Canada’s economic outlook is glowing; so too should our confidence

In early May, WestJet announced the purchase of 45 new planes from Bombardier in a contract worth $1.35 billion. This deal, simply put, was great news for Canada. It was great news because Bombardier will assemble the planes in this country and because 54% of the aircraft’s components are Canadian-made. It was great news because Bombardier’s Q400 turboprop aircraft bested foreign competitors to win the contract. And it was great news because it represented a Canadian company confidently spending on new equipment and pushing toward growth. WestJet’s deal implicitly demonstrated conviction in the Canadian economy. Now, we need more businesses to do the same.

We have exited the age of uncertainty. Canada’s economic outlook is undeniably positive. True, the month-to-month employment rates occasionally stutter. And yes, the stock market occasionally sags. But taken as a whole, the economic evidence over the past few months has offered every reason for optimism. The Bank of Canada in April hiked its growth forecast to 2.4% for 2012, up from the 2% in January. The International Monetary Fund also upgraded its estimates for Canada, calling for 2.1% this year, an improvement over its previous call of 1.7%. From employment rates to GDP, the trend lines for almost every graph are now pointing in the same direction—up.

The one set of indicators that remain stubbornly uncertain deal with perception. Consumer and business confidence ratings still ebb and flow on a monthly basis. Only 23% of Canadians expect their family’s finances to improve over the next six months, while 18.4% think their family’s position will actually worsen, according to an April report by the Conference Board of Canada. Despite reasons for hope, Canadians don’t seem to have much faith in their economy. 

The collective mood of the corporate class finally seems to be improving. Roughly 43% of business leaders think conditions will improve in the next half year compared with just 19% last November, the Conference Board says. But the same leaders don’t appear inclined to act upon their renewed optimism. Since last year, there’s been a 7% drop in the number of firms planning big capital investments.

Worried about the global financial system, many companies are hoarding cash rather than investing. As Dominic Barton, the global managing director of McKinsey & Co., noted recently in Canadian Businesscash levels for corporations in this country have increased by 60% since 2008.

There is some expectation that Canadian firms might start spending more freely. The Bank of Canada now projects that business “fixed” investment in things like infrastructure and equipment could spur GDP growth by 0.9% this year, an increase over its previous projection of 0.6%. And a TD Economics report suggested Canadian firms will soon stop paying down debt and hoarding cash to “take advantage of the nation’s much-improved business tax climate to retool and raise productivity levels.”

If that happens, it would be a good thing. The ongoing woes in the rest of the world shouldn’t deter Canada from investing in itself. In fact, the global concerns mean Canada must rely on its domestic markets to spur growth. So it’s time to stop worrying and start investing. It’s time for Canadians to be confident again.

http://www.canadianbusiness.com/article/83282--canada-s-economic-outlook-is-glowing-so-too-should-our-confidence

Posted via email from Markham Real Estate Today with Asif Khan