Friday, October 10, 2008

The "Big Five" Banks see little growth

Different from a 'typical recession,' Canadian economists say

By David Frieson
The Canadian Press

Economists from Canada's Big Five banks expect little or no growth in the near future, warning yesterday that the domestic economy's current gloom will deepen into something worse than a recession.
The word "recession'' wouldn't describe the deep structural problems affecting everything from the U.S. housing sector to the Canadian oil industry, said Bank of Nova Scotia chief economist Warren Jestin.
"You have to invent a new word to describe what we're in now,'' he said after the banks presented their perspectives at the Economic Club.
"It's being driven through the financial markets into the real economy.
All of those things suggest that it's entirely different than what you might expect from a typical recession.''In their most recent economics forecast, Scotiabank economists predict recessions for both the U.S. and Canada, economic slides that will require central bankers in both countries to cut interest rates by at least a full percentage point.
All agree that a slide in commodity prices bodes ill for the Canadian economy, which is heavily dependent on the production and export of oil and gas, metals and minerals.
Drops in oil and metals prices have hit the already teetering Toronto Stock Exchange hard.
Yesterday (Monday) it took an agonizing 1,200-point fall before recovering somewhat to sit around 700 points in the red as oil dropped to trade around the $90 US mark.
And Bank of Montreal economist Doug Porter said prices will continue to take a beating over the next year, dragging Western Canada's formerly booming economy in particular down with them.
"You're going to be seeing Western Canada come back down to the rest of us with a thud, especially if commodity prices keep doing what they've done in the last three months,'' he said.
"It's almost as if the markets are pricing in a much harder landing for commodity prices. I think that's reasonable if you don't get some thawing in the credit markets relatively soon.''
Porter said the direction of Canada's economy depends on whether the financial-sector troubles in the United States start to settle down.

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