Today's economy

Is the Canadian economy in trouble in 2013?

By Kevin Press, BrighterLife.ca

Comments (37)

Canada’s economic recovery will lose steam in 2013 and its main stock index will end the year in negative territory. Those two predictions come from Sadiq Adatia, chief investment officer of Sun Life Global Investments. He and I spoke on Thursday.

Sadiq Adatia, chief investment officer of Sun Life Global Investments“The Canadian economy is in trouble,” he told me, answering a question we posed in a blog post last June. “People are overly optimistic about the Canadian economy. I think it is going to have a tough time in 2013. And I think the Canadian stock market will actually be negative next year — somewhere in the 5% range.”

Adatia said housing, consumer debt and factors outside the country could all contribute to a tough year.

Activity in the residential housing sector is slowing, probably as a result of Ottawa’s move to tighten the country’s mortgage lending rules. Expect to see that push housing prices down in the first half of 2013. That’ll lead to rising unemployment in the construction trades.

“Canadians will feel a little bit worried,” said Adatia. “They’ll tighten their belts a little bit. Growth will slow because they won’t be spending.”

For many, debt will contribute to that worry. Statistics Canada reported Thursday that household credit market debt across the country reached 164.6% as a percentage of disposable income in Q3 — another record high. The only good news is that the increase over the previous quarter was smaller than the jump measured between Q1 and Q2.

Globally, the warning signs are clear. China’s slowdown — no matter how soft its landing proves to be — will hurt commodity prices. The eurozone will continue to make business leaders nervous in 2013. And of course Canada’s economy is significantly dependent on the strength of the U.S. recovery.

“Canadian and U.S. corporations have all cut back on their spending because of the fiscal cliff,” Adatia told me. “Q1 will be a tough quarter, even if you see a resolution … In the first half, I think you’ll see negative results in the Canadian economy and the Canadian stock market. There will be a bit of a bounce back in the second half.”

Three additional predictions:

  • Canada’s gross domestic product will grow between 1% and 2%. “We’ll be at the lower end of that — maybe 1% — in the first six months,” said Adatia. That number could improve in the second half.
  • The overnight rate will stay at 1%. A consensus had formed around an expected increase by the Bank of Canada in the second half of 2013. Adatia believes that’s off the table. “The U.S. has already said that they can’t raise rates until 2015,” he said. “[Bank of Canada governor Mark] Carney’s hands are tied. Canada can’t do anything until 2014.”
  • Neither inflation nor deflation will be factors in 2013. “I don’t think either will be a concern in the next couple of years,” Adatia told me. “As we get further out, then I think the U.S. is where we worry about inflation. Today’s problem is just to get growth going again.”

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jblackstone on

It’s all about confidence….sheeple follow the media’s lead and act accordingly. On the other hand if your a nonconformist you may find some wonderful opportunities in the “new economy” no matter where you are located.

Vijau on

Real Estate will be in demand albeit at lower level .Around 200000 new immigrants are entering Canada every year bringing in billions of dollars with their skills are new home seekers .Unfortunately,tourism Canada is less competent than neighbours .Govt has to give more incentives to tax payers to spend more to move demands rather than squeezing their pockets. Tax structure needs to be in favor of middle class who are aspiring to raise their standards.Exports are limited to few sectors and need to be promoted extensively in all industries.Very few sectors are tapped for Canadian products which seem very contented with buyers next doors.BRICS ,a future economy of the world has to be aggressively managed as demand of Canadian products in these markets can save the economy for better.Canada is a very rich country but needs to explore more.

Alex K on

mortgage rates will go up as they are not set by the central bank, it’s the bond market that dictates the rates and we have already seen a small spike there. the trend is upwards no question about that

kyle (@selloffusa) on

Wait until mortgage interest rate go up. Canada loans have terms, they all expire at the end of the term. Then borrowers must re-apply for a mortgage. Imagine what happens when interest rates go back to historical normal, around 8-11 percent. The 600sqft condo they have perchased for 450k with 20% down. now carries for roughly 3500 a month plus insurance, maintenance, and property tax. Real estate people can get consumers into trouble real fast.

