HEADING INTO 2009, CANADA'S ECONOMY WILL FARE BETTER THAN MOST

By John Clinkard, Consulting Economist, CanaData

Entering the final quarter of 2008 and looking ahead to 2009, if there is one thing the world has no shortage of, it is "doom and gloom."
Indeed, based on several of the key indicators of future economic health, the global economic climate has seldom appeared so threatening.

For example, in the United States, the September Manufacturing ISM Report on the Business Purchasing Managers Index (PMI) dropped to 43.5 from 49.9 in August 2008. According to the Institute of Supply Management, "the PMI indicates a significantly faster rate of decline in manufacturing."

In China, the CLSA China Manufacturing PMI dropped from 49.2 in August to 47.7 in September, a new survey low. Also in the month, the volume of new orders in that economy declined at a "series-record pace" to 45.8.

In Europe, the Eurozone Composite Purchasing Managers Index, which captures both services and manufacturing, fell from 48.2 to 47 in September 2008. According to Markit Economics, the information group that produces the survey, "the latest readings were consistent with stagnation."

While most of the world's major developed countries seem to have been enveloped by this global economic maelstrom, the most recent leading economic indicators for Canada are pointing in a different direction.

In particular, the most recent Ivey Purchasing Managers Index unexpectedly rebounded from 51.5 in August to 61 in September 2008, well above the consensus view of 51.

This positive statistical report was reinforced by the Statistics Canada Composite Leading Index for August, which rose by 0.2% following no change in the previous two months. As with the Ivey Index, the increase in the StatsCan index was more than analysts expected.

Finally, in its most recent World Outlook, the International Monetary Fund projected Canada's growth in 2009 to be the fastest of the seven major developed countries.

It should be noted that, given the pervasive nature of the current global financial crisis, it is highly unlikely that Canada will avoid significant economic pain over the next couple of quarters. However, the fact that our economy has proven to be quite resilient thus far suggests that it will continue to do better than many expect over the near term.

John Clinkard has over 30 years experience as an Economist in international, national and regional research and analysis with leading financial institutions and media outlets in Canada.

Source: www.journalofcommerce.com