OTTAWA — Canada appears to be in the final throes of a painful recession, with growth that’s now starting to trickle through the economy intensifying next year, say two reports released Thursday.
The Conference Board of Canada and Scotia Economics expect Canada’s economy to grow in 2010 after shrinking this year because of industrial restructuring, falling commodity prices and slumping exports.
Both reports fit the emerging consensus that the recession’s end is near following more than nine months of damage to workers, businesses, the stock market and homeowner wealth.
Bank of Canada Gov. Mark Carney recently said the summer quarter should produce growth of 1.3 per cent, the first quarterly economic expansion in Canada since last fall. But Finance Minister Jim Flaherty has cautioned against overly optimistic assessments, warning that Canada will continue to shed jobs even if there is GDP growth.
The Conference Board of Canada’s summer outlook says Canada’s economy will shrink by 1.9 per cent this year, but it will bounce back next year with 2.7 per cent growth as commodity prices recover and Americans open their wallets again.
Americans have seen their nest eggs, investment holdings and home values decimated by the recession, and that coupled with rising unemployment has led many to become more stingy in their spending habits.
That, in turn, has weakened growth prospects in America’s trading partners, notably Canada. That means U.S. demand for everything from Canadian-built cars and trucks to lumber, newsprint and machinery has slumped, leading to layoffs north of the border.
Scotia forecast a similar economic retraction this year, 2.2 per cent, followed by a 2.5 per cent expansion in 2010.
“By many indicators, the current quarter will likely mark the end of the Canadian recession,” wrote Scotia economist Alex Koustas.
The reports differ on how the provinces will fare this year.
The Conference Board sees Manitoba and the Maritime provinces — which it says aren’t prone to boom-bust cycles and have been sheltered from the economic downturn — as the only provincial economies expected to grow this year.
“They weren’t as affected by the commodity prices collapsing,” said Marie-Christine Bernard of the Conference Board.
“In general, all three Maritime provinces, their labour markets have not collapsed. There’s been some job losses, but nothing compared to the national level or what we’ve seen in Ontario and Alberta and B.C.
“With the labour market, we’re seeing that consumer demand is also stronger in the Maritime provinces compared to other provinces.”
Scotia, on the other hand, expects Saskatchewan to be the only province whose economy will expand this year.
The bank points to a rebound in the potash industry after high prices scared off buyers and hammered stocks. Uranium production and oil prices are also expected to climb.
“Saskatchewan’s resilient resource sector and domestic economy are expected to be growth leaders this year and next,” Koustas wrote.
Both reports agree the economies of provinces will grow, or at least not shrink, next year as Canada takes trepid steps toward recovery.
But the economic growth won’t come without pains.
The Conference Board says stimulus spending by the provinces — often to match federal cash infusions — will leave regional governments with big deficits for some time.
The reports also warn a stronger Canadian dollar — which is fluttering above 90-cents U.S. and rapidly closing in on the greenback — could hinder a bounceback in manufacturing.