Home building is far behind the needs of the population, and inventories of available dwellings are getting perilously low, suggesting a resumption of the building boom. Americans are still driving clunkers, but can now afford to get out of them into something newer. Businesses the world over have been under-investing for at least a half-decade, and capacity is tightening. In the US, it’s just a shade below the pre-recession peak, and rising. It’s time to invest.
These developments suggest that the world is in for a run of growth that we haven’t experienced in a long time. EDC's Spring 2014 Global Export Forecast, released today in Burlington, Ontario predicts that the US economy will take the lead, rising 3 per cent this year and just under 4 per cent in 2015. The EU will remain in the black and gain strength next year. Developed markets will be the world’s near-term dynamo, lifting planet-wide growth to 3.7 per cent in 2014 and 4.3 per cent in 2015.
Canada will see timely benefits as global trade picks up. Prospects for the domestic economy are not strong, but exports are already rising nicely. Domestic weakening should help to free up capacity for exports, which is running pretty tight in some industries. In others, there is capacity to absorb growth. And as companies are generally flush with cash, we expect a significant increase in business investment through 2015. Exports are expected to see inflation-adjusted growth of 6 per cent both this year and next, bringing economy-wide growth to 2.8 per cent in 2015 from 2.2 per cent this year.
The bottom line? There are solid reasons to expect a sudden and sustainable rush of growth this year. Success will mean plotting the right course through the rapids, and avoiding the rocks.
By Peter G. Hall, Vice-President and Chief Economist