The Canadian Chamber of Commerce is warning that Canada's economy is heading into a period of subdued growth after an initially robust rebound from the recession.
In its Economic Outlook for 2011 report, released Monday, the chamber said a number of factors will constrain growth below 2.5 per cent next year, after a "sluggish" expansion of 2.3 per cent in the second quarter of 2010 and a mere one per cent in the third quarter.
Canadians will be spending less as they work on repairing their finances after racking up record debt levels, and the hot housing market will cool over the Harmonized Sales Tax in Ontario and B.C. and amidst tighter mortgage rules.
The chamber also said the end of the federal economic stimulus program in March and overall government belt-tightening will mean government spending will contribute less to overall real GDP growth.
The ongoing economic woes in the United States will continue to dampen demand for Canadian exports, while a high Canadian dollar will continue to strain the U.S.-Canada trade balance, the chamber said.
"The Canadian economy is chugging along but not at full steam," said Chamber of Commerce president and CEO Perrin Beatty.
According to Beatty, a factor that will contribute significantly to Canada's economic growth in 2011-12 is business investment, particularly in machinery and equipment.
Imports of machinery and equipment hit a 13-year high in October, and imports will be further fuelled by the strong loonie, low borrowing costs, high corporate cash reserves and few tariffs.
"With strong headwinds buffeting the economy and competitive pressures remaining fierce, it is encouraging to see the increased push by Canadian companies to invest in productivity-enhancing goods," Beatty said.
The chamber predicted that factors such as Canada's "enviable" fiscal position, strong banking system and favourable commodity prices will all contribute to keeping the loonie at or slightly above parity in 2011 and into 2012.
The chamber also said it expects the Bank of Canada to hold interest rates at their current levels until next summer, with the overnight target rate hitting two per cent by the end of 2011 and three per cent by the end of 2012.
While the report's figures look ahead over a two-year period, Bank of Canada Governor Mark Carney has warned that recovery from the economic crisis could take as long as a decade.
"History suggests that recessions involving financial crises tend to be deeper and have recoveries that take twice as long," Carney recently told the Economic Club of Canada.
"In the decade following severe financial crises, growth rates tend to be one percentage point lower and unemployment five percentage points higher. The current recovery is proving no exception."
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Firinn
A " Recession " is that what we call this cycle we were in ? You know what folks, we have never been through this before, There is no economic classes or models for what has taken place . THIS is a change of Empires. Canadian jobs in manufacturing , industry have left for the east PERMENANTLY ! The good ole days are just that. Love how the King Steve followers applaud the fiscal wizadry of the Cons. How quick you forget to point out how they denied even being in a recession or how Canada would be effected deeply by the US economy, Flaherty looked like an ass. Nice to pat yourself on the back when hypocritically pleasing.The TRUTH is Canada will undergo major changes to housing, industry, class system just as the USA in the next decade. It doesn't matter which party is in power . CHANGE is coming for this nation. No political party will save you from this uprising.
Mike
Sadly, we have a government that lacks the real vision for pulling us out of the recession. The stimulus money, which the Cons had to be forced by the opposition into spending and for which they are now taking credit, is beginning to run out. In any case, it was frittered away in individual riding's, most of them Conservative, instead of being spent strategically to improve the economy. It’s too bad there wasn’t a comprehensive plan for bringing our infrastructure into the 21st Century. What if this money had been spent on a high-speed rail system running from Windsor to Quebec City? We would have put many people to work in construction and in industries supplying steel and we would have something tangible to show for it afterward. Here in Alberta, we could build also build HSR between Calgary and Edmonton. How much more competitive would the heart of industrial Canada be if we could move people quickly, efficiently and safely. Think of the hundreds of thousands of man hours saved not sitting in traffic or waiting in airport security check-ins. Think of the thousands of tons of green-house gases we could have saved from being spewed into the air we breathe. Sigh... yes, just think of what we could accomplished... if we actually had a government with some VISION.
Gerald
Hey...where's that little Wiki guy? All turkey'd out??
JB in Ontario
Put me at the helm, I 'll get this economy just rock'in!!!
URU
Chugging along means the economy is coming to an end!!!! The best of the worst hasn't really started yet because everyone was too focus on buying nonesense things for Christmas. Buy now cry later!!
eddytoronto
Yes the way to get the economy going is High -speed rail(MAGLEV) interesting Im very happy CTV asked this question. I commented on this 1yr ago on CTV.CA ...A 0% loan for such a long overdue project...The construction of 50,000 miles of modern maglev rail systems and Idled auto plants should be reconverted for these purpose. High energy physics, and biomedical research should also be fully funded in this way to provide technological modernization. These are quite simply the requirements for the maintenance of human civilization in this part of the world. Until measures like these are carried out, Canada and the world will continue to sink deeper into the bottomless pit of economic depression.We need to wipe out the derivatives bubble with the help of a 1% Tobin tax or securities transfer tax, on all speculative financial transactions, including futures, options, stocks, bonds, commodities, foreign exchange, and so forth. The top 10 Wall Street banks are zombie institutions that need to be seized and liquidated under Chapter 7 bankruptcy at once, with all of their derivatives going into the shredder. Foreclosures on homes, farms, and businesses should be banned outright for five years or for the duration of the depression, which ever lasts longer. To provide a home for people to live .Federal Reserve and the Central Bank Of Canada should be seized and nationalized, and used as a vehicle to issue 0% credit for productive activities only, not for speculation.
