OTTAWA - The Canadian economy will likely be able to avoid a double-dip recession, predicts a new report as fresh evidence emerged that Canadians have more than recouped the hit to their pocketbooks from the last one.
The new projection from the Conference Board predicting the economy will expand by 2.4 per cent next year and 3.3 per cent in 2013 was noteworthy because it came from a body that was among the most pessimistic on growth for this year.
But even so it comes with two big caveats — both European and U.S. policy-makers must implement policies necessary to stave off disaster.
"All bets are off if we have another financial crisis. It's very scary right now," said economist Pedro Antunes of the Ottawa-based think tank.
The signs are ominous in advance of a critical meeting of the European council this week.
Greek protesters rioted for a second day in protest of harsh spending cuts being demanded from creditors, and there was yet no sign of the comprehensive bailout package for European banks. In the U.S., political squabbling continued to hold up a job creation package and a general agreement on fiscal sustainability.
Still, Antunes says the chances of a recession in Canada are slim and even in the U.S., he put the odds at no more than one in three.
"If we get through (a European crisis), there's not a lot fundamentally in the U.S. economy than can burst. The U.S. is fundamentally at the bottom and there's good signs coming out of the U.S."
A U.S. bounceback will be good for Canada because it helps exports, one of the mainstays in the economy, and supports global growth, a positive for commodity prices.
The relatively upbeat forecast was released Thursday after Credit Suisse issued its inaugural analysis of global wealth, showing Canadians are catching up to Americans in terms of worth.
While U.S. adults are still eight per cent poorer in terms of wealth than they were in 2007, Canadians' wealth in terms of the domestic currency is three per cent higher. The report says Canadians have mostly closed the gap with Americans in terms of wealth.
"It's current wealth level, at US$245,000 (per adult) is very close to the US$248,000 figure for the United States," Credit Suisse said, noting that a decade ago, Canadian mean wealth was only 56 per cent that of the U.S.
And Canadian wealth is more equitably distributed with both a smaller fraction worth less than US$1,000 and a larger percentage worth over US$100,000 than the United States.
In world rankings, Canadian households placed eight in terms of wealth.
Going forward, Antunes said although both Canada and the U.S. have similar outlooks for growth, there is no comparison between the two economies because the U.S. fell much further during the recession and is still playing catch-up.
He said the Canadian economy is expected benefit from high global prices for commodities that Canada exports, the spin-off from the resources boom, and the fact jobs growth remains relatively strong.
The Conference Board is particularly optimistic, in comparison with other published forecasts, on employment.
While some chartered banks see the unemployment rate rising slightly in the next few months, the Board has the rate on a steady, downward slide from the current 7.3 per cent to 6.3 per cent at the end of 2013.
"This summer's weakness in private sector employment is expected to be temporary," the report argues. "Despite a decline in infrastructure spending, construction employment will be bolstered by strong investment in the resource sector and in commercial and industrial buildings. Service sector employment will also do well."
The heavy drag for both the economy and employment comes from government, said Antunes. He said governments will be taking about $12 billion out of infrastructure spending next year as the last projects of the stimulus spending introduced in 2009 to combat the recession wind down.
Still, with businesses continuing to invest and the resource sector rebounding on strong commodity prices, it's hard to see how workers will not benefit, he added.
Antunes notes that next year's growth is still modest by traditional standards, but given continued weakness in the U.S., it may be the best Canadians can expect.