TORONTO – After relatively modest growth in the third quarter, Finance Minister Jim Flaherty says he’s optimistic that Canada’s economy will pick up the pace into next year.
Flaherty said Tuesday he believes the domestic economy will show more strength in the remainder of this year and into 2010, eclipsing the slow climb out of a recessionary environment that has characterized the recovery so far.
“We hope that we will have a continuation of growth at a greater pace in (the fourth quarter),” Flaherty said in Toronto at an announcement unveiling federal stimulus spending money to help renovate Maple Leaf Gardens.
“We are certainly more optimistic about economic growth in 2010.”
Economists generally agree that Canada’s economy is going to grow in the near term but that the climb will be sluggish in the coming months as the global economy struggles toward recovery.
“Over the next six months we’re in a recovery phase,” Warren Jestin, the chief economist at Bank of Nova Scotia (TSX:BNS), said in an interview after making a presentation at a Toronto economic conference on Tuesday.
He said inventory adjustments, particularly in the auto sector, will drive growth as companies ramp up production.
“Auto production is starting up and government projects are finally getting into the ground. In general, that will lead us into another phase that will tend to be one of probably sustained growth, but not as strong a growth as we used to think was normal,” he said.
Jestin warned that developed countries could risk weakening again as stimulus packages start to run their course, and economies attempt to operate with waning government assistance. Many economists caution that the economy is still walking a knife’s edge between recovery and another downturn.
Statistics Canada offered some cause for optimism about next year on Monday when it reported that Canada’s real gross domestic product inched ahead in the third quarter at an annualized rate of 0.4 per cent, marking an end to the recession in this country.
However, a report released Tuesday by CIBC (TSX:CM) said that key metropolitan areas in Canada are still feeling the financial pinch.
CIBC, which compiles a metro monitor index, said that 10 of the country’s top 25 urban areas showed negative growth in the third quarter.
“On a year-over-year basis, our index continued to trend downward,” said Benjamin Tal, a senior economist at CIBC.
“More than two-thirds of Canadian GDP is generated in Canada’s major cities. So the tale of those cities is the tale of the economy.”
The report said nine of the 10 cities that experienced negative growth were in Ontario and Quebec, which have both been battered by years of weakness in the manufacturing and forestry sectors and hurt by lower demand for their products in the United States and a stronger loonie.
“Calgary and Edmonton, which until recently were the stars of our index, (are) losing ground rapidly and currently hardly above water in terms of overall economic momentum,” Tal added.
Jestin said that long-term growth will be mild in Canada over the next couple years, near two-and-a-half per cent, while emerging economies like China and India will grow closer to a rate of seven to nine per cent. Jobs will also see a gradual pickup, Jestin said, with the country adding net new jobs in 2011.
But “they’re going to be different jobs than in the past,” he cautioned.
“Additional jobs created are probably going to be in areas that are small firms, medium-sized firms and very specialized in their markets. (They will be) less focused on the U.S., more focused on niche markets.”
Jestin said the Canadian economy is running stronger than south of the border, though exporters are facing heavy headwinds, with sales volumes down 20 per cent in the summer over a year earlier.
