ISSUES OUTLOOK

By Royce Lowe

Neighbor up North Canada’s the place up north that attracts rich Americans to fly in to fish. When it’s not burning, that is. Canada, has a population very slightly larger than that of greater Tokyo, and on a par with that of California at just under 40 million. Oh, and it’s the world’s second-biggest country by geography, and surely one of the coldest. It was also a pioneer in North America in the use of basic oxygen steelmaking and continuous casting. It also has two official languages, but anyone who’s visited knows about that. And it drives in kilometers.

Matthew A. Winkler recently wrote an opinion for Bloomberg on Canada, and much of this article from here on takes into account his opinions. Starting with the fact that a good part of it was, is, ablaze, much to the consternation of its neighbors to the south who were surprised to see strange orange particles, for want of a better word, blocking out the sun in certain places. A lot of this was taken care of by those wonderful hail-filled rainstorms that are the answer to Canada’s summer humidity.

Then there’s the Bank of Canada which was blamed for tanking global bond markets earlier in June when it unexpectedly raised benchmark interest rates to the highest in 22 years. Whatever that means.

But forget the fires and the interest rates, and look at the fact that Canada is booming like it never has before. Unprecedented population growth, record-low unemployment, the most diversified economy in its 156-year history, and a world-beating stock market since 2021 are contributing to what nine out of 10 economists say will be the best performer among the Group of Seven developed countries by 2025. Wow, that’s really something to say about the little brother of the US and the UK.

Let’s leave the next two paragraphs to Mr. Winkler. After all, he seems to have said it quite succinctly: “Prime Minister Justin Trudeau, who has been continued in his position since 2015, started the process of transforming the eighthlargest economy from hidebound finance and fossil fuels to technology and other 21st century industries. was No. 2 with a 3.3 percentage-point decrease).

Unlike most of his G7 peers, Trudeau welcomed immigrants after jumpstarting his successful campaign for office with a hitherto taboo declaration that it was time during a period of exceptionally low interest rates to boost public spending and invest in greater diversity, even if that meant tolerating budget deficits. His opendoor policy enabled Canada for the first time to expand by more than 1 million people, or 2.7% in 2022, the fastest growth among industrialized economies and a rate comparable to many African nations (international migration accounted for 95.9%), according to Statistics Canada.

To be sure, the housing market remains unaffordable for too many Canadians, partly as a result of the surge in immigration. Inflation, meanwhile, shows no signs of decelerating to its pre-pandemic pace, which means perpetual credit tightening by the Bank of Canada may hasten a recession.

In spite of all this, Trudeau’s policies are proving to be successful. A national poll earlier this year found that 52% of respondents said the prime minister’s plan to increase the number of new permanent residents each year will benefit the economy (38% said the increase will be a detriment).

Sure enough, the gap between people with jobs and those without has never been wider with a record 20.1 million employed in April, overwhelming the all-time-low unemployment rate of 5%, according to data compiled by Bloomberg. The 3.9 percentage-point decline in the jobless rate since the end of 2020 is the biggest improvement after the Covid-19 pandemic among the 10 largest economies (the U.S.

Canada’s fullest employment is reflected in the more balanced economy Trudeau promised when he entered 24 Sussex Drive in Ottawa (That’s sort of the Canadian “White House”). Financial companies, the biggest industry by market value in the S&P/Toronto Stock Exchange Composite Index, shrank to 27.8% from 33.5%, energy fell to 15.7% from 17.7%, while technology almost doubled to 10.2% from 5.4%. Materials and industrials rose to 12.3% and 11.8% from 9.4% and 7.6% respectively. Corporate Canada, which exported a record $624 billion in 2022’s third quarter, has never been so diversified, according to data compiled by Bloomberg.

Bloomberg’s economic forecasts say Canada already is the fastest-growing economy after the U.S. in the G7 this year, and that it will probably repeat that performance in 2024. Bloomberg forecasts it will be No. 1 in 2025, with gross domestic product expanding by 2.3%. Technology is driving much of the growth. Shopify Inc., the Ottawabased commerce platform provider, is the country’s third most valuable company and the No. 5 application software company in the world after more than doubling in value from its 2015 initial public offering. None of Shopify’s peers will come close to matching its 22% sales growth this year, according to analyst estimates compiled by Bloomberg.

Nuvei Corp., the Montreal-based payment processing company that went public in 2020 and receives 60% of its revenue from outside North America, will appreciate 90% over the next 12 months on sales growth of 47%, according to analyst estimates compiled by Bloomberg. Bombardier Inc., the Montreal-based manufacturer of private jets, appreciated 171% during the past 12 months after reporting eight consecutive quarters of positive earnings surprises -- a netincome superlative unmatched by any of Bombardier’s global peers.

This is all great news, and not at all like the Canada of the first six years of this century, when Canadian shares showed greater price fluctuations and a total return (income plus appreciation) that was 64% less than the Bloomberg World Large & Mid Cap Index. Not only are Canadian shares less volatile than they’ve ever been, they’re beating the benchmark by 13 percentage points, according to data compiled by Bloomberg. Oh, and Canada sells an awful lot of hydroelectric power to the Eastern U.S.

Thus Justin Trudeau, unlike any of his peers in the developed world, has managed to show 40 million fellow citizens - it’ll pass this mark this year - the benefits of immigration, as evidenced by the economy’s performance. This has involved welcoming people from around the world, under all and any economic circumstances, to participate in and to celebrate this country which is Canada. And by their sheer presence and skills to make their country grow. The country is, to say the least, worth a visit, all 5,000 miles width of it.

The Outlook: Canada will continue to perform well when its economy kicks back into gear, but not everyone is happy with oppressive income taxes as high as 60%, and Trudeau’s popularity is wavering. Nonetheless, Canada continues to show resilience in the near-term.

Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook. n

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