U.S. spreads,” says BMO.

CIBC World Markets agrees with that assessment, noting, “Widening interest rate spreads seemed to attract foreign investor interest in Canadian bonds during August, giving the loonie a bit of a lift, if only temporarily.”

While they were buying bonds, CIBC says that foreigners also dumped a significant amount of Canadian money market paper in August. “There was only tepid interest in Canadian stocks in August,” it says, “with foreigners adding just $0.1 billion to their net holdings in the month. As in July, there was significant net selling in the market for outstanding equities, which was just barely offset by a roughly $1+ billion BCE issue to finance the repurchase of Bell from SBC Communications.”

BMO reports, “In contrast, Canadian investors were net sellers abroad after six consecutive months of buying. The year-to-date net outflow of $18.5 billion now appears set to fall short of last year’s $37.7 billion net outflow. Canadians were net buyers of foreign stocks during August but were net sellers of bonds during the month.”

It was also reported that Canada’s leading indicator rose 0.2% in September, slightly above expectations. “However, September’s gain was mild compared with March’s 19-year-best 1.3% rise. The pace of gains has ebbed in the past 6 months, suggesting economic growth will ease in the second half after averaging nearly over 5% in the first half,” says RBC Financial.

“These data are generally of only passing interest to markets,” says CIBC. “Still, with trends in the leading indicator aligning themselves with our own view that Canadian economic growth is in the process of downshifting materially, the Bank of Canada should find itself glued to the sidelines until well into 2003.”