Canada's plastics processors marked another record year in 1999 as strong domestic and export markets absorbed about C$23.7 billion (US$15.9 billion) worth of shipments, up about 10 percent from the previous year. Continued growth, albeit at a slower pace, is expected next year, according to Faris Shammas, Ontario region executive director and chief economist for the Canadian Plastics Industry Association of Mississauga, Ontario.
Shammas said U.S. economic conditions are critical to how well Canada's processors perform. U.S. exports account for a big chunk of plastics products made in Canada and any slowdown in the United States will curtail processing in its northern neighbor.
Many economists predict the U.S. economy continuing strong in 2000. But Shammas said some numbers, including high inventory levels in late 1999, suggest U.S. manufacturing will slow in 2000.
"If the U.S. economy grows 3 percent or more in 2000, it will be a good year for Canada," Shammas said in a telephone interview. "The key is interest rates in the United States and Canada."
Shammas said inflation concerns could drive up interest rates. Commodity prices, including those for plastic resins, have been rising. The tight U.S. labor market also could fuel inflation through wage gains. Canada's labor market, although not as tight as in the United States, is beginning to show shortages of skilled and semiskilled workers. Canada's unemployment rate fell to 6.9 percent in November, an 18-year low.
Canada's exports have benefited from the relatively low value of its currency. Canada's dollar hovered around 67 cents relative to the U.S. dollar in 1999 but strengthened late in the year to about 69 cents. Shammas thinks export problems won't appear unless the Canadian dollar exceeds 72 cents. The downside of the recent low dollar is that it could be hurting Canadian manufacturers' investments in productivity, a negative trend for the long term.
Shammas expressed caution about economic performance in Canada and the United States, but other economists expressed optimism. They see momentum from the strong performance in 1999, when Canada's gross national product increased about 4 percent. The fourth quarter of last year was the 15th consecutive quarter of growth in the country.
A Bank of Nova Scotia report is typical of most forecasts publicized by financial institutions and agencies. Scotiabank predicts Canada's GNP will increase 3.7 percent in 2000 and 3.2 percent in 2001, outperforming the U.S. economy by about a quarter of a percentage point each year.
The United States accounts for 85 percent of Canada's overall exports, including 56 percent of the country's total industrial output, according to Canadian Business magazine.