NAFTA talks cloud in gour financial future, TD economist tells luncheon
United States President Donald Trump is“driving with a lot of fog” right now, an economist told members of the Peter borough business community Thursday.
The keynote speaker at the TD Economic Outlook Luncheon, TD Bank Group vice president and deputy chief economist Derek Burleton was referring to the economic uncertainty created by continuing North American Free Trade Agreement (NAFTA) negotiations.
The Americans’ hard-lined items would represent “quite a shift in the status quo” if they were to become part of a new deal, Bur let on explained.
For example, a 50 percent United States content requirement and an 85 per cent North American content requirement for vehicles, scrapping the NAFTA arbitration system and demanding Canada end its system of supply management.
“It doesn’t seem like we’re close to a deal,” he told dozens gathered at Peter borough Golf and Country Club. “My view is that it could go either way ... it comes down to the politics of it.”
In order for the U.S. to pull out of the agreement, Congress–which is dominated by Republicans–would have to be onside, said Burleton, who offers industry analysis as he speak sat about 75 events annually across North America.
Trump just wants to “get some wins” that he can take back to the masses, said Burleton, who remains hopeful a deal can be reached. “It’s just a bunch of grey. We don’t know.”
Burleton addressed a variety of financial topics Thursday, including the hot housing market–which has been responsible for most of the growth in Canada’ s economy– inflation, household spending, debt and planned changes to Ontario’s minimum wage.
The massive growth in the housing market is not sustainable, the economist explained. The seven percent growth is Canada’ s home ownership is higher than anywhere else and eventually, we will see a shift back towards more rentals, he said.
The global economy has been in a “nice phase” overall that has neither been too hot or too cold, with growth of about 3.5 per cent, he said.
At the same time, inflation remains very low and economists are trying to determine why. “All we know is that something is going on that isn’t usual.”
This is a key reason why we should expect interest rates to stay low, Burleton said.
Speaking about Canada in particular, he pointed out that TD economists predict an 80 percent chance the U.S. could slip into a recession– something it hasn’ t seen for nearly a decade and could “blow north of the border.”
The value of the dollar has declined in recent months and Burleton said more of the same is expected in the short term, with it expected to hover around 80 cents American by the end of 2017.
It will rebound somewhat in the longer term, however, as the Bank of Canada is expected to hike interest rates, he said.
What’s most surprising about the economic forecast is spending, Burleton said.
While businesses are investing about the same as a year ago, consumers are spending more than expected–and economists can’ t say exactly why. Credit card use is also up, but the rates are not sustainable, he said. “We have a big drop-off in our forecast.”
While many households are barely making payments, they are in a financially stable position because they continue to pay off principal, Burleton said.
What does worry him are the 12 per cent of households that are highly indebted and at risk in the event of a setback, he added.
As for the coming increase to the minimum wage, the economist said moving from $11.60 to $15 by early 2019 will be “more disruptive” in Ontario than in Alberta or British Columbia .“It could have quite a big impact.”
He doesn’t expect a spike in job losses, but“it will certainly cut into growth.”
Burleton recommended government spread the increase out over two more years, particularly for smaller cities will the impact will be more “biting.”
A benefit will be more spending, he added. “But I worry about some of the offsetting negative effects in the short term.”
Peter borough and the K aw art has Economic Development (PKED) president and CEO Rhonda Keen an also spoke Thursday, updating business leaders about four emerging trends that will shape the work of the organization in 2018.
The first trend is continuing community growth. More residential development requires more investment in infrastructure to serve plains, trains and automobiles, she said.
PKED hopes to see support for Via Rail’s proposed Toronto-Peter borough-Ottawa-Quebec City high frequency passenger rail service, for example.
The second is that the face of the economy is changing. The retail and manufacturing sectors are transforming, meaning it will be critical that were-in vent ourselves through innovation, Keenan said, pointing out the importance of collaboration in this area.
The third is staying on trend in tourism. The region will continue to focus on experiential travel and adapting to the needs of its visitors, she said.
An example of offering an experience one can’t find elsewhere was the Under Water Dining at Lock 21 held this year, an event that sold out in less than 12 hours, drawing visitors from as far away as California, Keenan said.
The region has also become a destination for cyclists, something else officials will continue to encourage moving forward.
The final trend is the rise of entrepreneurship, Keen an said, highlighting the shift towards self- employment and micro enterprises.
So far in 2017, some 42 businesses have opened their doors locally, she said, adding how the city is quickly becoming known as a start-up community. Those kinds of businesses are also a great way to engage and retain youth, Keenan added.
The luncheon was a partnership between PKED, TD Bank Group and Collins Barrow.
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