Canadian Economic Outlook for 2013: Cautious Optimism

The Bank of Canada announced this week that Canadian businesses are optimistic about 2013.  The economy is expected to grow modestly this year with most of the growth in the manufacturing sectors in Eastern and Central Canada.

http://business.financialpost.com/2013/01/14/canadian-businesses-see-brighter-future-bank-of-canada-reports/?__lsa=bc90-e162

Meanwhile, the Economic Club of Canada predicts that the U.S. will have a 'surge' in the economy for 2013 and this will benefit Canada.  Canada's economy will get a boost in exports, which supports the Bank of Canada's prediction of growth in the manufacturing sector.

This is good news for Canadian businesses, not only for those in the manufacturing sector but also for support services.  With an increase in demand, businesses will likely see modest growth over 2013.

However, one must wonder if the rosy predictions are merely temporary?  With governments continuing to run deficits, with debts piling up and with consumer debt at an all time high, one wonders how long we can continue before interest payments overwhelm us.  When growth is being financed by debt, there is a problem.  Whether or not Canada (and the West) can manage both growth and debt reduction remains to be seen. 

Long-Term Unemployment Increases

Although unemployment figures in the U.S. have remained steady at 10.0 %, long-term unemployment has continued to increase. Long-term unemployment is defined as more than 27 weeks unemployment. 39.8% of unemployed Americans, or 6.1 million Americans have been unemployed for at least 27 weeks as of December 2009. This compares to 22.9% of unemployed Americans, or 3.5 million Americans suffering from long-term unemployment in 2008.

In November 2009, Federal Reserve officials predicted modest economic growth and predicted the jobless rate would drop to between 8.2% and 8.6% in 2011. Still, the Fed cautioned it would take 5 or 6 years for the jobless rate to drop down to pre-2007 levels. Others suggested even longer.

Not all economists agree with these predictions. Some are suggesting unemployment will climb to 10.5% before declining late in 2010.

Either way, 2010 will not be 'business as usual' no matter how much profit Wall Street rakes in. Prudent management of companies, regardless of scale or industry, will do well to keep an eye on expenses as we move into a cautiously optimistic, but uncertain, economic future.

Will 2010 be a Better Year?

Yesterday, the United Nations came out with a positive forecast for the global economy for 2010. The primary drive will be from Asia. The U.S. is also expected to see modest economic growth.

Nevertheless, the U.N. cautioned the growth will be 'fragile' and could fail if stimulus spending stops and if the U.S. deficit and external debt continues to climb. Such a crisis could cause global instability.

No word yet on how continued stimulus spending will not lead to a (at least temporary) increase in both the U.S. deficit and external debt.

There is a lot of talk about a looming 'double dip recession' (also mentioned in the U.N. report). There is also a lot of talk about the likehood of 'modest growth' and a 'fragile economy'. I think it's more a case of both cautious optimism and having it both ways. If the economy grows, it was predicted. If it fails, it was mentioned as a realistic possibility.

On that note, I'm not going to be any different. I think 2010 will be better although how much of this is based upon wishful thinking I can't say. Suffice it to say that everyone appears to be in general agreement that we still have a long way to go.

What this means for businesses is simple: stay focused. Don't lose sight of sound cost management practices. Put them in place now (if you haven't already done so).