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October 2, 2012
U.S. economy can be a global catalyst, says CanaData speaker Peter Hall
What seems like a bleak world economy now is going to be turned around by a growing American economy, taking Canada along for the ride, said a speaker at this year’s 27th annual CanaData Construction Industry Forecasts Conference.
“Despite all that’s going on in the world, I do believe we are turning a corner,” said Peter Hall, vice-president and chief economist at Export Development Canada.
“Growth from abroad is going to help Canada stay afloat and in fact prosper incredibly as we go forward.”
The economy has suffered through unprecedented times recently, said Hall. The length of the growth cycle itself is double the length of a normal cycle, which created a pile of excess that had a global reach.
The result of that pile of excess was the biggest drop in world activity that has been seen since the Great Depression.
The “vast outpouring” of fiscal and monetary stimulus was intended to lift the world back to growth, though Hall said “many misinterpreted the growth that came out of that as the real recovery.”
Hall asked the audience what country or region could be considered a growth engine for the world economy. He pointed out that Europe is in a double dip recession.
Though Japan has had decent growth, it is very much related to reconstruction spending in the wake of an earthquake and tsunami last year and therefore likely unsustainable.
The emerging markets of China, India and Brazil have been very stimulus dependent since the world economy collapsed at the end of 2008. They are “not mature enough, not deep enough to act as global growth engines,” explained Hall.
Despite constant reports that the American economy is not recovering, U.S. housing prices have started to rise.
“They jumped in June at a faster pace than at any other point in the entire price series,” he said.
“That was not just a blip, that was something that was confirmed by upward movements...it’s actually affecting some of the hardest hit areas more than in other areas as well.”
Other sectors of the economy react to this growth in housing, because people need to put “stuff” into those houses, pointed out Hall.
He said if the housing market grows 30 to 40 per cent, “then all the stuff that goes into those houses has to grow by a 30-40 per cent rate as well...That’s something that ignites an economy.”
Couple that with a business sector that is almost 100 per cent of the way back to full capacity, there will be strong economic growth, which is good for Canadian trade.
Another issue affecting Canadian trade “is the most dramatic trade diversification into emerging markets that I believe we have ever seen,” Hall said.
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