By MEGAN BURKE, THE RECORDER AND TIMES
The main story ahead in 2012 for the Canadian economy is modest growth, according to the deputy chief economist for Bank of Montreal (BMO). Doug Porter made a stop in Brockville Tuesday afternoon at the Brockville Country Club to deliver his sentiments on the world economic situation and where Canada fits in. "Ultimately, we are affected by the trends of the United States economy. We have been doing a little better, especially in the housing market and job market, but we can only separate ourselves so much from the U.S. economy," Porter told The Recorder and Times. These markets have been big positives for the Canadian and local economy, as Porter noted an improvement in the job market showing the unemployment rate decreasing. "We are seeing a bit of a split decision between agriculture and construction - which have done well -and manufacturing, which got hit very hard. It's still trying to recover," said Porter. "There have been lots of bright spots. The farming sector has done well, real estate construction has done well. In the middle is the retail sector. Their challenge now is record levels of household debt and a lot of cross-border shopping." Manufacturing, however, is a sector that has seen losses in jobs over recent decades. "There will always be a manufacturing sector, but to compete globally, it has to remain extremely productive and often that means the production comes with fewer jobs than before," Porter explained. "The economy loses a lot of manufacturing jobs in a recession and they don't always come back. We see people adjust into new jobs, all types of different industries they find their way into. Unfortunately, that transition doesn't happen overnight." On the local front, Ernie Schroeder, commercial banking area manager for BMO's Eastern Ontario District, acknowledged that while the Brockville area went through tough times with the loss of major manufacturing jobs, that these setbacks were picked up by other industries. "The emergence of smaller businesses have taken up that market and increased their jobs. I can think of eight or nine local businesses that have really prospered and continue to contribute to the market," Schroeder said. "The recent announcement of the hospital expansion is great news for the area. It will bring a lot of peripheral benefits." The job growth is a factor contributing to the housing market being a pleasant surprise for Porter with his future forecasts. "It's been healthy without overdoing it," he said. "What we've seen is a healthy market, with slight increase in sales and an uptake in prices." The only significant change Porter saw was when the federal finance department moved to tighten the mortgage lending roles by shortening the amortization. "We thought it would put a chill into the market, but it didn't have a big effect," Porter said. "Ottawa, in recent years, has taken three separate steps to try and cool the market, but overall, the housing market still looks healthy." "The local housing market in Brockville is pretty insulated," said Schroeder. "We don't see great peaks or valleys, it stayed consistent. There were no huge decreases in values or increases in vacancy rates. It's a pretty stable market." Interest rates are also likely not moving, he said. An important factor for this, said Porter, is the U.S. Central Bank federal reserves has almost guaranteed short-term interest rates won't be moving. As the Canadian market takes its cues from the U.S., short-term interest rates are unlikely to change over the next 12 months, much like the previous 12 months. "Interest rates will remain exceptionally low for quite a period of time," Porter said, noting that long-term interest rates can change. With the moderate growth happening across Canada, a double-dip recession continues to be a risk that Porter no longer completely dismisses. "The concerns I have are the European debt situation and the weakness of the U.S. economy, as they are at a risk of renewed debt," Porter said. "I don't completely dismiss the risk, but our main view is the economy will continue to avoid an outright double-dip. The economy is muddling along." There are concerns that the Canadian dollar may weaken in the next few months as it is largely driven by worldwide markets, but Porter says looking forward into late 2012 into 2013, the Canadian dollar will hold its value. "We've seen a lot of volatility in the last couple of years. Even in the space of a month, it's been from $1.05 to 95 cents. It's been bobbing in that range ever since," he said. At one point, Porter believed the Canadian dollar would move above parity, but now believes it will remain strong as it is looked upon positively from worldwide markets. "We've seen a tremendous amount of foreign investment in recent years and that reflects Canada's economic strength," Porter said.
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