QuoteRecession is over: Bank of Canada
Challenge is to now make our economy healthy once more
By Paul Vieira and Derek Abma, Canwest News Service
July 24, 2009
Canada's first recession in nearly 20 years has come to an end, according to the Bank of Canada, with the economy set to return to growth in the coming months as business and consumer confidence improves.
Canada's economic downturn, which had been ongoing for three-quarters of a year, is giving way to renewed growth in the current quarter as a result of improved credit markets and higher levels of consumer confidence, the central bank said in its monetary policy report on Thursday.
"We believe the economy will grow this quarter," bank governor Mark Carney told reporters at a media conference Thursday. "The rate of growth will pick up to the end of the year and into 2010."
The Bank of Canada's latest forecast is for economic growth of 1.3% for the current quarter ending Sept. 30, followed by a healthy 3% gain for the final three months of 2009.
In its previous forecast in April, the Bank of Canada anticipated the economy would shrink 1% in the current three-month period.
"It is there in black and white, that the recovery has effectively begun," said Douglas Porter, deputy chief economist at BMO Capital Markets. "I think it is astonishing how quickly the economy turned to the good in the last four or five months."
Finance Minister Jim Flaherty was also upbeat about an economic rebound,: "Recent news economically is more encouraging than it's been in recent months."
The Bank of Canada's latest ray of economic sunshine follows results of its business survey released last week that showed 61% of respondents expected their sales levels to improve in the coming 12 months. That was up from 30% when the same survey was taken three months earlier.
On Thursday, Carney said Canada -- along with the rest of the world -- is recovering largely because of extraordinary monetary and fiscal stimulus measures governments and central banks have implemented since the start of the financial crisis last fall.
For example, the Bank of Canada's key policy rate as low as it can go at 0.25%, and it has pledged to keep it there until June of next year.
"It is early days, and it is a long road," Carney said. "But things are unfolding as we broadly expected them to -- a little faster in terms of some of the recovery of confidence in financial conditions."
Carney warned the labour market would be slow to adjust to the pickup in momentum. Between October and June, the Canadian economy has lost 454,000 jobs, pushing the unemployment rate from 6.2% to 8.6%.
BMO's Porter said unemployment can expect to be at an elevated rate for some time.
"One of the last things to turn around is employment," he said.
Porter said the time lag between economic recovery and labour-market recovery is a result of employers waiting "to make sure the recovery is for real."
And as they see the need to boost production, companies will take initial steps such as moving part-time workers to full-time positions and having employees work overtime before they actually hire new staff.
Also Thursday, the Conference Board of Canada said its monthly consumer-confidence index was up for the fifth straight month. The measure rose 0.8 points to 82.9 in July, with a particularly positive change in consumers' attitudes toward the current period being a good time to make major purchases.
The Ottawa-based think-tank said although the July increase was marginal, the gradual improvement in sentiment indicates "consumers do indeed see a light at the end of the tunnel."
That report came one day after a Statistics Canada said retail sales rose a better-than-expected 1.2% in May, led by a 2.4% increase in automotive products.
And earlier this week, in its monthly monetary policy announcement, the Bank of Canada revised its forecast, saying the economy would contract 2.3% this year and grow 3% in 2010.
It had previously expected a 3% decline this year and 2.5% growth next year.
On Thursday, the Bank of Canada specified that some of the elements helping the economy recover this year would be better-than-expected improvements in consumer spending and housing sales.
Despite the upward revisions, however, the central bank suggested household spending is expected to remain "cautious" for the remainder of this year and next in light of a weak labour market, and stock-market losses sustained late last year and during the early part of 2009. The savings rate, meanwhile, is expected to remain "elevated" for the next several years.
The Bank of Canada said inflation, which influences its interest rates, has come in higher than expected as wages continue to increase despite weak productivity and an excess supply of goods.
There have been quite upbeat reports here too. The economy has apparently only stagnated in the last quarter and not shrunk anymore and they expect some growth again at the end of the year.
:( What about my extremely cheap mortgage? Is it bye bye time?
Quote from: The Brain on July 27, 2009, 02:25:29 AM
:( What about my extremely cheap mortgage? Is it bye bye time?
Not for a couple of years, no.
But I am afraid these rumors/reports of the recession being over are horribly over-optimistic.
... meanwhile, shoplifting is up!
http://www.google.com/hostednews/canadianpress/article/ALeqM5i3CkGQNQBCUX_y5LvQn6PXi1RalA
Quote from: Bluebook on July 27, 2009, 03:08:17 AM
Quote from: The Brain on July 27, 2009, 02:25:29 AM
:( What about my extremely cheap mortgage? Is it bye bye time?
Not for a couple of years, no.
But I am afraid these rumors/reports of the recession being over are horribly over-optimistic.
Seems that way to me also, from what I've been hearing elsewhere. Just yesterday on a CNN news program, several of the financial guests were very guarded about the course of things. I was actually a bit surprised about how bad things could get if what they say pans out. One issue was credit card debt about to hit the rocks. Other things like people have changed habits or have been hit so hard in their retirement or investment type accounts that it will all have negative effects on growth as many people will be reluctant to invest, will change habits. Saving is up, which should be good, but over all people need to be spending to pull the economy out. And that may not change too much given how hard people have been hit with their investments and such. Other issues, but I don't recall. But I've been hearing similar dark predictions for a while.
The recession is over?! Wahoo! Time to get back in credit card debt!
By the way that is the Canadian recession, not necessarily the US recession.
Quote from: Barrister on July 27, 2009, 08:29:31 AM
By the way that is the Canadian recession, not necessarily the US recession.
Damn...I guess I should cancel that big screen TV.
