Strong economy expected in 2020
For businesses which operate on a calendar year cycle a New Year ushers a fresh start to corporate planning, either for a fiscal reset or the start of a new quarter.
Business forecasts are shockingly unified in their expectations (which likely indicates a good time to be contrarian). Job growth, corporate profits and market returns are all expected to remain buoyant for the year ahead. The U.S. will lead this growth and Canada with its provinces will benefit.
For Canada, all provinces are expected to have a strong 2020 and P.E.I. is again expected to be an outlier leading growth through the coming year. From manufacturing to exports on the outbound to tourism and immigration on the inbound; across our economy we are leading our sister provinces.
Politically, the strength of the economy is being disproportionally harvested. Federally, deficit spending remains an irresponsible stimulant in a strong economic environment with a similar story provincially as spending exhibits little constraint when reinvestment should be considered.
Business’s biggest concern remains access to labour, more so in a strong economy. 2020 should see our province going over twelve months with unemployment under nine per cent – and an achievement almost without precedent in recent times.
In a predictable myopic policy lurch, the provincial government has directed nearly 100 per cent of its resources to working with off-Island firms in attracting labour to address shortterm gaps. Nearsightedly, no consideration is afforded to the downward slope of the growth curve or how this can be muted in late 2021. Immigration retention will be the measure of success through the government’s current policy approach and will make or break our economy post 2020.
It is interesting to observe that job growth in the service sector is very strong (4,000 jobs added in the last year), but growth in the goods producing sector is in decline (a loss of 2,000 jobs). In contrast, manufacturing shipments are growing with non-durable goods up 11 per cent and total exports up 20 per cent. With a strong economy exports should continue, although increased mechanization and efficiency will capture corporate returns and labour will not be as big of a participant in exports through 2020 and beyond.
Real estate remains the bellwether of the coming year. With continued low interest rates and high demand, the construction trade is positioned for more growth in 2020, constrained only by access to reliable labour.
A shrinking housing supply witnessed price inflation of 8.7 per cent last year but sales retreated 8.6 per cent overall. With supply dropping to its lowest level in fifteen years the industry has responded with a 61 per cent increase in residential construction. 2021 will be the year the equilibrium shifts to the residential buyer/ renter as oversupply shifts the balance.