Harper's upbeat economic outlook in context

Prime Minister Stephen Harper’s upbeat speech earlier this week on Canada’s economic prospects can now be read in the context of some fresh forecasts. Broadly speaking, the PM’s tone gets some support from RBC Economics, but TD Bank is far gloomier.

“Canada was the last advanced country to fall into this recession,” Harper said in Tuesday’s speech. “We will make sure its effects here are the least severe and we will come out of this faster than anyone and stronger than ever.”

I’m going to read “faster than anyone” as meaning mainly the U.S., the inevitable and main point of comparison. The references to the recession being less severe and Canada emerging even stronger also suggests, I take it, a more robust recovery here than in the U.S.

RBC’s economists seem to at least partly agree. They see both Canada and the U.S. beginning to grow again by the third quarter of this year. Then in 2010, Canada’s GDP will rise 2.6 per cent, while the U.S. economy recovers just a bit less at 2.2 per cent.

TD’s economists, on the other hand, see worse times stretching into next year, and predict the U.S. economy will grow a pathetic  1.4 per cent  that year, and Canada’s will perform just as anemically, even a fraction worse, with 1.3 per cent GDP growth. (That’s not really slower or weaker, but neither is it faster and stronger.)

Let’s not fixate too much on the exact prejections—a mug’s game. But the numbers can serve as shorthand for the perhaps more telling analytical perspectives of the economists behind the forecasts.

I spoke briefly this afternoon with Craig Wright, RBC’s chief economist, and he sounds cautiously hopeful. For instance, Wright tells me he sees prices for key commodities like oil and copper “forming a bottom and moving forward,” which would be good news indeed for our natural resource sectors. He also points to the “lift” Canada’s exporters are getting from a lower C$.

Don Drummond, TD’s chief economist, is markedly less inclined to accentuate the positive. “We’ve got big problems being matched with big plans, making for an uncertain and volatile ride,” he says. And that squares more with what the World Bank president said earlier today, when he called these “dangerous times.”

What do we take from all this? First, that economic forecasts vary widely, and all responsible forecasters acknowledge that their predictions, never very reliable, are uncommonly tentative just now. Second, that even though there are reputable economists who share the PM’s hopeful outlook, there are at least as many who think the worst news is still ahead.

In general, a prime minister shouldn’t be in the prognostication game. He’s apt to be wrong—any forecaster is. Better for him to stick to saying what he thinks we need to do to make the economy strong (and he did a fair bit of that this week), and not make what are inevitably empty vows about how Canada will outstrip other countries in rebounding from tough times.

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