Economic recovery ongoing
Economics, said Dr. Warren Jestin, is a confidence game.
“Confidence in the sense that if businesses don’t have confidence, they won’t spend,” said the chief economist for Scotiabank. “If consumers don’t have confidence, they won’t spend.”
That confidence is on it’s way back, said Jestin, who delivered a talk at Okanagan College on the key economic and financial market trends that are likely to influence the Canadian economy through 2013.
“The U.S. consumer is finally spending and that should drive the economy back at a fairly fast rate,” said Jestin, who spent a lot of time discussing U.S. politics and economy during his talk, focusing on the struggles the U.S. federal government is having with the economy.
While federal wrangling is likely to continue for some time as Republicans and Democrats find more ways to disagree, the U.S. is still seen as a low-risk investment on the world market.
“Why? Because U.S. business has strong balance sheets in general, strongest I have ever seen,” said Jestin. “The good news is U.S. consumers are starting to spend. We are seeing it in a wide variety of ways. U.S. car sales are going up. We are also finding that the U.S. housing industry is coming back in a big way.”
It is a slow recovery for the housing market, but the direction is clear, according to Jestin.
“The mood has changed, Americans are buying houses now,” he said. “This has a major impact on one key industry in B.C. and that is the forest products industry. If you look at lumber prices, and you look at the outlook for lumber, it has changed very fundamentally.”
The outlook for B.C. resources is especially strong, thanks to the development of an offshore market, principally in Asian markets, at the same time as Canada’s traditional export market begins to recover.
Those markets mean more to Canada and B.C., however, than simply resource exports. As income goes up in many developing nations, Jestin said, so is demand rising.
“There is a new buyer out there. Protein consumption is going up. It’s going to affect grains, oil seeds, it is going to affect many other areas of agriculture,” he said. “We are talking about a structural shift in global demand. There are new consumers out there. There are more cars and trucks sold in China than there are in the sum total of Canada, the U.S. and Mexico.”
For the Okanagan Valley, he said, there are more tourism dollars out there. While B.C. tourism has traditionally focused on the American market, their tourism spending has been eclipsed, as has that of Germany, Britain and France.
“So this year, who is number one? China. It’s unbelievable,” said Jestin. “Many of these tourists haven’t started travelling yet, globally, and they are spending more than any other country in the world.
“The world is changing. The market opportunities are changing.”