OTTAWA - Two new indicators released Friday appeared to wash away some of the doom and gloom about the Canadian economy that rocked equity markets earlier in the week.

Canadian wholesale sales tripled economists projections in May, registering the third consecutive monthly increase by jumping 1.6 per cent to $44.2 billion, with all seven sectors except autos registering gains.

Meanwhile, June's composite leading index came in unchanged after advances the previous two months, while showing two key pillars of the economy - consumer spending and average hourly earnings - continuing to grow strongly.

While regarded as minor economic indicators, they nevertheless suggest that Bank of Canada governor Mark Carney was more than just trying to talk up the economy Thursday after an onslaught of negative news Tuesday to which he may have played a key role.

"I was a little surprised when I saw the headlines," said TD economist Eric Lascelles. "We had a cluster of economic numbers this week that made the economy look worse than it actually is. The Canadian economy is weak, but not as weak as it looked."

Perhaps due to unfortunate timing, the Bank of Canada did not help matters Tuesday when it announced that it would keep its key interest rate unchanged, as widely expected, because of spiking inflation, slowing growth and risks to the economy.

The Canadian central bank's "bad news" got lumped together with worse news elsewhere.

U.S. Federal Reserve chairman Ben Bernanke gave sobering testimony before the U.S. Congress in the aftermath of the Fannie Mae and Freddie Mac mortgage debacle; General Motors announced more downsizing and stock markets shook.

On Thursday, Carney discounted concerns about the Canadian economy having suffered through a recession, saying April-June quarter growth will come in at plus 0.8 per cent and describing the first quarter 0.3 per cent stumble as a statistical anomaly that won't be repeated.

Onward and upward, Carney told reporters, with the economy advancing at ever increasing rates quarter to quarter until it tops three per cent in a year's time and returns to full capacity in 18 months.

"The Canadian economy remains robust," he said in French. "The Canadian (banking) system is very strong," he said in English. And in both languages, he talked about how oil and natural gas wealth is being spread across the country, although not evenly.

After dropping nearly 400 points on Tuesday, the Toronto Stock Exchange index recovered about half the losses in the latter part of the week. It closed Friday at 13,515.96, down 194 points since July 11.

Bank of Montreal deputy chief economist Doug Porter said nothing changed from Tuesday to Thursday other than perhaps the central bank's spin.

"I don't think it's the Bank of Canada's job to cheerlead the economy," said Porter, but added that the bank may have "been a little bit concerned about the way numbers were presented (in the media). A lot of it is the tone or the spin they put on the numbers."

The numbers Carney put out Tuesday and Thursday were solid, however, said Porter, whose inhouse economists have projected second quarter growth even more optimistically than the central bank at 0.9 per cent.

Friday's wholesale report again showed economic activity consistent with Carney's forecast of moderate, but positive growth in the quarter that ended June 30. Not only were total sales higher, but volumes increased by 0.7 per cent. Excluding the troubled auto sector, total sales would have recorded an impressive 2.2 per cent hike.

"Wholesale trade will contribute positively if albeit slightly to May GDP (gross domestic product) figures," agreed economist Derek Holt of Scotia Capital.

And Holt believes Carney's confidence in Canadian consumers will be born out next week, forecasting a continuation of April's 0.6 spending rebound after that first quarter hiatus. Increasingly, the first quarter swoon in spending is being regarded as more due to the unusually bad winter weather and perhaps a hangover from robust pre-Christmas shopping than a true sign of consumer caution.

Some economists quibble with Carney's assessment of the Canadian economy's progress going forward.

A recent Conference Board survey found consumer confidence dipping to the lowest level since 1995 and that may impact growth in the current July-September quarter. Some believe the U.S. slump will last longer and deeper than Carney forecasts, restraining Canada's recovery by limiting imports of Canadian autos and forest products.

But most agree with the finish line to full recovery, sometime in 2010, when renewed U.S. demand for Canadian products should spread the recovery more evenly that today's commodities-driven growth.

"If we're sitting a year from now where the bank says we'll be sitting, I would be very happy," said Dale Orr of Global Insight Canada.

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