    GDT on

    I remember the time when a 1 year renewal rate was 18% .. all I did – working at a mortgage department for a small Canadian bank, was Foreclose, foreclose, foreclose…. 18 hours a day and couldn’t catch up. The average Canadian with a mortgage today is paying 70% of their pay for the PIT on their mortgage at 2.5 to 3 %… Crash, you have no idea how bad this will be. (Sub prime – what a nice word for deadbeats that don’t qualify, except that now all that garbage paper is sold off to your pension fund or mutual fund and the bank doesn’t care.. CMHC is the next Freddy Mac and Fannie Mae.)

      micker07 on

      in response to mortgage rates. The central bank controlled financial system is backed into a corner now, with historically high debts and an economy unresponsive to historically low interest rates. This is the end game for the Keynesian experiment.
      Rates will go up over a central bank’s dead body, and I mean that literally. Because for rates to go up would mean our already skyrocketing debt personally and nationally would become more expensive, leading to a complete system failure, or should I say a SOONER system failure.

      There is no escaping debt, and those who think this is no big deal need to read a few history books on nations which got themselves in this kind of debt. The statistical probability of this ending in tears is 100%

vicky on

My self and family members and many friends seek time in Montana or state side. B.C. has priced itself out of the markiet place. Hotels, food, etc is totally over priced. Cheaper to vacation ie Mexico, Hawaii, south Texas, Sorry BC folks.

Dgp on

Yes does not look very promising…

Marilyn on

It would really help a lot if we would make a point of buying Canadian made goods, which may cost more, but the money stays in Canada. One has to read labels and packaging carefully. Sometimes the country of origin is not stated … only that the item is packaged in Canada. Thirty years ago, before manufacturing was was sent off-shore, we didn’t own so much stuff. Because of the cheaper price for items made off-shore, we are not saving money … we are just buying more. Our expectations keep inflating, and we have become bloated consumers.

joecanadian on

Been frequenting all kinds of board and agree that we are rapidly approaching some kind of reset. The question is what should joe average (steady job, mortgage, RRSP, not really making progress) informed Canadian do? Load up the mortgage, pay off the mortgage, precious metals, stockpiling; what are the trade offs. Anywhere there is a good discussion of the options and ins and outs? I’ve about reached my limit of the chicken little whiners, I want to build my shelter.

dewayneg on

B.C. is losing jobs here in Penticton and area at a very fast pace. the heat is turned up on business. i have noticed this. but in order to get change we must live with the times. we are used to paying dearly for things and it will get worse. i bought an egg beater 15.99 when i get to the cashout till the lady says something like 21.50 i said there must be a mistake. she says no it’s all the hidden costs then she showed me the $4.50 that was added to the price. the next day i returned the egg beater now i know why there is a line up at the second hand place. on opening hrs. thanks B.C.

Lucien Alexandre Marion on

Canada will have to work hard and to be very careful this coming year in 2013 about its Economy. Doing big business with USA (+-75%) our own Economy (Canada) will be in serious problem if we don’t “watch” ourself and this is not the fault of PM Harper and its Gouvernment. The American Congress played a major role of what will be happening and President Obama has declared it last friday.
In Canada, thanks to the vision and hard work in that sense of PM Harper, Canada will diverfified its Trade and Commerce with China and India mostly…
China needs Oil and we will supply it and working in that sense and this could help Canadian Economy a lot …the same with our Natural Ressources and goods with India.
Thank you-Merci
Lucien Alexandre Marion
Canada