ChrisOkanagan
I agree with our governor Carney in the last few sentences that it will take a decade to recover. Canada's demographics are a huge headwind this decade.https://sites.google.com/site/canadianhousingdemographics
Will
Cam, you forget one simple thing...printing more more DEVALUES the currency and does not (as you seem to think) make it more valuable simply because there is more of it. We do not want a devalued dollar but rather one that is strong and stable, in demand as an international currency. Don't sweat this report, our economy is strong and stable and that won't change as long as we don't let the wingnuts panic and toss all our gains down the proverbial toilet.
Amar
EU and USA moving to the LEFT and their economy is in the tank. Canada moving to the RIGHT and our economy is looking OK. Interesting concept.
BC boy
The Federal Reserve is using QE2 to try to get Americans to borrow which will result in more spending which is the way in which the American economy grows. So Americans have to go deeper in debt in order to "grow" their economy. The Canadian economy is linked to that mess. The U.S. is going down and Canada is going down with it.
Cam
The biggest obstacle to recovery is our high over-valued dollar which is killing exports and the manufacturing sector. Harper's non-interventionist conservative monetary policy has turned an $18B trade surplus into a $44B trade deficit. This deficit is unsustainable and will result in a recession. The only way out is for a new government with a more liberal monetary policy that follows the lead of the US Federal Reserve which is printing more money to stimulate the economy. In the Chretien era, the Liberals were willing to err on the side of job creation over worries about a sinking dollar. Although the dollar got dangerously low, it recovered and during this time we had a decade of huge trade surpluses and a booming manufacturing sector. Like in the post-WW2 era, we should print more money to buy up debt. Inflation is no longer a problem. In fact, the economy is in danger of a double-dip recession especially with Conservative plans of austerity measures.
Joel - Edm
I don't care what the economists are saying, most people I have talked to in Alberta have said the last half of 2010 have been extremely busy (work wise), and most companies are understaffed going into 2011. 2011 will be a strong year here, and I am hearing similar rumlings from our neighboring provinces.
MARG MM
Slow and steady wins the race. We actually are pretty well off in Canada considering other countries around the world. Of course we have the "usual" doom and gloom commenters, that are down on everything that has to do with the Conservatives, and long for the return of a Liberal Government. Be careful what you wish for. Canada has already experienced too many years of Liberal rule, to our detriment. Sue, perhaps you could ask your Liberal friends for some new "talking points" as the "same old,same old" is getting too repetitive.
Prof. Pye Chartt
Economists (both private and public sector) and sundry "experts" advised us a year ago that a modest, plodding recovery, often witnessed as two steps forward and one step back, would follow this unprecedented recession. Employment issues, rooted in competitive inefficiencies, would require considerable time to work themselves out. Interest rates would need to rise, to counter inflationary pressures and balance consumer credit/debt. Our current plight is anything but shocking, and reflects more than the cup being half full. All considered, we're in pretty good shape, but, we're not an economic island that can remain outside the negative influences of the U.S. and Europe. Those whiny partisans who like to pretend that a Liberal government in Ottawa would have had our fortunes in order, with little debt (as if Ignatieff wouldn't have eventually dumped $60B into stimulus spending in the throws of an economic panic), and jobs for everyone, are the same delusional nibs who still cannot figure out why Iggy and his Liberals are floundering, and their own mindless complaints are now considered comedy postings. (The lambasting that Mr. Ignatieff took on this website yesterday -- "Voting NDP or Bloc is a Vote for Harper: Ignatieff" -- was something to behold.)
Doug # BC
Well said "caught in a snowdrift".People who think a lower dollar is a good way to stimulate an economy are living in a fools paradie.With a lower dollar,consumers pay higher prices.So any wage increase they get,minus taxes on earned income,just puts them farther in the hole.A low dollar is no different than the "corporate welfare" that Jack Layton has been whining about for decades.The only difference is that the subsidy is paid for by comsumers,in the form of higher prices. As to "Sue's contention that we need a Liberal government to sort this out,I should remind her that it was Trudeau who dug this debt hole that we have been trying to climb out of.It was Brian Mulroneys hated GST and FTA that started paying off the debt.While I do have concerns about current Conservative spending,at least I see hard assets for the money.With Liberal spending it's always about more "free" social programs.People consume those "free" government cheques,and the nation ends up with nothing.Except,of course,another on going program for people who won't work for a living,for illegal refugees and immigrants,and for centres where people shoot illegal drugs. Productivity is the key.If you get a raise that is not accompanied by an equal increase in productivity,you are part of the problem. Lower input costs in Canada.The best way to fight poverty is with a job.When we export at a profit,we all win., As to personal debt.It's a personal problem.If you want to live above your means,you will go into debt.Most people have more debt,because they buy what they WANT,and then expect other taxpayers to supply what they NEED by having government pay for their daycare or rent.
