By Anthony Capkun
September 26, 2014 – Earlier this week, Electro-Federation Canada (EFC) conducted its 2014 Economic Forecast Day, where the organization brought in a several economists to talk about the state of affairs—domestically and internationally—in an attempt to help member businesses make informed decisions.
Repeat performer (and always a treat to hear) Maureen Farrow (Photo 1) emphasized the notion that businesses the world over have been hoarding their money, and “we need to see a turn up in capital investment”.
She touched upon the situation with Russia and the Ukraine, and ISIS, and noted the European economic climate is still, overall, not very good. The United Kingdom’s economy “is surging ahead”, she said, but that Italy “is in its third recession in six years”.
China’s economy is slowing down; still growing, but correcting itself, said Farrow because, to paraphrase, you can build only so many ports and rail lines. India should prove interesting because, for the time in decades, the country has a majority government. This should help move projects along better, noted Farrow, adding that it is easier to do business in India because of our Commonwealth similarities.
As for Canada, we can expect to see the loonie around the 90-cent mark for a while, and we must get our exports moving east and west, not just southward (and, for this, Farrow gives the Harper government a failing grade). “We’ve got to get exports moving,” she said. “We cannot rely on condos in Toronto, Vancouver and Montreal.”
She reiterated that we’re going to see more mergers and acquisitions; because of market uncertainty, businesses are forgoing capital investment and going straight to buying something they know: the competition, perhaps, or complementary companies.
Again, the capital investment… there’s not enough of it, complained Farrow. “We rely too much on home building and consumers filling those homes with goods!”
Tim Gill (Photo 2), economist with NEMA (National Electrical Manufacturers Association, U.S.), echoed Farrow’s comments about relying too much on home buyers, noting that the all-important first-time home buyers are absent! The Millennials have no money, likely a lot of student debt, and have seen their folks lose equity in their own homes.
If anything, Gill sees the commercial and healthcare sectors are expected to lead the way from the standpoint of electrical equipment.
Carl Gomez (Photo 3), economist with Bentall Kennedy Canada, also recognized that sectors that once led Canada’s economy (consumption, housing) “are fatigued”. Add to that the fact that Canadians have racked up a lot of household debt over the last decade (the debt to income ratio is huge), and discretionary spending from consumers is being cut deeply.
Speaking of the condo market, Gomez noted that a lot of purchasers are, in fact, what he calls “small investors”, and that they will eventually (if not already) engage in the “shadow rental” market. On the plus side, older homeowners will want to stay put and, as such, will spend discretionary funds on home renovations.
— Anthony Capkun, Editor, firstname.lastname@example.org . (Photos A. Capkun)