Todd on

I agree with many of the comments I have read here and hope to add a bit more information to the discussion and the approaching situation Canada and the rest of the G7 and G20 are about to face. Steven Keen has said “debts that can’t be repaid, won’t be repaid”, it’s that simple. “Growth and Productivity” are what pays the debt – the debts of the developed world including Canada are so utterly ridiculous high – three generations, or more – of full on productivity and output growth would be needed to pay it off…if even then! We are going to see a slow grinding down until 2020 before we bottom. H.S.Dent has stated that the DOW will collapse to 3000, by 2014, over a 75% decline from present value …why? Because people are the economy – and older people don’t spend, or start households, and because of the economic mess, young people are not starting new households way later in life, if at all. There can be no real growth, or economic improvement until the Debt slavery – imposed by the Banksters, Corporate Elites and robbing – rent seeking Governments, are resolved. This cycle in the economic world has all happened before – to different countries and regions, and for slightly different reasons ( ie. size of debt) but we keep doing it to our self, every 60 -80 years, this time its just way, way bigger and will impact more people for longer.

Big on

It looks like big real life game that the biggest fish have mastered.

The media turns on the fear or optimism in tandem, regardless of information reality. They can make the sick sound great and the great sound sick.

Upon careful back testing of analyst estimates, the number always gets changed @ information release to suit the purpose.

The world needs independent media: I stopped reading newspapers many years ago because of the bias in the arguments, and now I have to turn the TV off for the same reason. No one gives a dame about the fundamentals, only want a person in front of a camera is telling them. (yes master!)

    dewayneg on

    yes i feel the same way never listen to tv or even the cbc radio at times i pick my stories on the internet that have my interest and go with it. lost interest in the cell phone, sat tv and canned radio.

deryk houston artist (@derykhouston) on

I am a Canadian artist on the west coast and I find that serious collectors buy art no matter what the economy is doing. They tend to purchase the larger pieces because those tend to be harder to aquire. Buying art is a form of addiction for most collectors. And artists are most grateful for their support. Thank you.

    Tom Brown on

    @derykhouston artist:

    Excellent observation, deryk…very important to note this one, folks. Extremely wealthy people (especially multi-generational wealthy, dynastic families) understand that in order to preserve their purchasing power over time, and also to negate the effects of currency debasement–known to many trusting folk these days as ‘quantitative easing’ or here in Canada, ‘liquidity injections’, they must invest their wealth in three basic things: 1) Real estate (not talking about suburban single family dwellings here…more likely spots would be London England’s central core, Washington DC, and Manhattan), 2) Gold and Silver bullion (those ‘arcane, barbarous relics of a bygone era’), and 3) Fine artwork.

    What do the rest of us ‘average’ folks tend to invest in…? 1) Real estate (the kind which loses value over time to the negative effects of currency debasement (inflation), such as your average suburban family dwelling, 2) mutual fund/bond/GIC/T-bill RRSPs, 3) Cash (currency)

    Who do you think has a history of losing their shirts–the multi-generational wealthy dynastic families (think politicians, bankers, CEOs of multinational corporations, etc.), or ‘average’ folks like us? Do you think a lot of people who lost their shirts during the Great Depression were invested in Manhattan or Washington DC real estate, gold bullion and fine art? The answer is no. The ‘average’ folks who lost their life savings had their wealth invested in paper assets, like those many of us invest in today. Their wealth was transferred upward, to the pockets of the wealthy, dynastic inbreds, oops I mean families. . .

    If you have no idea what I am talking about here, it may be too late for you to understand and do something about it. If, on the other hand, you have an inkling that what I am saying makes some sense…you should delve more deeply into some topics:

    1) How, and under what conditions is currency created? Who creates it? Why do we use currency?

    2) What does the term ‘fractional reserve banking’ mean? How leveraged are the ‘strong and stable’ Canadian banks, on average? (IE, how much cash do they have on hand compared to how much money they have lent out to their clients?) If everyone in Canada suddenly wanted to withdraw their cash and investments from their financial institutions, would it be possible for everyone to get their money? Why not?

