Signs of a Recovering Economy

Signs of a Recovering Economy 

Spring has arrived and with it a continued sense of optimism in the Canadian economy. While there are many positive indicators including strong GDP figures for March, there are still financial hurdles to overcome and we may not be out of the woods just yet. These hurdles reported in the media in the past few weeks include changes in how Canadian consumers are shopping post recession, the financial fallout of a potential real estate housing bubble and Greece’s financial debt crisis and how it could hamper our recovery.

First up is an article in this week’s Globe and Mail about The New World Order of Consumption, a report that analyzed shoppers’ buying habits around the globe. For Canadian consumers, they are back in stores but are hanging on to their recession buying habits and spending differently than they did before the downturn. Retailers that resort to the old way of doing business by stocking shelves and expecting shoppers to buy it, will find it a tough go in today’s new shopping environment.

According to the report, consumers are now shopping around for the best possible deals, trading down to cheaper items and private labels, and scaling back on non-essentials. Retailers are finding they need to slash prices to stay competitive. This further reduces their profitability after several lean years endured during the recession. Economists are warning that for a full recovery to kick in, consumers will need to pick up their spending to get the economy rolling once again.  

On the hot Canadian housing market, it’s looking more like a bubble in the making, according to a report by Edward Jones that warns Canadians should prepare for a possible impact of a housing downturn. You only have to look at the recent collapse south of the border to see just how brutal a housing bubble burst can be. A huge wave of U.S. foreclosures played a key role in the global financial meltdown.

Much of Canada’s economic recovery from the recession has been spurred on by the buoyant housing market. The goose that laid the golden egg for the broader Canadian economy may very well be in jeopardy with higher interest rates expected this summer and fall. With higher consumer debt that has risen steadily for several years along with the burden of higher mortgage costs could keep people from spending on other items creating a domino effect in all aspects of the economy.

On the global economic front, despite optimism about the recovering U.S. economy, Euro woes have rocked global markets and wreaked havoc with currencies. The Greek government has promised to carry out big budget cuts and tax hikes while striking public workers are challenging their government's bailout deal with the EU raising doubts whether this can be achieved. It has the potential to be the biggest risk to the global recovery and it could very well hamper Canada’s economic recovery now underway. The Greek crisis however may only be the tip of the iceberg. The debt problems in other Euro countries, such as Spain, Italy and Portugal, may prove to be even more serious than Greece and have yet to be dealt with.

With today’s economic uncertainty, protect your accounts receivables against bad debt with Veri-Cheque’s Account Receivables Protection Plan. It may very well be one of the best business decisions you will make to ensure your company’s future growth and longevity. I invite you to give us a call to get more information about how we can assist with your business plans for the future.

Best Regards,
 
Ronald Renwick
President
Veri-Cheque Ltd.