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Innovation key to surviving commodity downturn: CMD Senior economist at CanaData West

0 132 Economic

by Russell Hixson

Alex Carrick, CMD Group's chief economist, gave his construction forecast at the recent second annual CanaData West Construction Industry Forecast Conference in downtown Vancouver.
Innovation key to surviving commodity downturn: CMD Senior economist at CanaData West

"There ain't no such thing as the status quo," started Carrick.

He explained that he is concerned about where Canada is going as there appears to be a sense of complacency.

"Toronto and Vancouver often top lists of best cities, but you have to recognize that there are eager competitors. Other nations are very aggressive at going after issues like trade," he said.

Right now, there is a down cycle for commodities, which are hitting Canada's economy hard. Things are not as bullish, but what can we do about it? he asked.

We need to strive for a better-balanced economy through innovation and efficiencies up and down the value-added goods and services supply chain. Carrick said that the solution to getting this innovation can be as simple as buying it – by hiring good managers or purchasing super equipment.

However, the timing is bad with the low Canadian dollar. Our big advantage is commodities, he said.

"You are in a province that is very dependent on commodities and you have a problem getting those resources to market," he explained.

Canada, and especially B.C., are tied to the U.S. economy, which has been recovering, though Carrick noted Canadians should be looking beyond the U.S. for trade partners.

"They are doing very very well down there," Carrick said about the States. "If they get their confidence back the U.S. is going to really start roaring."

Housing starts are still not where they should be in the U.S. and, if they were near normal, you would see wage rates increase, Carrick said. Canada is still the top supplier of oil to the United States, with Saudi Arabia way behind, Carrick said.

In fact, oil from Organization of Petroleum Exporting Countries (OPEC) nations has rapidly dwindled, which is a real opportunity for Canada, he added.

"That changes the geopolitics in the region," he said.

What sets the U.S. apart from the rest of the world is their high tech sector, which is first in the world.

"But, living in B.C., you have several similarities to this sector and Vancouver resembles San Francisco and San Jose," he said.

Much of the new jobs occupying space in Vancouver are "brain power" jobs, but "we still don't have the 'clusters' they have in the United States," he said.

One of the main reasons the recovery has been shaky internationally is that governments are turning to austerity, based on fears of an aging population and pensions.

"Monetary policy and fiscal policy have not been getting along," he said. "If Mr. Trudeau does go into deficits, which I'm sure he will, it will be more traditional deficit spending to improve the economy."

Carrick also worried about Trudeau's plans to tax the rich, which he believed could result in a chunk of the country's brain power leaving for better economic opportunities. He explained that the combination of low oil prices and a low-valued loonie have been a boon for tourism, the petrochemical industry, film and television production, airlines and export-oriented firms. Many of these industries are of benefit to B.C., he said.

Carrick also warned that construction now can come down to whether it makes more sense to build "bricks and mortar" or to utilize the internet. There are alternatives to building square footage, though there will always be some industries such as hotels that require a physical component.

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