This time of year your loyal scribe usually finds himself recounting a successful year on the farm. At least that’s what I like to do, get a little respite before I buckle down to a winter of writing and speaking on the circuit. This year however I find that I’m driving a huge green combine through the cornfield with December staring me in the face. It’s been such a tough wet fall that I’m afraid I’m going to hear Christmas carols over the combine radio, something which tells me the growing season has long past.
Hopefully my time will come soon when I can get off that combine and maybe do a little bit of Christmas shopping. It’s seems that our fellow Canadians are really getting into the Christmas cheer this year as statistics Canada reported last week that retail sales were up 1% in September to 34.9 billion, the seventh increase in nine months. It might be a bit of a knee-jerk reaction from where we’ve been but when you have the seventh increase in nine months I think that means the recession really is over.
The point being it looks like the domestic part of our economic recovery is well on the way. It is true when you descend to the economic depths where we were every incremental increase in economic activity can be “over emphasized “in our zeal to get out of the recession. Needless to say, we are in a much better spot than we were a year ago today as positive economic growth is always better than going the other way.
Interestingly enough the only two provinces where retail sales went down in September were Alberta and Saskatchewan. In the days where we had the unemployment rate at 5.8%, which was only a couple of years ago I often pointed to these two provinces as being Canada’s economic engine. However when the meltdown came in commodity prices collapsed both Alberta and Saskatchewan have had their share of problems. It doesn’t surprise me that there retail sales are down but I do expect that turnaround with a pickup in commodity prices. Copper is reaching new highs these days and at certain point oil is going to reach $80 per barrel. That will surely be a boost to Alberta and Saskatchewan’s fortunes.
Of course the big question in my mind is when will the other shoe drop for the Canadian economy? That other shoe is our export growth into the United States. With our American friends still mired with an unemployment rate of over 10% it’s making it very difficult for Canada. We need the United States to be the United States again in all its economic glory. However, with the US dollar in free fall and government deficits growing I’m not so sure were going back to the way it used to be.
Look at it this way. Our American friends have had to deal with two wars, which are very costly. Add to this about $12 trillion worth of fiscal and monetary stimulus and a future $4 trillion government bond sale between 2009 and 2010 and what do you have? I’d like to say a stronger United States economically but I’m not so sure. Spending all this money is certainly going to be hard on the value of the US dollar. It reached a 15 month low last week and the consequence was a rejuvenated loonie, something we don’t need in the export related economy of southwestern Ontario.
If your eyes are glazing over by now just think of it this way. All that money that the American government has been borrowing and paying out in economic stimulus has to be paid back someday. There are thoughts that it will be “monetized “which means the US government will drive the value of the US dollar down and pay back this debt with cheaper money. That usually results in too much money chasing too few resources, which add up to inflation big-time. That ultimately results in higher interest rates and the economic balance, which is always so difficult to maintain gets turned over with the rest of the turnip wagons. It’s all in the mix now and that is one reason why the American economy is not racing toward recovery. There’s just too much uncertainty at this time for big positive economic growth results and employment gains.
Key to the short-term economic future in the US is their Christmas sales. It all starts with a bang this week on Black Friday. Last year sales were terrible so don’t be spooked if you get much higher retail sales this time around compared to last year. The secret will be to maintain and increase Christmas sales into 2010 and 2011. If we see any early signs of that it can only bode well for South Western Ontario and the rest of Canada.
I’ve got to believe our American friends are on the way back. But at a certain point, I’ve got to see the hard economic numbers. I don’t see them now, but for Canada’s sake I hope they are around the corner. Our own economic status and standard of living will surely depend on it.