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Conference Board Believes No Recession for Canada
The Conference Board of Canada believes that the Canadian and U.S. economies will be able to survive the current world uncertainty and avoid a recession next year assuming that both the European and U.S. policy-makers implement the necessary policies. Board economist Pedro Antunes, said he is still hopeful European leaders will take action to shore up banks exposed to Greek debt and that of other Mediterranean countries, thereby preventing the problems from spreading around the world as happened in the fall of 2008 with the failure of Lehman Brothers. The outlook represents a somewhat rosier picture from what earlier this year was among the most pessimistic of Canada’s major forecasters. The Conference Board said Canada’s economy, which is slowing down to 2.1% growth this year, will pick up some steam next year and advance by 2.4%, before accelerating to 3.3% in 2013.

By that time, Canada’s unemployment may reach as low as 6.3%, the group’s economists say, a level not seen since early 2008, before the onset of the global recession. Meanwhile the economy in the United States is likely to rebound to levels similar to its northern neighbour. The board’s call for next year is about half a point stronger than expectations from some of Canada’s banks, particularly Scotiabank and the Bank of Montreal. For Canadian workers, the best news is that the Conference Board sees unemployment on a steady downward track to 6.3% by the end 2013. It currently sits at 7.3%.

“This summer’s weakness in private sector employment is expected to be temporary,” the report argues. “Despite a decline in infrastructure spending, construction employment will be bolstered by strong investment in the resource sector and in commercial and industrial buildings. Service sector employment will also do well.” The big drag for both the economy and employment comes from government restraint, said Antunes. He said governments will be taking about $12 billion out of infrastructure spending next year as the last projects of the stimulus spending introduced in 2009 to combat the recession wind down.  He notes that next year’s growth is still modest by traditional standards, but given continued weakness in the U.S., it may be the best Canadians can expect.

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Sources: Bloomberg, Investment Executive, Conference Board of Canada