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Home » Report: Canada Poised for Marginal Improvement in 2010
Canadian Manufacturing Sales: Oct 2008-Oct 2009

Report: Canada Poised for Marginal Improvement in 2010

By    MDM   Staff 
January 12, 2010
More about:  Canada,  Economy
Manufacturers Alliance/MAPI study forecasts growth of 2.6% for the Canadian economy.
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The Canadian economy withstood the global recession in 2009 better than most G7 nations, including the U.S., and is poised to see marginal improvement in 2010, according to a new Manufacturers Alliance/MAPI report.
 
The G7 is comprised of Canada, France, Germany, Italy, Japan, the United Kingdom, and the U.S.
 
In Review of the Canadian Economy, 2009-2010 (ER-692e), Jeremy A. Leonard, MAPI economic consultant, writes that Canada was spared the worst of the 2008-2009 global recession due to its relatively sound banking sector and strong improvements in its terms of trade, the latter buoyed by robust demand for its natural resources.
 
Real gross domestic product (GDP) in Canada declined only 3.3% from the third quarter of 2008 to the second quarter of 2009, the smallest peak-to-trough decline among G7 nations, and well below the 3.8% drop in GDP in the U.S.  Prospects for 2010 are encouraging for a moderate recovery, with GDP expected to increase by 2.6%.  Domestic demand should grow by 2.8%.
 
The forecast for Canadian manufacturing is for the sector to remain essentially flat on a year-over-year basis.  The weakness is due to sluggish export demand driven by a likely U-shaped American recovery and the strong Canadian dollar, as well as lackluster capital spending at home.
 
In a forecast of selected economic indicators for 2010, the report indicates that pre-tax corporate profits are expected to grow by 9.5 percent, exports to increase by 4.5 percent, and imports to increase by 7.6 percent.  Consumer spending is anticipated to grow by 2.8 percent, and real disposable income should increase by 3.5 percent.
 
The unemployment rate edged up from 6% to 8.7% during the recession but fell back to 8.5% by the end of 2009.  According to the report, the rapid turnaround in the labor market is unusual and is a byproduct of resurgent business confidence.
 
Canada’s economy remains on more solid footing than that of the U.S. for several reasons.
 
“The structural underpinnings of the Canadian economy are firmer than those in the United States,” Leonard said.  “The credit crunch is essentially a vestige of the past, and, thanks to more prudent mortgage lending practices, Canada has avoided the longer term adverse effects that continue to plague the American economy.
 
“In addition,” he said, “Canadian labor markets are already starting to improve, providing strong growth in aggregate disposable income, which is the lifeblood of economic activity.”


 
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