What an exciting year for business! The Canadian
Chamber of Commerce just published its Crystal Ball –
Outlook 2015 Report, and big changes are coming to
the global economy. Canada performed well last year,
but there are vulnerabilities just over the horizon, from
highly indebted consumers to worries about our
housing market and now weaker oil prices. But, there
are also big opportunities as the U.S. economy is
accelerating into a booming recovery while the weak
loonie is boosting our exports.
Around the world, we’ve been seeing signs of
weakness even after last year’s dismal results.
Emerging markets, which used to be the engines of
global growth, have slowed and are much more
vulnerable than in the past. Brazil is struggling with
stagnation, Russia is in a deep recession and even
mighty China was forced to lower interest rates to
prop up its bubbly housing market and reduce
financing costs for business.
Across the Atlantic, the euro crisis is back, as
disappointing growth combined with mild deflation.
The 18 countries of the euro zone will see growth of
around 1% in 2015. And, there are risks to even this
gloomy scenario as a radical leftist Syriza party is
leading the polls in Greece and could form the next
government on January 25. European governments
may find themselves in a showdown with a Greek
prime minister demanding debt relief and an end to
austerity. Markets will be troubled by renewed fears of
a euro break-up, even though that remains unlikely.
There is really only one major economy that is picking
up strength. Fortunately, it’s the world’s largest, the
United States of America, with 20% of global GDP. The
U.S. economy grew a staggering 5% in the third
quarter of 2014 thanks to a resurgent consumer and
astonishing strength in the corporate sector.
Unemployment in the U.S. is down to just 5.8% and
wages are rising.
The big question for 2015 is whether the U.S. economic
resurgence can pull other markets along with it, like a
huge locomotive dragging the global economy
forward. We think it can, and that’s why we’re
optimistic that global growth can accelerate to 4.1% in
2015 from 3.3% in 2014. The second big question for
2015: Is Canada ready?
Exports to the U.S. rose 12% last year in spite of weak
energy prices. Some of the fastest growing sectors were
auto parts, lumber, aircraft, plastics, medicines and
machinery. With a rip-roaring U.S. economy and a
weaker loonie, the growth could be even better this
year. That’s why many Canadian companies may have
to scramble to build the capacity, in terms of
investment and human capital, to keep growing.
The main challenge for our economy is that, in order to
maintain a healthy rate of growth, we have to shift
away from domestic consumption, as consumers put
their credit cards away, and focus more on exports and
business investment. Oil prices are likely to remain
weak through 2015, and the Bank of Canada warned
that this could subtract 0.3% from GDP growth.
This means Canada’s manufacturing, technology and
service sectors will need to shift into high gear. Risks
abound, but there are so many opportunities, and 2015
will be an exciting year for Canadian business. Are you
-Henrick Brakel, CCC