October 2, 2012

U.S. economy can be a global catalyst, says CanaData speaker Peter Hall

KELLY LAPOINTE

staff writer

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.

VINCE VERSACE

Peter Hall, EDC’s vice-president and chief economist speaks at the 27th annual CanaData conference in Toronto.

Canada has to build more inside the country to accommodate the growth that is happening externally, he said.

“I believe that for the construction industry, international trade is actually going to attract so much business to Canada that we will be building out construction to accommodate that as we go forward,” he explained.

“It’s already happening, we are already seeing constraints in the Canadian economy.”

Those constraints are going to continue, as Hall pointed out that over the next 10 years, 600 major projects are currently on the books, representing a spending of $650 billion and creating 800,000 net new jobs.

Every province is included in this major project spend, but there are more potential plays in the territories than are on the books right now, he said. Many potential projects are in areas where there is no infrastructure.

“Will we have to think in a different way about how the industry is structured so that we can actually accommodate this, so we can partner perhaps with external service providers to create this?”

“We are on the leading edge of a building binge in Canada that we don’t believe lower commodity prices are going to underline in the least.”

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