Despite the uncertainty surrounding federal elections in Canada and the United States, both economies should roll along whatever the outcome says Sherry Cooper, chief economist at BMO Nesbitt Burns.

“It is hard to believe at this juncture that only six months ago, the newly installed Prime Minister Martin was slated to win a huge majority in the upcoming election polling more than an estimated 50% of the popular vote. At the same time, President Bush had a better-than 50% approval rating and the election appeared to be a shoo-in if the U.S. economy cooperated,” Cooper marvels.

“In both countries, the economy does not appear to be the determining factor in the upcoming elections. While much can happen before June 28th in Canada, and over the next five months in the U.S., it is safe to say that the electoral outcome is far from certain,” she says. Nevertheless, Cooper says she’s not changing her forecast for either Canada or the U.S. economies or financial markets based on election results.

“While I am not suggesting that it makes no difference, the differences might well be relatively short-lived and uncertain. In Canada, a minority government of either stripe could well last only a short while. In the U.S., it is unlikely that a Democratic victory in the White House would be accompanied by a majority in the House or Senate, reducing the likelihood of a major change in policy. Paralysis is more likely,” she says.

In the meantime, the economies are solid, she insists. “The U.S. manufacturing sector is rebounding strongly, with manufacturing employment reported by the Institute for Supply Management at a 30-year high. As corporate profits have surprised on the upside, businesses have unleashed capital spending programs for technology and software. Nonresidential construction is no longer such a drag on the economy, and a coming rebound in inventory accumulation will no doubt boost second-half growth in both Canada and the U.S.”

Canadian corporate profitability is still strong, “largely because commodity prices have risen by more than the appreciation in the loonie, especially in the past year”.

“So, while geopolitical risks and terrorism remain a dark cloud over the global economy, the fundamentals are sound,” she concludes.