The recession ended three years ago but nobody believes it, says the chief economist of the Conference Board of Canada.
The recovery has been moderate but global consumer confidence is shaky and financial risks abound, said Glen Hodgson, senior vice-president of the board.
“The world economy is being held back by, frankly, crappy management under the euro system in Europe,” he said at the International Livestock Congress held in Calgary Aug. 15.
“It was never built on a proper foundation and they never agreed on a fiscal foundation where all countries would have a high standard of behaviour.”
Canada and the United States are experiencing moderate growth.
The U.S. is growing at a rate of about 2.5 percent, but unemployment is still high at more than eight percent.
Hodgson said Canada has an open economy affected by activities around the world. It is recovering at a rate of 2.25 percent led by private investment, which is a good thing, he added.
Interest rates remain low, but personal debt levels are a continuing worry. He said there will be a shock when interest rates rise.
He predicted the loonie will stay strong for the foreseeable future and will remain around par with the U.S. dollar. That’s bad news for exporters because they lose revenue when they trade with the U.S.
“We have to adapt to this brave new world,” Hodgson said.
Oil is likely to hover around $95 to $100 US per barrel.
He said Canadian workers have received real wage increases since 2004, so their take home pay is staying ahead of inflation. Unemployment is falling and there is a worker shortage in Western Canada.
Labour shortages may need to be addressed with more technology and equipment upgrades to do the jobs people once handled. Most corporate investments appear to be going this way, said Hodgson.
Housing markets have improved.
“There may be some bubbles, but you can still get a decent property in the Lower Mainland of B.C. for half a million bucks,” he said.
British Columbia housing actually fell by six percent and Toronto dipped slightly, but Alberta is seeing an upward swing in the market.
Most economic growth is happening in the West, where governments are working to balance their budgets within a couple years. All provinces have good fiscal positions with the exception of Ontario, which may not balance its budget until 2017.
Outside of Canada, struggles continue.
Hodgson said the average price of homes in the U.S. is much lower than the plateau of 2006 that was followed by the collapse in 2008.
“Prices in Phoenix are basically half what they were in 2007.”
California real estate is up eight to 10 percent, but house prices are falling in Las Vegas. There are homes that have been built but still aren’t occupied.
Some global regions have more positive outcomes. China and India, for example, are growing six to seven percent annually.
“When I look at the world, I see the growth titans as China, India, Brazil and Indonesia and maybe parts of Africa,” he said.
China has been an economic miracle. In the last 30 years, it has turned around from being a closed society and now has a lot of cash for foreign investment. However, it is not a democracy and those doing business there have to encourage China to be a fair trader rather than one that wants to export but refuses access to its markets.
Western Europe continues to be a dismal story.
Spain and Italy are in recession. Italy’s debt is 115 percent of its GDP and half the young people in Spain are not working or in school. Even with the economic boost from the summer Olympics, Britain will probably drift into recession.
Greece is in the fourth year of a seven year contraction.