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Area Development - Site Selection, Facility Planning and Workforce Development

Canada Report: Ahead of the Curve in Returning to Pre-Recession Conditions

Sound decision-making by Canadian banks and businesses has resulted in the nation's weathering the global economic downturn better than most and putting it in a position to grow more rapidly.

Fall 2011
For everyone who thinks the business pages are incapable of reporting anything but dismal news, take a look to the north! Canada, which made it through the recent economic downturn in a lot better shape than many other Western nations, has had plenty of good business news to report lately, and is ready to generate more positive headlines.

To begin with, hear what Avery Shenfeld, chief economist, and Benjamin Tal, deputy chief economist, at CIBC World Markets Inc. have to say: "Canada's business sector, including small- and medium-sized enterprises, emerged from what was a deep global recession in good shape to participate in today's recovery." The economic researchers completed an in-depth look at the Canadian economy a few months ago, and seem to have been pleased with what they saw.

For one thing, they saw bankruptcies on the decline. In fact, they report that the recession of 2008 and 2009 was the first downturn on record in which Canadian business bankruptcies actually declined, and bankruptcies continued to fall through 2010. Yes, that's right.while American papers were filled with bleak stories of corporate carnage, Canadian companies were avoiding most of the wreckage. True, there were layoffs, but as the economists point out, the employment picture rebounds a lot more rapidly when companies are still in business, ready to ramp up again.

The Outlook

Clearly, the global economy remains shaky. But economists watching Canada like what they've seen in recent months and are hopeful that the good news will continue. RBC Economics Research foresees a healthy gain in exports, spotlighting a shift in economic drivers over the next couple of years. Even though consumer spending may slow a bit, the business sector stands ready to pick up the baton, according to RBC. "In the final analysis, we see Canada's economy growing at an above-potential clip in 2011 and 2012."

RBC keeps tabs on Canada, the United States, the United Kingdom, and the Euro Zone, and noted earlier in the summer, "Canada, once again, is the economy that is furthest along in terms of returning to pre-recession conditions. Canada's economy has been a frontrunner in the race to expansion."

How did Canada fare so much better? Sound decision-making on the part of businesses and banks. Companies were able to put on the brakes gently to avoid crashing into the wall. And banks and their regulators were served well by their particularly cautious nature. As a result, the financial sector remained in the business of loaning money to small businesses, and businesses were still there, ready to borrow and grow.

Looking ahead, the view is equally positive. To cite CIBC World Markets again, there has been an impressive recovery in capital spending and business investment. As Shenfeld and Tal note, it's not just a matter of being able to spend: "Corporations also have to be willing to take on risks, and here, the outlook is promising." Specifically, while the strong Canadian dollar is not necessarily welcomed by manufacturers seeking to export, it has been accompanied by an increase in the import of machinery and equipment. And those tend to be the building blocks of a healthy manufacturing sector down the road. "The surge in imports of machinery and equipment has clearly been facilitated by a strengthening Canadian dollar," Shenfeld and Tal report. "We expect the loonie's strength to persist over the longer term, which should help boost investments going forward in sectors that can remain competitive."

As of this past March, Canada's manufacturing sector was operating at 81 percent capacity, well ahead of the rest of the economy and getting near levels recorded before the recession. That's an indicator of potential investment on the way. The trends also look positive for capacity investments in the oil sands and utilities sectors in the coming years.

From a federal governmental perspective, the focus is on supporting jobs and growth through the "Next Phase" of Canada's Economic Action Plan. The plan calls for a stable, low-tax environment; development of a highly skilled and flexible work force; support of innovation and the adoption of new technologies; and expanded access to markets abroad.

Now let's take a look across the nation to see how each of its regions is faring:

CANADA REPORT 2011: Atlantic Canada

CANADA REPORT 2011: Ontario

CANADA REPORT 2011: Quebec

CANADA REPORT 2011: Western Canada

Exclusive Research