"We're going to come out of this stronger than the other major economies and we're going to come out more quickly."
Tired of that boast? It feels like Finance Minister Jim Flaherty has been promising that Canada will lead its peers out of the global recession since before there was a global recession. Except that wasn't Mr. Flaherty. That was U.S. Treasury Secretary Timothy Geithner on March 12 - eight days after Mr. Flaherty, in his budget speech, said "key measures" show that "Canada is performing better than the United States and other advanced economies."
Ladies and gentlemen, we have the makings of another Canada-U.S. showdown.
Mr. Geithner's boldness is fuelled by the blazing 5.9-per-cent rate of growth, annualized, that the world's largest economy set in the final three months of 2009. (The U.S. Commerce Department is scheduled to publish its third and final estimate of fourth-quarter gross domestic product on Friday.) Canada's GDP expanded at a 5-per-cent rate; pretty strong, but not fast enough to win the fourth-quarter heat.
Opposition politicians in Ottawa love to exploit discrepancies like that to embarrass the government. But a fair comparison requires consideration of where the two economies are going. On that score, it appears the two countries are headed for a photo finish. The International Monetary Fund predicts the U.S. economy will expand 2.7 per cent this year compared with 2.6 per cent for Canada. Bank of Nova Scotia also gives the U.S. the edge. Toronto-Dominion Bank and Bank of Montreal predict a dead heat. Royal Bank of Canada is pulling for the home team with a forecast for 3.1-per-cent growth in Canada and 2.9 per cent in the U.S. this year.
A fair comparison also demands an emphasis on the qualitative over the quantitative, or as TD deputy chief economist Craig Alexander puts it, the indicators that actually matter to people. The U.S. unemployment rate was 9.7 per cent in February compared with 8.2 per cent in Canada. Housing prices are surging in Canada, while in the U.S. they have yet to rebound from year-ago levels, meaning homeowners are a long way from recovering lost wealth. One must also consider the scale of destruction. The U.S. economy shrank by 3.7 per cent during the recession, compared with 3.3 per cent in Canada.
So what do all those numbers mean? Think of it like the Olympic hockey tournament: Canada edges the U.S. to claim the gold, but not as easily as it was originally assumed. "There is no question in my mind that the Canadian recession was much milder than the U.S. recession and the Canadian economy is, at a minimum, keeping pace with the U.S.," Mr. Alexander said.