Canada’s recovery will get a boost from an improving U.S. economy and increased business investment that will temper any slowdown, say economists including Andrew Gretzinger, a portfolio manager at Manulife Financial Corp. and the most-accurate forecaster in a Bloomberg News survey.
Gretzinger, No. 1 among Canadian economic forecasters in data compiled by Bloomberg for the past two years, predicts the economy will grow at 3.1 percent pace in 2011. Economists from the country’s five largest banks also released forecasts today that show an improved Canadian outlook.
“Businesses will ramp up investment,” Gretzinger said in an interview, citing “attractive” borrowing costs. As well, “Canada will get some traction from an improved south-of-the-border performance -- that will help net exports.”
The Bank of Canada projected in October the expansion will slow to 2.3 percent this year from 3 percent in 2010, amid restrained consumer spending and the withdrawal of government stimulus.
Economists have been boosting their outlook for Canada’s economy in the past month amid signs the U.S. recovery is strengthening. Service industries expanded in December at the fastest pace since May 2006, according to the Institute for Supply Management’s non-factory index released yesterday. Fewer Americans filed claims for unemployment insurance payments over the past month, indicating the labor market is improving, according to data released today by the U.S. Labor Department.
Canada’s five largest banks predict the economy will expand by 2.75 percent in 2011, according to the median of their estimates given at a conference today in Toronto hosted by the Economic Club of Canada.
Forecasts include growth projections of 3.2 percent by Royal Bank of Canada, 2.75 percent by Bank of Montreal and Bank of Nova Scotia, a 2.6 percent rate by Toronto-Dominion Bank and a 2.2 percent rate by Canadian Imperial Bank of Commerce.
“Canada will benefit materially from a stronger U.S. economy,” Craig Alexander, TD’s chief economist, said in an interview at the conference. Other chief economists at the event included Sherry Cooper at BMO Capital Markets, Warren Jestin from Bank of Nova Scotia, Avery Shenfeld of CIBC World Markets and Craig Wright from Royal Bank.
Gretzinger, who is part of a team that manages C$17 billion ($17.1 billion) in assets for Manulife Asset Management in Toronto, credits his dual roles as economist and fund manager for helping to produce better forecasts. Gretzinger, 41, said he works closely with Bill Cheney, chief economist with Manulife-owned John Hancock Financial Services Inc. in Boston, to form broad views on the global economy. He then puts out forecasts consistent with those views.
“A lot of economists, they look at models, they look at spreadsheets, they look at trends, and that’s great,” Gretzinger said. “But when you put some money behind it, that’s where you stand behind your convictions. We manage our portfolio based on what we think.”
Bloomberg’s overall ranking is a composite of rankings of three indicators: quarterly growth rates and monthly employment and consumer price data. Gretzinger placed second for his prediction of quarterly growth among the 17 forecasters in the Bloomberg News ranking, and third in predicting net changes in employment. Gretzinger predicts Canada’s unemployment rate will continue to drop at a “slow and steady pace” from the current 7.6 percent.
Bank of Canada
The No. 2-ranked forecaster, Sheryl King, head of Canada economics at Bank of America Merrill Lynch, and the No. 3, Jonathan Basile, director of U.S. economics at Credit Suisse Holdings USA Inc., also predicted growth of 3.1 percent for Canada in 2011.
Gretzinger said the Bank of Canada will start raising its benchmark overnight rate again by the second half of the year and bring it to 2 percent or more by the end of this year. He also said the Canadian dollar will continue to trade at parity with the U.S. dollar this year and may rise further if oil prices rise as the U.S. recovery gains momentum.
Douglas Porter, deputy chief economist at BMO Capital Markets in Toronto, was the best forecaster among economists working at Canadian banks, coming in fourth in the overall ranking. Economists at Desjardins Securities Inc. in Quebec were the fifth-most accurate forecasters.
Gretzinger received a bachelor degree in economics from Brock University in St. Catharines, Ontario, and has a master’s degree from the University of Western Ontario. He completed one year of a doctoral work at the same university before joining Bank of Nova Scotia in 1997. He moved to Manulife in 2001 to provide economics analysis to the high-yield division before managing funds.
Top Forecasters of the Canadian Economy ================================================================ Name Firm ================================================================ Andrew Gretzinger Manulife Asset Management Sheryl King Bank of America Merrill Lynch Jonathan Basile Credit Suisse Douglas Porter BMO Capital Markets Francois Dupuis/Benoit Durocher Desjardins Securities Inc. ================================================================
METHODOLOGY: To identify the top forecasters of the Canadian economy, we used estimates submitted to Bloomberg News for three key indicators: gross domestic product (CGE9ANN), the net change in employment (CANLNETJ), and the consumer price index (CACPICHG). We compiled estimates made over two years, ending Dec. 31, 2010, then averaged the difference between the forecast made by each analyst and the actual number released.
To qualify for the CPI and unemployment rankings, the forecaster must have made at least 13 out of the 24 forecasts. For GDP, a quarterly indicator, we looked at 12 quarters’ worth of forecasts; to qualify, each economist must have made at least nine.
Economists not presently associated with a firm or who had not submitted forecasts for at least two months were excluded from the final ranking.