OTTAWA – The economy is showing unmistakable signs of having recovered from a year-long recession economists said Wednesday, citing a string of new data pointing to a surprisingly strong rebound across the economic spectrum.
The biggest surprise came with release of July factory shipments, the Achilles heel of the Canadian economy, showing a one-month robust 5.5-per-cent jump in activity, more than double the consensus forecast.
And the Conference Board of Canada reported new online jobs postings rose in August, signalling that the employment slide – a critical piece of the puzzle on a sustainable recovery – was at lease close to bottom.
The new figures follow Tuesday’s shocking 2.7 per cent increase in U.S. consumer spending that augers more good news for Canadian exports of autos and other manufactured goods.
And Canada saw reports of increases in home and auto sales that suggest low interest rates are proving hard to resist.
“This is very good news,” said economist Sal Guatieri of BMO Capital Markets.
“The global economy is on an upswing. We are seeing a faster than expected recovery, not just in Canada but in the U.S. as well.”
In a new forecast, Royal Bank economists said in retrospect the just-past recession looks like the “shallowest and shortest” of the past three dating back to the early 1980s, and that the rebound will average 2.2 per cent in the second half of 2009.
Although close to half a million full-time jobs have vanished, that is about half the carnage that has occurred in the U.S.
The recent numbers, although still early and incomplete, point to the much-desired V-shaped recovery, so-called because the rebound is as steep as the slide.
But economists caution that is unlikely to happen. They note the quick rebound of late is partly a reflection of such temporary factors as the U.S. cash-for-clunkers program, temporary government stimulus and the extent of the fall that has occurred over the past year.
Most expect the pace of growth to start slowing, and that some sectors of the economy, such as the pivotal labour market, may not recover until well into 2010.
The 30-nation Organisation for Economic Co-operation and Development (OECD) issued the most grim outlook for Canadian jobs, predicting that the unemployment rate would hit 10 per cent next year before it starts to rebound, although that is higher than the Royal Bank’s 9.2 per cent estimate for mid-2010.
Employment is usually among the last aspects of an economy to recover because firms typically resort to other strategies, such as hiking their employees hours or introducing productivity gains before taking the decision to start rehiring.
Still, Royal Bank assistant chief economist Paul Ferley said the danger of a more U-shaped recovery, or even a double-dip W-type return to recession are fading.
