Economists more optimistic than Canadians

TORONTO – Cheer up, gloomy Canadians — the recession is long over and growth will continue this year, say the country’s top economists, despite a survey which has found that most Canadians believe the economy is still in a downward spiral.

The chief economists of Canada’s big five banks gave their predictions for moderate Canadian growth Thursday at a panel discussion sponsored by the Economic Club of Canada.

About an hour before the economists took the stage in Toronto, the Economic Club released the bleak results of a survey that showed 65 per cent of respondents still believe Canada is in a recession.

Economists officially declared the recession had come to an end in mid-2009.

“The perceptions don’t reflect the fact that things have been getting better for now a year and a half,” TD’s chief economist Craig Alexander told the Toronto audience.

“There’s no question that the recession is over, so how do you actually reconcile the poll results with what the economic forecasters are talking about?”

Avery Shenfeld, chief economist at CIBC, said the difference of opinion stems from semantics.

“Canadians are reflecting, rightly, that the job market isn’t as good as it was when times were good and they say ‘we’re in recession’ because of that, where economists say ‘we’re in recovery’ because we’re not as bad as we were during the recession.”

Canada has churned out six quarters of economic growth, and the economy has recovered all of the jobs lost during the recession, but the Economic Club and Pollara survey suggests that Canadians are less optimistic about the state of the economy than they were a year ago.

The poll found that about 38 per cent of respondents feel the Canadian economy will improve in the next few months, compared to 54 per cent who felt that way a year ago.

Meanwhile, the economists predict moderate growth rate of from 2.2 per cent from CIBC to about 3.2 per cent from Royal Bank, with most saying that any revision to those forecasts would be on the upside. The economists’ consensus is that the Bank of Canada will raise interest rates by a full per cent to two per cent by the end of the year.

“The forecasts aren’t all that different …What we’re really talking about is a moderate pace of economic growth that gives the Bank of Canada time to gradually rebalance monetary policy, probably starting in the second half of the year,” Alexander said.

Sherry Cooper, chief economist at the Bank of Montreal, explained that Canadians may be jaded about the economy because good news about the economy is often downplayed while bad news is highlighted, especially coming out of the U.S.

“Canada is in great shape and we don’t hear that,” she said.

Craig Wright, chief economist of RBC Financial Group, who predicted the highest rate of economic growth among his peers said the decent growth will be driven by moderate consumer demand and improved business confidence.

“There will still be support for growth … a fairly strong consumer sector, a strong business sector, (it) all adds up to over three per cent growth,” he said.

Still, if a significant number of Canadians are downbeat about the economy, as the poll indicates, that could weaken consumer confidence and therefore reduce domestic spending, which could dampen growth prospects.

One in five respondents to the poll, conducted in December 2010, said they felt the economy will actually worsen in 2011, compared to about 14 per cent of respondents from the December 2009 poll.

However, less than 10 per cent of respondents were concerned about sinking into a severe recession, compared to 17 per cent a year ago.

The poll results were collected from 2,560 Canadians by Pollara research firm.

“Canadians were feeling overly bullish on economic recovery this time last year,” Michael Marzolini, chairman of Pollara, told the audience.

“But clearly, these lofty expectations in Canada and around the world have not yet been met, and Canadians are now more measured in their feelings about the economy.”

Canadians are more concerned about their own pocketbooks than about the global economy as a whole, he said.

Top economic concerns for Canadians include cost of living, having enough money to retire, health care costs and family debt loads.

FIXES number of Canadians polled