Dennis L. Krahn
The good times are gone because we and everyone else in the world who had access to credit abused it. Blame the banks, governments, the US, Harper or the man in the moon. The fact is that no one forced us to become mired in the quagmire of credit cards and the postponing payments on things that we could have done without. In closing, we got ourselves into this mess and we are the ones who will have to get ourselves out.
Gord. Robson, Nova Scotia
Yes the economy is slowly getting better but it is getting better. This is much better than slowly getting worse ! Telemarketing jobs have been with us for decades and people always come and go in that type of job. There are always people who are not able to work for one reason or another and they may not be included in the stats but lets stop this gloom and doom comments ! Yes it would really be nice to have no unemployment and to have things back to what they were but the world has been through very rough economic times but things are s l o w l y getting better. As a senior it is hard getting by but I am thankfull for what little I have. Our Conservative Government has seen us through and they are working hard on the economic situation, The Liberals are doing nothing but making a few promises.
caught_in_ a_snowdrift
Canadian exporters should not use CAD as the only means of being competitieve. How about increasing productivity, or if that does not work, maybe Canadians should not be making things we do not have competitive advantage in ... wasted resources. The loonie should not be used as a way to subsidize industry. Anyway, rasing interst rates is necessary when Canadian housing prices and borrowing by households are reaching levels higher than the US. Canada needs to avoid the missteps that took down our neighbours to the south, namely out of control borrowing.
Will
Of course our economy is slow at the moment, it is ALWAYS subject to a slowdown in winter, this is normal. Stop trying to scare people, we still have the most stable economy in the world.
Sue
Due to declining wages Canadians debit to income ratio has be growing twice as fast as incomes. We now have the same debit ratio as the Americans had when their bubble broke. In the past 3 years bankruptcies in Canada have doubled & everyday 84 million of our tax dollars goes to pay interest on our massive national debit. The neocon reformer have laid out their plan to continue to spend like drunken sailors. A year ago the Australian dollar was 50 cents our $1.00, now the Australian dollar is at par. Wages continue to fall while the cost of everything else keeps going up, we are going backwards. We need the liberals to put the country back into a forward motion. Harper has no vision for Canada and has shown Canadians he has no forward gears.
lc
The ivory towers these folk were seeing a "robust recovery" from certainly are not located anywhere east of the Red River.Reports from Chamber of Commerce or other right wing think tanks never portray reality on the ground for the middle class.According to them we should be thrilled because we are pumping out natural resources.Only problem with that logic is the average Canadian consumer is being bankrupted by soaring energy costs because we pay world market prices for a resource located in our back yard .A child should be able to see that the cost/benefit structure of the Canadian energy sector is broken.
WesternDave
If Boc head Carney matched the American interest rate, our dollar would drop and the economy would rock. I want answers as to why Carney, and by extension Flaherty are keeping the interest rate unduly high when compared to the American rate. It is no coincidence that the Cdn dollar rose when the rate rose. That has cost exporters 12% of sales on an ongoing basis. Of course the economy will slumber along as long as the BoC and Finance Minister prop up our outrageous bank profits with this 'private tax' interest rate.And yes, I am an exporter who is choked the banks are making billions while our meagre profits are getting sucked away!
DaemonNice
The good times are gone because too many people either don't vote or vote stupidly, which would be either Conservative or Liberal.This recession was contrived by wealthy foreign interests whose purpose it is , is to take money away from the average citizen, put governments into debt and slash social programs because of it.
Jim
I keep seeing news about the economy and of course unemployment is always a factor. I wish media like CTV would investigate the employemnt stats, as they may be far worse then the gov reports.Did you know that in some companies the turnover in staff is termendous, telemarketing for example . If they hire one hundred employees over a period of 2 months, yet only 50 stay , it still counts as 100 new jobs !!There are thousands of less jobs in the country than stats claims, just another factor why our dollar is artificially high.
Gerry
We are much better off then the socialist in the E.U. or then Obamas socialists in the U.S.
thomas in brockville
positive growth is better than negative. when most of the legacy economies a in serious trouble, canadians should feel proud how the economy is been managed. i am not a big fan of the current management team in ottawa, however we will never catch up to the tigers of india or the dragons of china.So the good times are slowly coming to a grinding halt in Canada-sorry but this is the reality.
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