RBC Financial Group economists say that the slide in Canada’s leading indicator suggests the economy is cooling.

Canada’s leading indicator of economic activity, the Composite Index, was up 0.2% in August, below an expected 0.3% increase. RBC says that manufacturing again accounted for most of the indicator’s gain with new orders for durable goods posting a fifth consecutive increase.

“The leading indicator is generally viewed as a good barometer of economic activity a month or two down the road. With the pace of the leading indicator’s growth tapering off since the hearty 1% gains earlier in the year, its trend is consistent with a slight deceleration of real growth as Canada heads into 2003,” it says. “However, building price pressures and Canada’s rapid move to full capacity provide ample reasons for the Bank of Canada to guide monetary policy in this country to a more neutral setting. We continue to expect a 25 basis point rate increase come October 16.”

RBC also notes that average weekly earnings for all employees in July were up just 0.3% from June and up 1.8% on a year-over-year basis. “This second-tier employment data continues to confirm what the Labour Force Survey data has already told us — Canada’s job market is a good news story.”