High oil prices could hurt U.S. recovery: Conference Board
OTTAWA—Canadian industry could take a hit from the string of natural disasters and political tensions unfurling across the globe, according to a new outlook from the Conference Board of Canada.
It forecasts the world economy will expand by 3.5 per cent this year, but several risks could hinder that growth.
Japan’s destroyed nuclear reactors, combined with political unrest in regions such as the Middle East and North Africa, are raising oil prices.
Japanese disruptions in production are also being felt along the global supply chain, mainly in South Korea and the U.S., where companies such as Boeing and General Motors rely on components.
Kip Beckman, the board’s principal economist, says that could hurt Canadian manufacturers.
“Right now we have exports of motor vehicles increasing at double digit pace, with most of it going to the States,” Beckman points out.
“If high oil prices persist and cause the U.S. economy to slow down, combined with the high dollar, that will affect our exports,” he says.
“Other sectors like fabricated metals would also be susceptible,” Beckman adds.
Despite those risks, the board’s view is that the U.S. economy will grow by more than three per cent this year.
“We’re still optimistic the U.S. economy is on a sustainable path to recovery. Labor markets are increasing, unemployment is going down, and the banks are starting to lend again.”