CME’s Myers paints economic future at CFPA meeting
CME president Jayson Myers gave CFPA members sobering, if not altogether unexpected, economic predictions for the coming year.
At the Canadian Fluid Power Association’s general meeting, held at the beginning of March this year, Jayson Myers, president of the Canadian Manufacturers and Exporters association, gave those present some sobering, if not altogether unexpected, economic predictions for the coming year.
“The next several months, at least up to the summer, will be very, very challenging,” he said. “It is during this period that a lot of sectors across Canada will see orders falling off. If there is some good news here, it’s that the outlook for the second half of the year will see things stabilizing. … Still, I don’t expect things to rebound until 2010.”
Myers said the current environment is different than others in recent history in that this is the first recession not caused by either a downturn in government spending or by banks trying to head off inflation by raising interest rates. Instead, it’s due to a systemic problem in the financial markets.
“The fundamental problem is that nobody knows, right now, the true value of assets,” he said. “That’s why equity markets continue to fall, banks are cautious about lending to each other, bond market activity has evaporated and venture capital is very hard to get.”
Looking forward, Myers said April to June will be a high-risk period because a lot of the variable rate mortgages in the U.S. will be coming due, potentially causing further problems for financial institutions. In addition, if China slows its investments in the U.S. bond market, to refocus on its half trillion-dollar stimulus package, the ripple effect could be a climb in long-term interest rates.
“If that happens, the U.S. dollar could fall very rapidly and the Canadian dollar appreciate against it,” he said. “The likelihood of that is about 40 percent, which is high but not a sure thing.”
Closer to home, Myers said Canadian manufacturers have been coping with the “perfect storm” of a rising Canadian dollar coupled with higher commodity and oil prices since 2002. Although manufacturing exports have looked good on the surface, he said they’ve actually dropped by 20 percent over the last five years when commodities and oil and gas are taken out of the calculation. In addition, it has been difficult to make up lost U.S. market share with other parts of the world. As a result, manufacturing has been hit hard in every province and across all industry sectors with the possible exceptions of aerospace, food processing and printing.