Tim Powers, vice-president of Summa Strategies Canada (left) answers a question from the crowd during the Canadian Chamber of Commerce annual general meeting in St. John’s Sunday, while Michael Gregory, senior economist and head of Canadian rates strategy, BMO Capital Markets, listens. — Photo by Colin MacLean/The Telegram
Canadians can expect some mild economic growth in the coming year despite media reports of another economic downturn.
The words of encouragement came from Michael Gregory, senior economist and head of Canadian rates strategy, BMO Capital Markets, who was a guest speaker Sunday at the annual general meeting (AGM) of the Canadian Chamber of Commerce taking place in St. John’s.
Gregory was one part of a dual presentation at the meeting, focusing on the Canadian economic and political outlook. Tim Powers, vice- president of Summa Strategies Canada, gave the political briefing.
Gregory, speaking on the economy, painted a mixed picture for Canada’s financial outlook by stating that while the country is in better shape than some reports have indicated, Canada is still vulnerable to global economic failures.
“So we do think that this soft patch will prove temporary, but the next three to six months are going to be quite uncertain and it’s that domestic uncertainty that is contributing to some of the weakness and volatility that we’re seeing in financial markets,” said Gregory.
This modest outlook is a far cry from six months ago when Canada’s economy was chugging along at full speed.
“When we first came out of the recession, we were literally firing on all cylinders,” said Gregory.
“Consumer spending, housing, business and government were all growing quite strongly, but that is beginning to change a little bit,” he said.
Government spending is slowing down, consumer spending is slowing down, and the housing market, traditionally a strong driver of economic activity, is cooling off, he added.
Gregory said he blames buyer fatigue for some of that domestic economic slowdown, although he gives credit where credit is due.
“Canadian consumers have done a great job buying a lot of big ticket items, homes, cars and things, but they’ve racked up a lot of debt. Now I think we’re at the point where I don’t think consumers have as much capacity to spend,” he said.
These domestic issues are compounded by a global marketplace that is becoming more and more skittish, he added.
This uncertainty stems from the emerging markets, such as China, Brazil and India, and whether or not they will tighten their spending policies to a point where the global market will be forced to slow down.
The other factor is the debt crisis ongoing in Europe and the U.S., the latter of which could have far reaching consequences in Canada, he said.
But all that being said, Gregory told the crowd of assembled delegates from across the country he foresees Canada faring better then most nations in the coming year.
“From our enviable resource exports to our top-rated banking system, Canada has a lot going for it,” he said.
“I think we will meet these challenges and the result will be modest economic expansion going forward,” he said.
Politics of money
Given how important politics is to the economy, and vice versa, the organizers of the AGM saw fit to pair a talk about the economy with a talk about the Canadian political scene.
Powers, a Newfoundlander, spoke at length about several issues, the foremost being the rise of the NDP and the connection between the Conservative party support base and the economy.
“The No. 1 focus for the government over the next six months is not playing silly bugger with the opposition, it is going to be the ongoing management of the economy,” said Powers.
He also mentioned that Prime Minister Stephen Harper’s legacy could be decided in the next six months and how he handles this latest downturn in the economy.
“I think Harper will see political success, with he as the author, if it is around economic policy. He knows that is where he can get great unison is around the economy,” he said.