Economists say growth will be slow this year

Canadians’ confidence in the economy appears to be reviving but some of the country’s leading bank economists predict the pickup will be relatively slow and that it could take years to return to pre-recession conditions.

Canadians’ confidence in the economy appears to be reviving but some of the country’s leading bank economists predict the pickup will be relatively slow and that it could take years to return to pre-recession conditions.

“This is the recession that will go on giving,” Don Drummond, chief economist of TD Bank Financial Group, told a gathering at the Economic Club of Canada Wednesday.

“We will be talking about remnants that built up well into 2011, (even) 2014.”

Economists at the other big banks share a similarly cautious outlook for the year, predicting that Canada and the United States will experience 2.5 to three per cent growth in gross domestic product this year, with jobs growth showing modest gains and the Canadian dollar inching ahead

A survey by Pollara Strategic Research for the Economic Club of Canada suggests that Canadians are more optimistic than they were last year but remain wary, particularly when it comes to the jobs front.

The study found that 54 per cent of Canadians surveyed in December believed the economy will improve in 2010, a huge boost from the same time last year when only 20 per cent expected 2009 would bring better times.

The Pollara poll also found more respondents, about 17 per cent, believed Canada is in a period of moderate growth, compared with only six per cent who felt that way in 2009.

The results weren’t all positive, though.

Pollara found fewer than half of those surveyed (43 per cent) said they think the employment situation will improve and nearly one-quarter (22 per cent) felt the situation will worsen in 2010.

However, both were improvements from last year when only 12 per cent felt employment would improve and 68 per cent thought the job situation would deteriorate.

More than three-quarters of Canadians surveyed by Pollara (78 per cent) still believed Canada is still in recession, but that’s down from 91 per cent a year ago.

Economists have said they expect unemployment in Canada and the United States would continue to rise, as is often the case in the early stages of a recovery.

“What we are likely to see is more of what we’ve been seeing,” said Avery Shenfeld, chief economist at CIBC World Markets.

“We will likely have the unemployment rate crest and come down, but it doesn’t look like it will come down aggressively this year.”

“It’s enough to keep Canadian consumers spending, not necessarily at a barn-burner pace, but reasonably comfortably.”

Stronger optimism about the economy has shown up in several recent economic reports, including one by the Conference Board of Canada, which said that its consumer confidence index rose in December after weakening for two consecutive months.

Another study by Royal Bank (TSX:RY) showed that more Canadians were confident about their financial situations in December, and that they were less worried about the job security of people in their households.

The Bank of Canada has warned that a stronger Canadian dollar could offset economic gains by making exports to the United States less competitive.

The Canadian dollar was at 96.85 cents US on Wednesday, up about two cents over the past week.

Craig Wright, chief economist for RBC Financial Group, said that he expects the loonie to rise above the U.S. dollar in the coming months before falling back below parity by the end of the year.

He said that a climb towards parity could encourage some companies south of the border to ramp up their orders for machinery, including orders for domestically manufactured construction equipment.

“A strong Canadian dollar makes importing machinery that much more affordable,” he said.

“That’s going to offset ongoing weakness on the trade side.”

Meanwhile, a recent report from the U.S. Institute for Supply Management said its manufacturing index rose to the highest level in almost three years in December, an increase that’s expected to provide an indirect boost to Canada’s manufacturers.

BMO Capital Markets chief economist Sherry Cooper said that even if the loonie touches parity, or at least hovers around its current levels, other currencies will prevent any major upswing.

“Until China is willing to allow its currency to rise significantly, much of the burden of the U.S. dollar’s fall will be on currencies like Canada’s,” Cooper said.

Scotiabank economist Warren Jestin said he believes the developed world will see a much slower growth trend than considered normal in the past, and that developing nations like China, India and Brazil will launch stronger growth rates.

“We are on the road to recovery but it certainly isn’t taking us back to where we were before the recession began,” he said.

Pollara chairman Michael Marzolini said that while many Canadians’ fears about the economy have abated, “the public has now shifted to focus on the growing national debt.”

Marzolini said that the number of Canadians expecting higher taxes has doubled since the survey last year.

The results were collected by Pollara from 4,263 respondents between Dec. 6 and Dec. 14 and were considered to be accurate within 1.5 percentage points, 19 times out of 20.

Small and medium-sized businesses owners, meanwhile, are taking the signs of growth lightly, and a separate poll by the Canadian Federation of Independent Business suggests that they are leaning more towards caution.

The federation said its December survey suggests the economy was still only recovering at a gradual pace during the month, with its business barometer index falling to 63.7 from 68 a month earlier and still below a 2009 peak of 68.7.

It said the sour mood among small business owners and operators last month prevailed across 10 of the 13 industry categories the federation surveys and in 8 of 10 provinces.

