Back in Action

After a significant absense, I've returned to the world of internet commentary and economic/political analysis. So here it is.

Today's story is a response to an article in today's paper (Medicine Hat News) titled, Canada's economy not looking so hot: slow growth may be best-case scenario . The name says it all. After an estimated contraction of 0.1 percent in April, economists are arguing that Q2 will show some very modest growth. This is largely caused by global trends (earthquake in Japan, etc.) but still affects the bottom line.

"While nothing remarkable, most economists would gladly take such an undramatic outcome. The trouble is, drama is in the air...'You will see a lot of excuses Thursday about April,' says Benjamin Tal, deputy chief economist with CIBC World Markets. 'People will say, 'Oh, don't worry about it, it's just the weather.' The other story is that we are in a really soft period reflecting a very weak American economy and some softness in here in Canada. (But) The fact is we are in a very modest recovery and that's an understatement.'"

The bottom line is, net growth is slow. And it means that our "rebounding recovery" is starting to look like it will be similar to the rest of the world. There are a few key concerns which are valid about this.
1. The article notes that Canada is still carrying a housing bubble. If weak growth continues and causes any more recessionary aftershocks, this could lead to a bursting which would hurt a little.
2. With Greece's flailing fiscal situation still in question (although less so as of late), worries still exist of financial pressures (don't say the "C" word) on Canadian currency which could lead to problems for the BoC. The article explains it better, in case you're economics head has been in a hole for the past 6 months (apparently like mine has)
3. One of this country's long-term shortfalls has been its low worker efficiency. As noted in previous blogs, Canada is in a position to recieve a higher investment flow. With our current exchange situation, we are also in a good position to be importing higher amounts of capital and especially high-tech/tech-sector capital. This combination could result in the development of greater and more niche tech-clusters throughout Canada. This would, in turn, also positively impact worker output efficiency.

Continued weak growth could ultimately signal to investors that Canada isn't necessarily safe for high-tech sector investment and undermine this potential trend.


So those are the real problems that I'm concerned with in this article. However, keep in mind that it's not all bad. The blanket statistics which are reported in these articles always seem to ignore the fact that this growth is across the whole country. Certain provinces are going to continue to grow. The Oil and Gas exporters (BC, AB, SK, NF) are going to see a bit of a decline in growth with commodity prices pulling back but I believe that their key exports will be largely unaffected and so will their growth.

At the end of the day, I always believe that unless we a plunging as an economy a little recoil is fine as the economy is simply cutting speculative fat. It means that past growth wasn't based on substantive development but on borrowed money (as per the article) and speculated investments.