From the volatile dollar to rising interest rates, economic pressures are impacting trade, pricing and business prospects for 2011.
Toronto: The economy has certainly taken manufacturers and supply chain managers for a ride over the past two years. From the volatile dollar to rising interest rates, economic pressures are impacting trade, pricing and business prospects for 2011.
To provide a look-ahead, Toronto-based economist Dale Orr gave a keynote presentation at the Ontario Institute of the Purchasing Management Association of Canada (OIPMAC) conference in Toronto recently.
He said Ontario is slowly recovering from the massive job losses seen since 2008, but the province’s unemployment rate is still higher than the national average—a situation expected to continue for a few more years.
Equally concerning are the expected increases in interest rates, he added. The Bank of Canada has kept them low throughout the recession and early recovery, but March will see the first of many rate hikes.
“There are whopping increases coming between now and 2013,” Orr said. “As the economy continues to gain equilibrium, they’ll go right back up to where they started from, over four percent.”
Consumers and companies with high debt levels might not be able to shoulder the payments, he added—another chink in the slow-recovering economy.
“These people are in serious trouble. So if they’re in trouble now, imagine what will happen every six weeks when the bank keeps raising their interest rates.”
The Canadian dollar is expected to remain at par to the US dollar, if not slightly higher. Even so, buyers should expect volatility as a year of “at par” for the loonie typically includes swings from 93 cents up to $1.10.
As for commodity prices, they typically follow the same pattern as the price of oil, he added. “We’re expecting the price of oil to keep pretty steady—80 cents over the next couple of years.”
He acknowledged Ontario’s economy has been hit hard by the softening automotive and US export markets, but he did offer some solace.
“If you think things are tough in Canada, you wouldn’t want to be in the US…You wouldn’t want to be in Britain which has really rung up its debt and is cutting back…We’re in really good shape compared to virtually every other developed country.”
Despite the gloom of the recession, and the hard-felt impact in Ontario, Canada seems to be in reasonably good shape for the year ahead, he concluded.