Canada’s Economy: Counting on a Weak Currency and New Customers to Fuel Growth
There’s another aspect of residential real estate that will be equally important. Home prices must not cave. To a fair degree, consumer confidence and personal consumption expenditures depend on a feeling of prosperity that is provided by rock-solid or increasing asset valuations. For homeowners, that includes the value of one’s own property. Plus, it takes into account pension and mutual fund holdings, which often include equities.
Thankfully, the Toronto Stock Exchange index (TSX) has finally shaken off its torpor and sprung to life, although it will have a lot of catching up to do to pull even with record-setting share prices in the NASDAQ, Dow Jones Industrials (DJI) and S&P 500 indices.
The forward propulsion for institutional and engineering construction will come from demographic factors and government finances. The fastest population growths are occurring in the resource-rich provinces of western Canada. This implies a need for infrastructure capital spending to provide essential public services.
Every province is experiencing an aging population, as the front-edge of the baby boom generation moves beyond its mid-60s and into its early 70s age-cohort. Construction of more health care facilities and graduated-levels of accommodation for seniors will receive an upgrade in priority.
In engineering projects, a pickup in world trade is slowly gaining momentum. Stronger commodities demand and an uptick in commodities pricing must eventually follow.
As for public sector civil projects, Ottawa and most of the provinces are in decent financial health, with budgets at or near balance and debt loads that aren’t overly onerous. Quebec and Ontario are the exceptions. The former’s new Premier, Phillippe Couillard, is determined to rein in costs. The latter’s, re-elected premier, but this time with a majority — Kathleen Wynne — has, so far, demonstrated no similar inclination.
There is one final statistic for Canada that has been briefly touched on in the foregoing, but warrants further elaboration. The latest year-over-year population change for Canada as a whole has been +1.2%. That’s one of the fastest rates of increase among all industrialized nations. The comparable U.S. figure lies between +0.7% and +0.8%. The resident counts of Germany and Japan are shrinking. There is a very simple way in which population change impacts the economy. More people with more jobs generate more income, leading to greater GDPenhancing consumer spending.
Let me wrap up on a philosophical note. Canadians are now living in a world that’s quite different from the one occupied by their parents and grandparents. The level of foreign competition for all kinds of jobs (e.g. in IT, as well as on production lines) and in a host of other areas that will continue to determine our standard of living has heightened dramatically.
After reasonable consideration, we must continue to adapt effectively with all good haste. Otherwise, we will see our quality of life take an embarrassing and unpleasant tumble.
This is an excerpt from The Leaders – Canada’s Best in Construction: 2014 Edition – published in November by CMD. For information, visit www.leadersinconstruction.ca
Written By: Alex Carrick, CMD Chief Economist