CARI Convention: Slower Growth Predicted

Years like 2004 don’t come around too often for the global economy, and business planners probably should not expect another year like it this year or next.

That was part of the message delivered by University of Toronto economist Peter Pauly to attendees of the Canadian Association of Recycling Industries (CARI) Convention, which took place in Toronto June 11-13.

“The global recovery has found firm footing,” Pauly told the more than 200 attendees regarding the 4 percent global economic growth rate. That rate could have been even better, he noted, if the economies of Europe and Japan had performed as well as those of North America. Leading the way, though, were the economies of China, India and other developing Asian nations.

While Pauly sees global average growth slowing from 2005 to 2007, he does not see a severe slowdown coming, but rather a pullback to the 2.5 to 3.5 percent growth range.

Among the issues that Pauly sees as troubling during the next three years is the “inflexible fiscal policy” being imposed on European governments as well as the current accounts deficit being racked up in the United States.

The University of Toronto economist also remarked that ever-increasing amounts of household debt are a troubling phenomenon in the U.S., saying he finds this “private demand unsustainable” for borrowed money and consumer goods.

Dale Orr of Global Insight’s Toronto office commented on challenges unique to Canada’s economy, although the nation’s close relationship with the U.S. means that economic factors affecting both nations need to be examined.

The stronger Canadian dollar, while it may be helping such sectors as utilities and retailers in Canada, has hurt manufacturers who rely on exports to the U.S. and other nations. Orr pointed out that Canada has lost 37,000 manufacturing jobs since 2002, “a lot of that for exchange rate reasons.”

Orr predicted that the Canadian economy could adjust to its stronger dollar, but that it will adapt “by a process of creative destruction,” referring to the loss of jobs at companies that had formerly exported successfully to the U.S. “Those exporting to the U.S. in the 1990s will now find it extremely difficult.”

Globally, Orr agreed with Pauly that slower growth rates are likely. “This year, virtually every country on the planet is going to have a slower rate of growth than it did last year.”