In an early morning speech Wednesday to the Economic Club of Toronto, Finance Minister John Manley sought to reassure Bay Street that the federal government’s budget is on track despite the impact of SARS and mad cow disease.

When the books are closed on Ottawa’s present fiscal year, this fall, John Manley expects to be reporting Canada’s sixth budget surplus in a row. Although he has lowered growth estimates for this year to 2.2%, down from the previously thought 3.2%, he expects 3% growth for 2004.

The tone for the second half of the day will be set when the U.S. Federal Reserve releases its latest rate announcement and monetary policy commentary at 14:00 ET.

The Federal Open Market Committee is expected to reduce short-term interest rates. Analyst estimates of r the cut range between 25 and 50 basis points. The Fed has expressed concern over deflation due to high unemployment and decreased demand.

This morning, the U.S. Commerce Department reported a drop in durable goods orders of 0.3%. That’s worse than the expected drop of 0.1%.

Wall Street futures are slightly negative ahead of the market bell. In Japan, the Nikkei rose a mere 13 points to close at 8,932.26 during the exchange’s Wednesday trading.

Overseas in London, the FTSE is down 72.2 points to 4,087.9. Paris’s CAC has fallen 2.22%. Germany’s DAX slipped 0.33%.

Here at home, Statistics Canada is reporting that the composite leading index rose 0.2% in May, its sixth straight increase. The financial market indicators took over from household spending in offsetting weakness in manufacturing. Half of the components edged up or were stable in May, while five components fell, one more than in April. The stock market posted another sharp gain in May, having regained most of the ground lost over the previous year. All the sub-indexes advanced, led by another double-digit increase for information technology.

Within household demand, only furniture and appliance sales continued to expand. The drop in the housing index in March and April moderated to just 0.1% in May, as existing home sales rose for the first time in four months. Demand for durable goods fell after a one-month upturn, pulled down by a sluggish labour market.

The U.S. leading indicator continued to lag behind the Canadian index. This gap was driven by the household sector, where jobs in the United States fell slightly again in May. Weak export demand was largely behind the slack in manufacturing in Canada.

Finally, some good news on the personal income front. StatsCan is also reporting that after-tax family income rose for the fifth straight year in 2001, due to higher government transfers and lower personal income taxes.

After-tax income for families (of two people or more) reached an estimated $58,000, up 3.4% after adjusting for inflation, even though average market income changed little in 2001.

Average government transfers paid to families rose 3.3% in 2001, halting four straight years of declines. At the same time, the average amount families paid in income taxes fell 8.2%.