Over the past year or so, the global recession has become the most popular topic in financial news. And by popular, we don’t mean that people were fans of it. Of course, now that Canada and the United States are climbing their way out of the financial turmoil they were in not long ago, some investors are worried about a sudden return to economic peril.
Not to worry says a CIBC World Markets report. According to an article published by The Toronto Sun earlier today, the chances of these North American countries falling back into a recession are pretty low. The article notes that it is very rare for a “double dip” to occur. This refers to a time when recessions occur less than two years apart from each other.
Apparently, in the United States, this only took place once in history during the early 1980s. Even still, it is a natural concern for both investors and business owners alike to have. Not to mention, the thousands of North Americans who lost their jobs due to the recession likely still worry. All of the above are hoping the recession is far behind them.
Says CIBC chief economist Avery Shenfeld: “Certainly, there are reasons for concern. But there is still a base of ongoing support coming from healthy corporate profits and a wide-open tap on monetary stimulus. That has us projecting a sharp deceleration in U.S. growth, but not an outright recession, with a similar fate in store for Canada.”
The CIBC believes that there are a number of factors that point to the indication that no new recession will develop any time soon. They include the recovering of corporate profits as well as strong liquidity and tight corporate spreads. In addition, the continuous news about job growth, especially in Canada, appears to be a promising sign.
Unfortunately, the predictions aren’t all rosy. Chief economist and strategist at Gluskin Sheff & Associates, David Rosenberg believes that there is a 67% chance of a double dip at this point. Just a month ago, Rosenberg surmised that the chance of another recession was only 45% likely.
His factors for this speculation include the Economic Cycle Research Institute’s weekly leading economic index. The Toronto Sun article reveals that it has dropped to a level that is lower than the worst point of the recession of the early 1990s. In case this isn’t enough to send citizens back into a state of worry, Rosenberg does cite more evidence.
He believes that “a major drop in the price of industrial metals since mid-April, such as an 18% decline for aluminium and 13% for copper (may point) to a sharper slowdown than expected in the Chinese economy, which drives demand for such commodities.” Let’s hope that Rosenberg is wrong, and that we have all seen the last of the recession.