‘ NEW NORMAL’ IS SLOW GROWTH
Canada poised to jump on U. S. upturn
Get ready for Canada’s “new normal” economy, one categorized by a long period of weak post- recession growth and slower pace of job creation.
Many forecasters, both private and institutional, have been downgrading expectations for the Canadian economy, which — like many major industrialized countries — is still struggling to shake off the lingering impact of the 2008- 09 recession and, to a lesser degree, the financial crisis that preceded it.
In fact, the Organization for Economic Cooperation and Development says its most recent gauge of leading indicators for Canada declined in 2014 and will remain weak, although stable, this year.
The OECD’s reading — with 100 as the long- term average — put Canada at 99.9 in January, down from 100 the previous month, while the United States was unchanged at 100.2.
Consumer confidence in Canada’s outlook is also wavering, along with the economy.
In particular, consumers are having second thoughts about buying big- ticket items, according the Conference Board of Canada’s February survey, and many believe employment opportunities are fading.
“The results showed Canadian’s deteriorating confidence about their current and future financial situations, their willingness to make a major purchase, and ... about future job prospects in their region.”
But the “new normal” for the Canadian economy may not be new at all, according to a study by the Fraser Institute, published Tuesday.
In fact, Canadians have lived through different versions of “normal” after previous downturns, and we have often come out the other side in pretty good shape.
The Vancouver- based think- tank says “slow growth in a recovery is not unprecedented and does not augur ( that) weak growth will continue.”
“There is reason to believe that pessimism about growth will prove to be an over- reaction to the current environment, just as happened in the 1930s and 1970s.”
Those past periods of prolonged weak expansion “ended when governments adopted better and more predictable policies,” argues Philip Cross, author of the study and former chief economic analyst at Statistics Canada.
“Canada is particularly well- positioned to take advantage of an upturn in the U. S. economy, since the lasting impact of the recession upon ( our) financial sector and labour markets has been much less pronounced than in the United States.
“This will help Canada overcome the recent slump in commodity prices,” Cross adds.
The Canadian economy grew 2.4 per cent in the fourth quarter of 2014, lifting the annual pace to 2.5 per cent, up from two per cent in 2013. The final reading for last year matched the Bank of Canada’s forecast.
But with the plunge in oil prices, the central bank expects economic growth of 1.5 per cent in both the first and second quarters of 2015 — with overall yearly advance of 2.1 per cent.
Private- sector forecasters put this year’s growth closer to two per cent.
And while the U. S. lagged slightly behind Canada in annual output last year, it is likely to post growth of about three per cent or higher in 2015.
“Canada’s population is getting older, and there’s nothing we can do about that. But the right government policies will help spur economic growth despite our millions of aging baby boomers,” Cross says in the study.
Similar to other post- recession periods, he says “governments could encourage more growth by creating an environment conducive to innovation by removing regulatory barriers, such as those being erected to inhibit the growth of innovative new technologies ... or preserving protected sectors such as telecommunications and finance.”