TORONTO — After relatively modest growth in the third quarter, Finance Minister Jim Flaherty is optimistic Canada’s economy will pick up the pace into next year.
Flaherty said Tuesday he believes the domestic economy will show more strength in the remainder of this year and into 2010, eclipsing the slow climb out of a recessionary environment that has characterized the recovery so far.
“We hope that we will have a continuation of growth at a greater pace in (the fourth quarter),” Flaherty said at an announcement for federal stimulus spending money to help renovate Maple Leaf Gardens.
“We are certainly more optimistic about economic growth in 2010.”
The minister’s outlook comes as economists, who generally agree that the climb will be sluggish in the coming months, grapple with just how quickly the economy will regain its posture.
“Over the next six months we’re in a recovery phase,” said Warren Jestin, the chief economist at Bank of Nova Scotia (TSX:BNS).
He said inventory adjustments, particularly in the auto sector, will drive growth as companies ramp up production.
“Auto production is starting up and government projects are finally getting into the ground. In general, that will lead us into another phase that will tend to be one of probably sustained growth, but not as strong a growth as we used to think was normal,” he said.
Jestin warned that developed countries could risk weakening again as stimulus packages start to run their course. Many economists caution the economy is still walking a knife’s edge between recovery and another downturn.
Statistics Canada offered some cause for optimism on Monday when it reported that Canada’s real gross domestic product inched ahead in the third quarter at an annualized rate of 0.4 per cent, marking an end to the recession in this country.
Meanwhile, Canada’s jobless rate sits at 8.6 per cent, and consumer confidence fell in November, according to a report from the Conference Board, as Canadians worried about the future of their jobs. Major Canadian companies like Rogers Communications (TSX:RCI.B) and Bombardier, (TSX:BBD.B) have slashed hundreds of jobs in the past few weeks.
Jestin said that the jobs market will see a gradual pickup, with the country adding net new jobs in 2011, but “they’re going to be different jobs than in the past,” he cautioned.
“Additional jobs created are probably going to be in areas that are small firms, medium-sized firms and very specialized in their markets. (They will be) less focused on the U.S., more focused on niche markets,” he said.
A report Tuesday by CIBC (TSX:CM) weighed more on the negative side, saying that key metropolitan areas in Canada are still feeling the financial pinch.
CIBC, which compiles a metro monitor index, said that 10 of the country’s top 25 urban areas showed negative growth in the third quarter.
“On a year-over-year basis, our index continued to trend downward,” said Benjamin Tal, a senior economist at CIBC.
“More than two-thirds of Canadian GDP is generated in Canada’s major cities. So the tale of those cities is the tale of the economy.”
The report said nine of the 10 cities that experienced negative growth were in Ontario and Quebec, which have both been battered by years of weakness in the manufacturing and forestry sectors and hurt by lower demand for their products in the United States and a stronger loonie.
“Calgary and Edmonton, which until recently were the stars of our index, (are) losing ground rapidly and currently hardly above water in terms of overall economic momentum,” Tal added.