    3) Who owns the Federal Reserve? Who controls the actions of the Bank of Canada? Why is BoC governor Mark Carney suddenly being sent to England to become their Bank of England governor (the real reason)? What percentage of political campaign contributions in the last US election came from financial institutions or their major shareholders? Why is this? How many former executives of Goldman Sachs have held key government and central banking positions around the world? Why is this? (hint: Mark Carney is one of them)

    4) How is the value of the Canadian dollar determined? What backs the Canadian dollar?

    5) What does the term ‘debt money’ refer to? (related to question 1)

    6) How is it that our national debt is increasing exponentially, if it only increases a few percentage points each year? Would you be able to afford your mortgage, line of credit, personal loan and credit card payments if interest rates doubled this year? What if they tripled or quadrupled over the next year or two? What would your payment be, compared to what it is now? If interest rates went to 10% in Canada, could you afford your present lifestyle at all? Why are interest rates so low these days? How come they just seem to keep getting lower? Is this normal? Have they ever been this low for this long? Why not?

    7) Are gold and silver considered ‘money’ by bankers and politicians (in public at least)? Why not? What would bankers and politicians stand to lose if gold and silver were still considered money?

    8) What is a ‘bank run’? (look up what happened in Cyprus over the weekend…related to what has been happening in Argentina about every 10 years, and is happening again RIGHT NOW, coincidentally–see question 10)

    9) Are you prepared to see most of your paper-based assets devalue very rapidly, to a small fraction of what they are worth today? If your RRSPs, bank account and real estate decreased to 10% of their present value, would you feel confident about your future wealth and retirement plans?

    10) Do you know what has happened in Argentina twice already in the past 20 years, and what is also taking place right now, with regard to banking and currency? (ask an Argentinian if you need to, this is important)

    11) What does the term ‘inflation’ refer to, with regard to price levels of goods and services? How is it calculated? Why are food and energy weighted much lower than other items in the CPI (consumer price index)? What is the real inflation rate in Canada, including food and energy costs? Does it mean that goods keep becoming more valuable over time, or is there another reason prices keep going up for most items each year?

    12) Why could people who worked 40 hours per week in the 1960s, for about $2/hour, afford to raise an entire family, live in a nice house, own a car with no loan, and have one parent stay home (and today have no mortgage)?
    (hint: related to question 11)

    13) Are you prepared to peacefully protest government actions if and when they authorize a mass currency devaluation? Would you be ashamed to take action if you suddenly lost your life savings, or would you rise up and fight (figuratively of course) against tyranny, if it presented itself before you as it has already in so many nations of the world? Do you understand what the term tyranny means, in the context of the relationship between governments and their electors (us)? Would you submit and give up your freedoms to tyrannical rulers, if they gave you the choice between safety/security and freedom? Do you think your government has your best interests at heart. . . Do you want your children to grow up in a world like the one you live in (whether you believe it is good or bad)?

    If you do not know what these ideas are all about, but are concerned enough about your well-being that something is resonating within you, please find out about all these topics…

      SAM on

      Great questions. Not all but most of the questions I do ponder from time to time. Also I would like to add that whilst trying to find the answers to all your questions is important; but the most important thing is not to get lost in the self analysis of observation and observation of what is….One must put more attention to what should be i.e to strategize ways to come out of this menace; created by the oligarchs and the governments acting in tandem. Commitment to the strategy is the answer not complete unrelenting observation and analysis of how things have been corrupted is the right way. Too much analysis has served to keep us in the rut mode and to the benefit of the people who have corrupted the system. They want us to be in analysis mode not in execution mode to come out of this quagmire.

Stan bielanski on

[Nonsense], the stock market is set to increase,a slow down maybe that will spur new capital investment to get ready for the electronic economy, China global downturn is a myth, while she is holding back internationally she is retooling domestically, the world is changing past indicators are becoming irrelevant as we take a side step to move forward.

    micker07 on

    China has the highest levels of inventory in its history as a nation. think there’s any connection between that and their GDP?

