Future Direction of the Economy

This past year Canadian businesses experienced some ups and down in the economy but with the recession now over, it’s a relief to be finishing the year on a positive note. While it may be like gazing into a crystal ball to know what direction the economy will take us, I’d like to share some financial data and trends that may determine where our economy is headed in the future.

Again this fall, I attended the “Economic and Financial Outlook 2011” hosted by our company’s bank, The National Bank of Canada. It’s a good opportunity to find out what the bank’s’ forecast will be for the Canadian and world markets in the year ahead.

I’ve been going to their presentations for several years and although some of their forecasts can be off the mark, they provide thoughtful direction as to what the future may hold for our economy. Here is an overview of the relevant points I found of particular interest presented by Stéfane Marion, the National Bank’s chief economist and strategist:

World Economy

  • The World is shifting its economic clout. The emerging economies are in the driver seat and are experiencing the largest rate of growth.
  • The rate of growth in the emerging economies has been on a steep incline in the past five years and is expected to surpass the economies of advanced countries by 2013.
  • Since 2007, the retail sales of emerging markets surpassed that of advanced countries and are on the steady incline, while retail sales in advanced countries have flattened.
  • Several Asian countries, in particular China and India, have reached a tipping point where large numbers of people will enter the middle class and drive consumption. China’s middle class today is already large at 157 million people; only the United States has a larger middle class.
  • Five years ago, General Motors sold 10 cars in the U.S. for every one car sold in China; today the ratio is now quickly approaching one to one.

Canadian Economy:

  • Canada’s employment productivity over the past decade now lags behind other developed countries including Japan, Germany and the U.S. This poor result will certainly hamper our future ability to compete in the world market.
  • Employment is recovering faster from the recent 2008-09 recession than the past major recessions in 1982 and 1991.
  • There are positive signs for the 2010 labour market for young people aged 25 and over: In Canada the numbers are on the rise this year; however they are on the decline in the U.S. and are an indication of the much slower rate of recovery in the U.S.
  • When comparing the net debt-to-GDP ratios for G7 countries from 2000 to 2015, Canada rates the best overall and expected to remain stable to 2015. Italy and Japan fare the worst and their net debt-to-GDP ratios are forecast to increase substantially over the next five years.

On behalf of the staff at Veri-Cheque, I would like to wish all of you a very merry Christmas and prosperity for your businesses in the New Year.