Canada's rebound lagging, OECD says

JULIAN BELTRAME THE CANADIAN PRESS OTTAWA May 2009

The Canadian economy remains in the grip of "strong slowdown'' despite the first baby steps of growth appearing in other parts of the world, a new report from the Organization for Economic Co-operation and Development shows.

The OECD says China is leading the world in a potential rebound from the world's most severe slump since the Great Depression, with the United Kingdom, France and Italy also showing signs that the economic slide is bottoming out.

The positive indicators in these countries are "tentative'' and "weak,'' the international think-tank says, but "they are present in a majority of the (composite leading indicators) component series.''

The rest of the industrialized world, including Canada, however, faces more economic deterioration, the think-tank says, although at a slowing pace.

The OECD's monthly data on economic indicators sensitive to expectations of future activity shows Canada's index falling for the fifth straight month, by 0.4 points in March. That puts it down 10.2 points over the past year, both numbers below the average for the 29 countries in the survey.

The report is at odds with Ottawa's oft-repeated boast that Canada will lead most major economies out of recession, and will bounce back higher.

Liberal finance critic John McCallum charged the federal government is partly to blame for Canada lagging behind some other economies, charging that Ottawa has been slow-footed in spending billions earmarked in January's budget for shovel-ready infrastructure.

"If you don't get your fiscal stimulus money out, you may as well not have a fiscal stimulus because it doesn't do one bit of good,'' he said.
"I don't think they can point to one job being created, for example, for infrastructure.''

Transport Minister John Baird, who is responsible for infrastructure, responded that the government has already given municipalities July's gas tax money and are moving quickly on construction projects.

The OECD report was not a surprise to most economists, many of whom have disputed Prime Minister Stephen Harper's contention that Canada would lead the world in coming out of recession.

Canada's dependence on exports to the U.S., China and other countries suggests that the country's economy depends on recovery outside its borders to boost demand for its products.

"At best, we've seen early signs Canada and the U.S. may be entering a period of more moderate decline rather than growth, but in East Asia we're seeing convincing signs that they are past the trough,'' said Avery Shenfeld, chief economist with CIBC World Markets.

China's resurgence would be good news for Canada, he adds, boosting demand for the country's base metals.

"Non-energy commodity prices typically rise in the early stages of recovery, or even before, in part due to the fact that firms must rebuild inventories before they can reactivate production lines,'' he said.

The OECD report is only the most recent voice sighting so-called "green shoots'' that are giving economists, investors and governments hope that the global economic and financial crisis is approaching a bottom.

European Central Bank president Jean-Claude Trichet also noted that growth has returned to some countries, although he cautioned that uncertainty remains high.

Even in North America, talk of seeing the light at the end of the tunnel is growing bolder with each encouraging, or less-than-awful, economic indicator.

Canada saw its first positive jobs report in six months in April, with employment registering a modest 36,000 jobs gain, although all came in the self-employment category.