Are we there yet?
This may be the only question left to ask after seeing some of the pillars of the banking industry disappear, recent corporate results that can only be described as dismal, savings evaporating – plus markets that are not reacting well to the innumerable rescue packages devised by central banks and governments.
This slide has been eroding not only pocket books – but also confidence. So people are well justified to ask “Are we there yet?”
Many analysts maintain that Canada is uniquely positioned to whether this storm better that any other G-8 country – an economy largely based on resources and energy, a sound fiscal situation resulting from prudent management of public funds including no budget deficits over the past 15 years and payment of almost a third of our national debt. These are elements that will certainly play in our favour - but as the crisis deepens south of the border, some sectors in Canada are being directly affected – and the ripple effect cannot yet be quantified.
For the moment, some of the key indicators, such as employment and construction starts, are showing good resilience. But other sectors are showing definite signs of fragility. Commodity prices have been falling and third quarter results for a number of large Canadian corporations leave little room for optimisim.
Is this a recession? This is a rhetorical question – and one that doesn’t really tell us about the future. So what will be the signs that we have reached “the” bottom? We should look at the same signs that have brought us the gloom and doom – stability in the American real estate market and greater solvency of financial institutions.
So, back to the question. Central banks and governments continue to pump billions into the system to “restore credit”, and real estate continues to lose value. Following this logic, the answer is no.
And the road back could be a long one.
Joanne Lefebvre, RGA
