“What’s Ahead for the
Global and Canadian Economy 2010”
With Brian Beaulieu of the Institute for Trend Research
September 22, 2009
Executive Summary
- The global recession has formally ended and a global recovery is underway.
- Recent leading indicators have demonstrated improvements in the Canadian and US economies.
- Lagging indicators will still give the impression that the economy has not turned around (bankruptcies, foreclosures and commercial real estate failures) however that is the nature of “lagging” indicators.
- The Canadian economy is expected to recover in 2010 and continue to improve through 2011 and 2012.
- The economy is expected to be soft in 2013 and 2014 as a result of the governments’ stimulus packages coming to an end.
- The economic upturn will be a jobless recovery. Unemployment will decrease but will stall at around 6%.
- Due to continuing significant deficit forecasts in the US at close to a trillion dollars per year over the next eight years, higher interest rates, inflation and significant weakening of the U.S. dollar is expected for the next 5 – 10 years.
- Canada is envied for its stable banking sector. The continued weakening of the US dollar will place the Canadian dollar at par or higher within the year, as investors pull away from the “Greenback” and invest in the “Loonie”.
- The increase in the value of the Canadian dollar will stunt the recovery in the manufacturing sector whereas the US manufacturing sector should see a significant increase as a result of the weakening of its currency.
- Commodity prices will be subject to upward pressure as the increase in economic activity takes hold.
- Crude oil prices will continue to increase at approximately ten dollars per barrel over the next year and at a similar pace the year after.
- China’s economy represents a growing percentage of the global GDP; however much of the current manufacturing activity is leading to increased levels of inventories. This would indicate a future slowdown in their economy as current inventories are first drawn down.
- Unless the US gets a handle on its deficits and becomes more fiscally responsible in the short term, the Institute for Trend Research is forecasting that somewhere between 2030 and 2040 there will be a “modern day depression”.
Action Steps
- Interest rates have reached their lowest point and the Bank of Canada will take action to adjust the interest rates upward once the economy begins to expand. Where possible, all borrowings should be locked-in at current long term rates.
- With interest rates at an all time low, the rebounding economy and the weakening of the US dollar, the maximum tolerable should be borrowed and invested in wealth creating assets.
- Investors should consider purchasing US residential real estate now and commercial real estate in 2011 and 2012.
- Businesses should immediately start to make capital expenditures, lock-in employment contracts, renegotiate long-term leases; hire high-caliber employees and plan for long-term strategic initiatives.
- Businesses should consider pursuing selling opportunities outside of North America (for instance Brazil, Costa Rica and Panama). It will not be a return to “business as usual”.
- Countries that have a diverse, growing and well-educated demographic together with rich natural resources such as Canada, Brazil and parts of Latin America are expected to have strong economic futures
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