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BMO Economics Introduces Canadian Business Activity Index

July 20, 2020 | Customers, Growth

BMO Economics has debuted the new BMO Business Activity Index (BMO BAI), which tracks monthly business activity with information on jobs, spending, sentiment and other indicators. With the Canadian economy entering the post-lockdown recovery phase, there is an increased need for timely information on what the recovery looks like.

“Given the unparalleled economic crisis caused by the pandemic, the need to track the recovery has never been greater,” said the authors of the BMO BAI: Sal Guatieri, Director and Senior Economist, BMO Capital Markets; Robert Kavcic, Director and Senior Economist, BMO Capital Markets; and Erik Johnson, Economist, BMO Capital Markets. “The index will inform how well the expansion is proceeding on what is sure to be a long and bumpy journey.”

The BMO BAI index includes ten indicators: hours worked, the unemployment rate, home sales, housing starts, business credit, wholesale trade, retail sales, manufacturing shipments, small business sentiment (from the Canadian Federation of Independent Business) and the TSX.  In addition, real-time data on Google retail and recreational mobility and credit card transactions are used to estimate recent retail sales prior to the release of official data. BMO Economics’ view of the economy is also used to benchmark estimates for other indicators when necessary. The index is derived from monthly percentage changes in individual indicators, whose contribution is adjusted to equalize the volatility of each, ensuring that more volatile indicators do not dominate swings in the index.

BMO Economics’ analysis shows that the BMO BAI collapsed faster than real GDP during the March/April recession, but snapped back afterwards. “We estimate that the BAI rose 6 per cent in May and 9 per cent in June,” stated the authors. “Business activity looks to have retraced roughly half of its March-April decline – a good start, but the second half will be a much tougher grind as pent-up demand wanes and consumer caution persists.”

The report on the introduction of the BMO BAI can be found at

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