Tony on

Canada will most certainly be in a recession this year i’m just waiting for the January jobs report that will confirm what i’m saying. America looks to complete two consecutive quarters of negative growth this March. At some point in time soon worldwide stock markets will have the biggest crash on record as i for one am totally sick of America’s fabricated stories to do with unemployment factious profits and GDP. Soon we’ll be hearing about the world being flat and moon being made out of cheese. At the time of writing the baltic index is moving back down after making 20 year lows. Stocks should be making new lows in a bear market as this bear market rally is much too long in the tooth.

    Jim on

    Agreed!

    Z on

    Well stated.

Maggie on

I just turned 60 and I live and work in the far north because the economy in the south is not good enough to provide me with enough of a pension for retirement. This is because of the slowdown in available work. When you do get work, it is at the bottom of the ladder, despite a good education and years of valid experience. It seems that education and experience does not count as much in the “new” economy.

The new workplace reality is more reliant on who you know rather than what you know. It is really sad to have to “dummy down” skills to match those around me, and to see others get credit for my contributions. As you can tell, I am having problems adjusting to this new workplace, but I am learning. Nonetheless, I look forward to “retirement” and although I will still work part of the time to supplement, I will have more autonomy because of a pension to pick and chose where I will work, or volunteer my time and skills.

If the economy were better, I would be able to pick my work and living environment closer to family in the South now rather than after “retirement”. I think a lot of us go where we can find work, and that is not reflective of a vibrant economy.

Jeremy on

I work in the real estate sector and I have to say the outlook for 2013 is quite optimistic as far as the real estate market in Vancouver is concerned. However, there are certain threats that could put a halt to that positive development, one of them being inflation pressures out of the US. The mutual interconnection between the two countries is very strong that’s why I hope the US government will do its utmost to find a solution to the fiscal cliff and thus prevent the worst from happening.

    D'Anne Howes on

    The real estate sector in Vancouver is not doing well, sales are down and so are sales prices in most areas. The economy here is flat and falling.

      fred on

      Individual home prices are still rising. My assessment for my home went up $60,000 in 2012 for the 2013 tax year.

      Mike on

      Don’t listen to a real estate person they are obviously biased. Vancouver RE is going to be in serious decline this year. Sell now or be prepared for major declines.

    JoeCents on

    From your point of view (in other words a real estate agent point of view).. for the rest of us… a decline is a good thing since home prices will come back down to affordable levels.

    Ever wonder why real estate agents love bubbles and rising home prices.. because they make more for doing the same measily amount of work.

    Example of why real estate agent love rising prices and they love driving up prices:

    If their fee is 4% on a 200k home in the year 2000 and they sell that same home again for a 4% fee in 2010 at 500k due to rising prices. They make 8000$ in fees in 2000, but they love the bubble in 2010 because they make 20,000$ in 2010 for reselling the same home.

    Second.. it’s just a sale.. they ain’t building homes.. the homes are already standing.. they just wait for a buyer to walk into their Royal Lepage or Remax office. It’s pure gravy. So easy. Basically mobile secretaries that make 200k per year with no education. Sell your own home. It’s easy as pie! Grapevine if you must but don’t go greasy real estate agent unless you want to susidize their brand new 2013 Jaguar and mansion.

      Chromeparts on

      yessir…!

    Alex K on

    how’s Vancouver doing these days? Eh

CanadianRepublican on

As the US devalues its currency more people will want to do business with them and less with us because the same product made in the US will be cheaper than the same made in Canada since we aren’t devaluing.

Friday Links on

[…] This week Brighter Life asked a troubling question: Is the Canadian Economy in Trouble in 2013? […]

    Ron on

    I think the reporter should get the opinion of several financial “experts” rather then just one person’s opinion!

      Joe Blow on

      financial “experts” Are the problem

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