First half of 2013 will be tough for investors: CIBC

The report offers three reasons for the stronger showing in 2013. The first is that the total number of hours worked as reported in Statistic Canada’s national household survey is up 0.2% despite low employment numbers.

Secondly, the report points to the recent rebound in auto sales, an indicator of consumer confidence, as a reason why the first economic numbers for 2013 should be positive.

Thirdly, a recent slowdown in exports to the U.S. may be about to change. CIBC’s report suggests that a slight disparity between U.S. sales of North American cars and Canadian auto output leaves room for higher production and export levels in the first quarter. As well, U.S. data, which tracks oil imports, indicates an improvement through mid-February of exports from western Canada.

One thing investors need to stop hoping for in the economy, according to the CIBC report, is help from corporate coffers. Corporations are not building up cash because they are afraid or hesitant about the economy, says Avery Shenfeld, chief economist, CIBC, in Toronto. Instead, corporations are acting out a long-term strategy.

“[Corporations] have been building up cash relative to other assets since 1990,” he says. “And essentially that’s because other assets like short-term inventories and accounts receivable have been declining.”

As such, rather than from corporations specifically, the report suggests that future economic strength will come from ongoing global growth because of the likely higher demand for Canadian resources and exports.

However, Shenfeld says, investors will have to be patient to see improvements in the Canadian economy and markets. “The first half [of the year] may be tough for investors,” he says, “but by the second half of 2013 we might see markets looking ahead to a growth pick-up in 2014.”