(February 15 11:45 ET) – Economists at CIBC are expecting a boom year in Canada, thanks to the Internet and a continued recovery in the resource sector.
The bank is calling for 3.6% growth in GDP at factor cost. “The industries that are leading the way for Canada are those that are building and extending the telecommunications infrastructure as Internet use expands exponentially,” says Joshua Mendelsohn, CIBC chief economist.
CIBC says the effect of the Internet is being felt in the tech industries through the growth of world-class Canadian firms, such as Nortel Networks Corp. and JDS Uniphase. The effect is also filtering down to business-to-business e-commerce, which is refining traditional relationships.
The tech story is not the only game in town, the bank says. “Adding strength this year will be a recovery in the demand for most of our resource products on world markets and the continued growth of industries serving the consumer.”
The boom should fuel strong employment gains, disposable income growth and consumer spending growth.
CIBC doesn’t see oil staying above US$30 per barrel. It does, however, expect oil to stay above US$20 per barrel in 2000 as long as OPEC holds.
Base metal and pulp and paper prices are expected to improve too. “We are now seeing a turnaround in the resource industries after the problems triggered by the Asian crisis,” says senior economist Anahid Mamourian. “Grains and oilseeds, on the other hand, will likely remain soft for another year. Industries such as textiles, clothing and footwear, which face tough import competition both in the domestic and U.S. markets, will continue to underperform.”
CIBC says that export-oriented manufacturing, such as the chemicals, rubber and plastics and furniture industries, should enjoy good times as the U.S. economy continues to roll.