National economists agree that the economy is poised for growth in 2011, but Canadians have a more reserved attitude, as was revealed at the Economic Club Outlook 2011 on January 6 in Toronto.
Only 38% of Canadians feel the Canadian economy will improve over the next 12 months, compared to 54% who felt it would improve in 2010, according to a recent poll by Economic Club of Canada and POLLARA. Meanwhile, one in five of those surveyed feel the Canadian economy may actually decline in 2011, compared to 14% who felt that way one year ago.
These results suggest that Canadians may have been overly bullish on economic recovery one year ago, and have since taken a more conservative stance, according to Michael Marzolini, chairman of POLLARA.
“Lofty expectations in Canada and around the world have not yet been met, and Canadians are now more measured in their feelings about the economy,” he said.
However, chief economist of TD Bank Financial Group, Craig Alexander, revealed that global economic growth is forecast between 4% and 5%, while North American economic growth is forecast between 2.5% and 3%.
“The recession is over, and if people aren’t getting more optimistic by today then they probably aren’t paying attention,” said Craig Wright, chief economist at RBC Financial Group.
In Canada, Wright stated global growth prospects, trade, consumer spending and commodity prices are all strong, and interest rates are still relatively low. Each of these factors will help drive economic growth this year.
The U.S. economy is forecast to grow at a more rapid pace this year than last, according to Sherry Cooper, chief economist at Bank of Montreal. Cooper predicted roughly 3% growth in 2011, but said, “If I’m wrong and we revise these numbers, it will be upward rather than downward.”
The improvement in the U.S. economy will be largely due to consumer confidence and spending, she added, despite a high level of unemployment, which is estimated to fall from 9.7% to 9%. This is because personal income and disposable income are forecast to increase.
“Just as we saw the Christmas season better than expected, and the best in the last five years, I think that pent up demand [will] continue and that the consumer will finally lead the way,” said Cooper.
On a global scale, record levels of employment and sustained interest rates are a few of the factors that propelled the economy in 2010, and will continue this year. Emerging world markets in India and China, for example, will be of great impact going forward, and if they continue to grow rapidly then global commodity will also be strong, it was noted.
“The emerging world will be important, not only as a driver of global growth, but with the large amount of savings in these economies, we will find it increasingly important in financial markets as well,” said Warren Jestin, chief economist at Scotiabank.
He added the world was on the road to recovery. “We’re just now heading back to where we were before the recession began, and strategies that worked before the recession are unlikely to be the best strategies in the next decade. We have to get used to the unfamiliar markets and take advantage of the book of opportunities they present.”
Avery Schenfeld, chief economist at CIBC World Markets, discussed the state of financial markets. He agreed the global economy was in a period of growth. However, he felt it was moderate and due to this, equities would outperform fixed income products.
In this environment, investors are best advised to put their money in stocks instead of bonds, he said. “I don’t think the economy is nearly as weak as the respondents to the POLLARA poll, and it’s really economic weakness that you would need to make money on bonds.”
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