Peter Hall, Vice President and Chief Economist, Export Development Canada, provided some valuable insights at the recent Burlington Economic Development Corporation's Economic Forecast Breakfast.
Some of the highlights:
Europeans are in a recessionary zone as well as Japan. Half believe it will get better and half believe it will get worse.
There is a lot of pessimism in the marketplace. Are we being psyched out and allowing the prophecy to become reality? Pessimism has three s's for a reason:
- Pessimism sells
- Pessimism spreads
- Pessimism is self-fulfilling
Have we talked ourselves into low growth? Many are calling this the new normal.
Five indicators are showing us a different story. Financial markets are exhibiting a new confidence:
- Lending activity – attitude of senior loans officers is improving. Bank lending is showing signs of easing. It is happening, first in the U.S. and then in Europe.
- Fright fatigure – after wave after wave of bad news, there is an underlying confidence that policymakers are generally getting it right.
- Looking at new solutions – the volatility that occurs is less often.
- Restoration of fundamental demand or balance.
- Momentum is economy – as more people put money on table, others are following.
Hall talked about the impact of psychology in the marketplace: "A critical problem is psychology in the marketplace. We are not mentally prepared for growth. The 'you first' mentality has made us cautious."
Next year, Hall predicts Europe's economy will grow. There are positive signals in the U.S. as well. Their housing market is roaring ahead; prices are rising and people are flooding into the market. Housing is a leading indicator of all economic activity, and after a hot quarter of growth in the U.S., we usually feel it here in Canada.
Businesses, both financial and non-financial are sitting on $6 trillium in cash in the U.S. How come we don't see this in the GDP numbers?
Emerging markets are getting on their feet again with a prediction of 8-10% growth in the next few years.
What does this look like to Canada? When trade lost one quarter of activity in 2009, growth in our internal economy was respectable. We were somewhat shielded, but indebtedness levels were high – not a source of growth moving forward.
What can we count on?
- Exports. Canadian dollar related to oil prices. Sitting at 97 cents right now.
- Revival of U .S. is the lynchpin for our economy. We are continuing to diversify into emerging markets. Emerging markets are 12% of overall trade activity; 30% of merchandise is exported to emerging markets. It's a new Canada.
We believe we will see trade growth of 5% this year and 8% next year.
The right strategic decision is to make sure we are geared for growth coming our way.
For more information on the EDC, visit www.edc.ca