The federation’s chief economist Ted Mallett said the survey indicates that small business owners felt they were not “out of the woods yet” after the recession, and were worried that there will be a large tax bill to deal with alongside slow economic growth.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

There were six additional deaths across Alberta reported over the past 24 hours, bringing the death toll to 1,926 since the beginning of the pandemic. (File photo)
AstraZeneca vaccine is ready to be used at a homeless shelter in Romford, east London, Wednesday, Feb. 3, 2021. THE CANADIAN PRESS/AP-Frank Augstein
AstraZeneca-linked blood clot confirmed in Alberta

A case of an AstraZeneca-linked blood clot has been confirmed in Alberta,… Continue reading

The Red Deer Catholic Regional Schools Board of Trustees selected the name St. Lorenzo Ruiz Middle School to be built in the north end of Red Deer. (Photo Courtesy of  Red Deer Catholic Regional Schools)
Red Deer Catholic Regional Schools raises about $8,720 for Terry Fox Foundation

Red Deer Catholic Regional Schools raised about $8,720 for the Terry Fox… Continue reading

A nurse gets a swab ready at a temporary COVID-19 test clinic in Montreal, on Friday, May 15, 2020. Health Canada has reversed course on home test kits for COVID-19, saying it will now review applications for such devices. THE CANADIAN PRESS/Paul Chiasson
Alberta declines Ontario’s request to send health-care workers

Alberta is “not in a position” to send health-care workers out of… Continue reading

The Red Deer Rebels allowed four straight goals from the Medicine Hat Tigers Friday night on the road. (Photo by Rob Wallator/ Red Deer Rebels)
Tigers hand Red Deer Rebels 10th straight loss

Tigers 4 Rebels 2 Through 17 games in the shortened WHL season,… Continue reading

Red Deer Public Schools will not pilot the new draft curriculum at its elementary schools. (File photo contributed by Red Deer Public Schools)
UPDATED: Red Deer Public Schools says no to piloting new curriculum

Alberta Teachers’ Association support school boards

Ontario Premier Doug Ford points on a COVID-19 caseload projection model graph during a press conference at Queen's Park, in Toronto, Friday, April 16, 2021. Ontario was set to backtrack on controversial new police powers to enforce stay-at-home orders implemented in the battle against COVID-19.THE CANADIAN PRESS/Frank Gunn
Ford backtracks on new police COVID-19 powers amid intense backlash

TORONTO — Furious criticism of new anti-pandemic powers that allow police in… Continue reading

The official program for the National Commemorative Ceremony in honour of Prince Philip, The Duke of Edinburgh, sits on an empty pew prior to the ceremony at Christ Church Cathedral in Ottawa on Saturday, April 17, 2021. THE CANADIAN PRESS/Sean Kilpatrick
Prince Philip remembered as ‘a man of great service’ during Canada’s memorial service

Canada’s commemorative ceremony in honour of the late Prince Philip offered a… Continue reading

CF Montreal head coach Wilfried Nancy speaks to his players during the team's practice Tuesday, March 16, 2021 in Montreal. THE CANADIAN PRESS/Ryan Remiorz
CF Montreal puts on a show, defeating Toronto FC 4-2 in MLS season opener

FORT LAUDERDALE, Fla. — CF Montreal, carving open Toronto FC’s defence, cruised… Continue reading

Demonstrators using umbrellas as shields approach a point in a perimeter security fence during a protest over the fatal shooting of Daunte Wright during traffic stop, outside the Brooklyn Center Police Department, Friday, April 16, 2021, in Brooklyn Center, Minn. (AP Photo/John Minchillo)
Journalists allege police harassment at Minnesota protests

Some journalists covering protests over the police fatal shooting of Daunte Wright,… Continue reading

A container ship is docked in the Port of Montreal, Wednesday, February 17, 2021 in Montreal.THE CANADIAN PRESS/Ryan Remiorz
Montreal dockworkers begin weekend strikes as talks drag on

MONTREAL — Dockworkers at the Port of Montreal kicked off a series… Continue reading

Brad Dahr, 53, is facing numerous charges. (Photo contributed by Alberta RCMP)
Alberta man charged for alleged sexual offences against children

An Edmonton man has been charged for alleged sexual offences against children… Continue reading

A person walks past a COVID-19 mural designed by artist Emily May Rose on a rainy day during the COVID-19 pandemic in Toronto on Monday, April 12, 2021. Employment lawyers say flouting COVID-19 public health orders when off the job or coming into work while knowingly sick could warrant discipline in the workplace. THE CANADIAN PRESS/Nathan Denette
Risky pandemic behaviour off the clock could mean workplace discipline: lawyers

CALGARY — Employment lawyers say flouting COVID-19 public health orders when off… Continue reading

Vials containing Russia's Sputnik V vaccine for COVID-19 are seen at the San Marino State Hospital, in San Marino, Friday, April 9, 2021.  THE CANADIAN PRESS/AP-Antonio Calanni
China, Russia using their COVID-19 vaccines to gain political influence

OTTAWA — China and Russia have been using their locally produced COVID-19… Continue reading

Most Read