Quote from: Barrister on July 27, 2009, 08:29:31 AM
By the way that is the Canadian recession, not necessarily the US recession.
True, but I'd think Canadians have been hit by some of the same negative issues that have hit people in the US. But I'll be glad if the Canadian recession is truly winding down, as that shows some positive light over all, I'd think.
Quote from: Barrister on July 27, 2009, 08:29:31 AM
By the way that is the Canadian recession, not necessarily the US recession.
There was some positive news last week though, I'm optimistic.
Quote from: jimmy olsen on July 27, 2009, 09:10:18 AM
Quote from: Barrister on July 27, 2009, 08:29:31 AM
By the way that is the Canadian recession, not necessarily the US recession.
There was some positive news last week though, I'm optimistic.
Oh for fucks sake! I was also hoping for the recovery, but now it has become Tim-tainted. :bleeding:
:lol:
Quote from: Martinus on July 27, 2009, 09:14:01 AM
Quote from: jimmy olsen on July 27, 2009, 09:10:18 AM
Quote from: Barrister on July 27, 2009, 08:29:31 AM
By the way that is the Canadian recession, not necessarily the US recession.
There was some positive news last week though, I'm optimistic.
Oh for fucks sake! I was also hoping for the recovery, but now it has become Tim-tainted. :bleeding:
Superstitious nonsense.
Tim is the Chamberlain-Paper-Waving-"Peace in our time"-predictor of the future.
Quote from: KRonn on July 27, 2009, 08:35:24 AM
Quote from: Barrister on July 27, 2009, 08:29:31 AM
By the way that is the Canadian recession, not necessarily the US recession.
True, but I'd think Canadians have been hit by some of the same negative issues that have hit people in the US. But I'll be glad if the Canadian recession is truly winding down, as that shows some positive light over all, I'd think.
Not really. We didn't have a mousing bubble collapse, and we haven't had any bank failures. So we're in much better shape than you guys. Now the collapse of auto manufacturing has hurt parts of Ontario, and falling resource prices have hit some areas (although those having been coming back), but things aren't nearly as bad here as down there.
Besides though merely ending a recession doesn't mean much. I certainly remember the early 90s. Sure the recession ended quickly, but we had several years of weak growth after that.
the experts are saying that despite the End Being Here, unemployment in Ontario is still predicted to rise further than the current 8.6%.
not much of a recovery. I think they are saying that we are reaching bottom, so therefore its over and we are no longer "officially" receding.
they are also saying to keep up the stimulus spending.
I agree with BB. The biggest Canadian casualties of US meltdown were the lumber and auto sectors. The Lumber sector collapsed some time ago and the Canadian economy had time to absorb that hit before the auto sector collapsed.
I am not sure where all the wealth is being generated but I suspect that although China is not the economic engine it once was it is still growing enough to buy up Canadian raw materials to keep our economy in decent shape. Add to that the fact that our Banks were never at financial risk and we still have credit available for both consumers and business.
If oil prices go up or if we can convince China to build with wood instead of stone and brick (especially in earthquake zones) then the concern will be over worker shortages and inflation.
Quote from: saskganesh on July 27, 2009, 11:21:54 AM
the experts are saying that despite the End Being Here, unemployment in Ontario is still predicted to rise further than the current 8.6%.
not much of a recovery. I think they are saying that we are reaching bottom, so therefore its over and we are no longer "officially" receding.
they are also saying to keep up the stimulus spending.
I am not sure what Ontario is going to do to replace that auto sector. There may be the possibility of a population shift to the west if the other resource sectors heat up again.
Quote from: jimmy olsen on July 27, 2009, 11:53:18 AM
Hey, it's not like I'm Vamy.
Mine only works for soccer :P
Quote from: Barrister on July 27, 2009, 11:16:03 AM
We didn't have a mousing bubble collapse, and we haven't had any bank failures.
My cat is happy to hear it. ;)
phew.gif
I was wondering when someone would pick up on that typo. :lol:
I know the Jays will probably get a decent haul for Halliday, but I think the Bank of Canada is being a little over-optimistic about its impact.
Quote from: The Minsky Moment on July 27, 2009, 12:24:04 PM
I know the Jays will probably get a decent haul for Halliday, but I think the Bank of Canada is being a little over-optimistic about its impact.
:lol:
Quote from: The Minsky Moment on July 27, 2009, 12:24:04 PM
I know the Jays will probably get a decent haul for Halliday, but I think the Bank of Canada is being a little over-optimistic about its impact.
They know that Canada will always go as the Jays go. If they made Cito Gaston Prime Minister Canada would enter a golden age.
Quote from: The Minsky Moment on July 27, 2009, 12:24:04 PM
I know the Jays will probably get a decent haul for Halliday, but I think the Bank of Canada is being a little over-optimistic about its impact.
The Bank of Canada has been a bit too much of a cheer leader for my liking. Back in October they were saying Canada would not go into recession and now they are saying we are already out.
Quote from: Martinus on July 27, 2009, 09:14:01 AM
Quote from: jimmy olsen on July 27, 2009, 09:10:18 AM
There was some positive news last week though, I'm optimistic.
Oh for fucks sake! I was also hoping for the recovery, but now it has become Tim-tainted. :bleeding:
Tim is always optimistic, so by this line of reasoning we are in a never-ending downward spiral.
Dunno. There's been a bit of an uptick in new home sales in the US, but I think it has more to do with the new home tax credit thingie than anything. And that's about to expire. Homebuilder stocks shot up there for a bit but now they're tanking again. There are rumblings of commercial real estate about to follow residential down the drain, but I don't know if that will happen or not. I've stayed mostly out of REITs in any case.
*lights a cigar with a hundred dollar bill then adjusts monocle*
:excellent: