Nearly half of Canada’s financial advisors are telling their clients not to expect any economic growth for the rest of the year.
According to Sun Life’s Advisor Sentiment Index, released last week, 44 per cent of financial advisors surveyed expected to see zero growth in Canada’s economy through the rest of 2013. Another nine per cent said they expect the economy to shrink.
Thirty per cent of advisors expect economic growth of around one per cent, well below the long-run average, while only 14 per cent see growth at two per cent or better.
The survey was conducted by Ipsos Reid from April 5 to May 22, meaning that the impact of the recent flooding in Alberta and the construction strike in Quebec would not have been taken into account. It’s a good bet their forecasts would be even more pessimistic now.
CIBC World Markets predicted last week the floods in Alberta would shave one percentage point off Canada’s GDP growth for the year. That’s about $17 billion in foregone economic activity.
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Estimates for the impact of the Quebec construction workers’ strike are harder to come by, but the strike — which started June 17 and ended this week with Quebec Premier Pauline Marois’ passage of back-to-work legislation — inevitably will have held down the economy.
Some 175,000 construction workers were off the job for a week, halting work on two Montreal super-hospitals and Quebec City’s new hockey arena, not to mention numerous housing developments.
BMO Capital Markets is now predicting the flood and the construction strike, taken together, would shave GDP growth in the second quarter down to 1.4 per cent, from their previous estimate of 1.8 per cent, and to two per cent in the third quarter, down from 2.1 per cent.
Still, those numbers — which more or less reflect the projections among Canadian banks — are in stark contract to the sentiment seen among advisors surveyed by Sun Life, the vast majority of whom don’t expect growth above one per cent.
But those advisors are more bullish when it comes to stock markets. Despite the fact that Canada’s stock exchanges are major laggards this year, they remain positive about the overall global stock situation, with 54 per cent being “very” or “somewhat” bullish about stock prices through the end of the year.
External threats to Canada’s economy have also been on the rise. China’s manufacturing base is contracting, and pulling commodity prices down with it. That, in turn, has put downward pressure on the loonie (which hit a two-year low on Tuesday), and on Canada’s commodity-heavy stock markets, which have been lagging all other major G7 stock markets.
Scotiabank’s commodity price index is down more than 14 per cent from its peak in 2011. However, recent months have seen a bounce-back; it had been down nearly 20 per cent as of the end of 2012.