cktimes.ca Archives for At Issue
At Issue
Our Good Economic News Should Be Rubbing off in Chatham-Kent
Tuesday, July 13, 2004
Some things in our economy are easy to measure. Last week, you could almost feel it. Many Chatham-Kent farmers were looking to the heavens hoping once again for rain. Then unexpectedly last Monday morning, the heavens opened up and gave us some heavy downpours. Even though there was some storm damage, area crops benefited greatly.The economic impact of that is yet to be measured. But in farm country it's often referred to as a "million dollar" rain. Rain makes grain some traders' say and our economy will probably benefit from last Monday's downpour come this fall. Cash registers will be ringing come this Christmas.
It is much harder to intuitively measure the impact of what is going on in the non-farm economy. Rain doesn't necessarily have the same effect on the auto sector versus the tourist sector versus the agricultural sector. Change is more incremental. Sometimes, especially for those of us in Chatham-Kent it's not noticeable even after several years.
If you read last week's "At Issue" you'll know that I see interest rates going up once again. That's not too much of a stretch as almost every economist is saying the same thing and there isn't a long way down. The 44-year low in interest rates give us the clue that there is only one way to go and that is up.
But of course the Federal Reserve in the United States and the Bank of Canada know more about this than simply looking at what "goes down must come up" scenario. They are worried about the whiff of inflation, which seems to be paralyzing them into interest rate action. It's quite a change from a year ago when Alan Greenspan, the Federal Reserve chair was dropping rates to avoid deflation, a prolonged slide in consumer prices. Now it's the other way around. Our respective economies are going into overdrive.
A report by Statistics Canada last Friday showed that the Canadian economy created 25,000 jobs in June. The statistics were within economists' expectations and had limited effect on the exchange rate. While the jobs numbers was not strong enough to stir speculations about higher Canadian interest rates when the Bank of Canada meets on July 20, it underlined the positive trend of the Canadian economy. The move to higher interest rates is one attempt by the Bank of Canada to keep our economy on an even keel cooling any threat of inflation.
All of us in Chatham-Kent know the importance our American friends have on our Canadian economy. So it is good when we look south to see the US economy once again in over boil. We might have heard a lot about the "jobless recovery" but the US economy is booming big time. It looks like George W. Bush has at least hit the economic nail on the head.
We could be talking about US economic growth in the fourth quarter reaching 5%. That's a powerful number especially in a large economy like the United States. Incomes there have been rising with wages and salaries up 4.8% since last year. President Bush's tax cuts have helped personal disposable incomes rise. It's helped Americans pay for the rising cost of gasoline. But even gas prices seem to be on the retreat.
There have been a few other Americans economic clues. There is a trade surplus in services, which goes against the conventional wisdom of outsourcing jobs to India, Bangladesh and other countries. Capacity utilization is tight. In other words American plant and equipment can hardly keep up with manufacturing orders. Lots of people down south are letting the good times roll.
Clearly all of this good economic news should be rubbing off in Chatham-Kent. Our auto parts job sites should be jumping. Food exports into the US from Chatham-Kent minus our mad cow products should find a welcome American home. If Mad Cow ever gets resolved, these food exports should explode.
But as we all know, sometimes these economic good tidings aren't always spread evenly throughout Canada. Last Monday Alberta Premier Ralph Kline announced that Alberta was debt free. That doesn't mean they don't have an annual budget deficit. It means they don't have any debt, something no Canadian province has done since the 1960's. It's quite a feat, something we're hopelessly far away from in Ontario.
From an economist point of few, it's almost like economic nirvana. A hot economy is great to write about. The hard part is getting every part of society to benefit. That's our government's greatest challenge. At the end of the day we can always do better.
Philip Shaw, farms 830 acres near Dresden, Ontario. He holds a Masters of Agricultural Economics and Business Degree from the University of Guelph and is a well-known commentator on agricultural issues in print, on radio and over satellite in Canada and the United States. In the Chatham-Kent Times, Phil will use his frank and forthright writing style to address political and economic issues from the local to the international stage. He is a keen observer of political life at all levels, reads widely and has travelled the world to gather fodder for his column. See what's At Issue this week.
