TORONTO — Canada's growth will taper off in 2001 but will remain healthy, most Canadian economists predict.
Toronto-Dominion Bank expects the country's gross domestic product to grow 3.4 percent from the 5 percent economic gain in 2000. Brakes on the economy include lower demand for Canadian goods in the United States and higher energy prices.
Canada's processed plastics shipments probably will rise 5-6 percent in value, predicted Faris Shammas, chief economist for the Canadian Plastics Industry Association. For several years processors' shipments have outpaced general economic growth.
Shammas said preliminary data indicated Canada's processor shipments rose about 8.7 percent in 2000 to C$29.3 billion (US$19.2 billion). Early signs are that the year started slowing down in the late months when the U.S. economy began to look like it was dragging, he said in a telephone interview from CPIA's head office in Mississauga, Ontario.
Most processing sectors expanded sales last year, including automotive, which at the end of September was 11.9 percent ahead of the 1999 pace. Automotive since has shown definite signs of decreasing shipments of parts and vehicles. Underlining that observation are plans by General Motors of Canada Ltd. to cut back production in the first quarter of 2001 by about 23 percent to 200,000 vehicles. Various GM facilities will be affected by the Oshawa, Ontario, program, and overtime shifts will be cut.
Canada's pipe and fittings producers' shipments grew 12 percent or higher by the end of September but could have slowed in the fourth quarter, according to Shammas. Film, sheet and bag production was up 13 percent or more, but part of that rise reflected higher resin prices.
Economist Jayson Myers said plastics will be part of a general shrinkage of manufactured goods exported to the United States. That country absorbs about 65 percent of Canada's manufacturing output, and any hiccup in U.S. demand is felt in Canada, said the official with the Canadian Manufacturers and Exporters Association in Mississauga.
Shammas said U.S. Federal Reserve Board Chairman Alan Greenspan wants to avoid a U.S. recession, and his monetary policies could crimp growth there to 2.5-3 percent.
"However, there still is the danger of a mild U.S. recession," Shammas warned.
TD Bank economists warned the risk of high inflation has not disappeared in the United States. There are labor shortages that could prompt workers to demand higher wages to offset high energy prices.
Myers said soaring oil and gas prices could hit plastics processors particularly hard because their raw materials are derived directly from the hydrocarbons. Lack of delivery capacity for Canadian natural gas to U.S. markets has pushed gas prices up in the United States with a consequent domino effect on Canada's natural gas prices.
Canadian processors and manufacturers in some regions could have an electrical cost advantage over U.S. firms, but that could change. The province of Alberta, for example, is deregulating its electric-generating industry, and early auction prices are among the highest on the continent, Myers said.
Canada's export strength has partly relied on the weakness of Canada's dollar vs. U.S. currency. A U.S. greenback could buy about 1.5 Canadian dollars as 2000 drew to a close.
Shammas said the currency advantage can be a troubling factor because it does not encourage Canadian firms to invest in automation to boost productivity. U.S. productivity grew 6.1 percent last year, well above the 2.3 percent increase estimated for Canadian industry.
Newfoundland, with its new and rapidly expanding offshore oil industry, will lead economic growth among Canada's provinces in 2001, according to the Conference Board of Canada. Long-standing oil province Alberta will benefit from high oil and gas costs and come in second at 4.1 percent. Ontario, the major manufacturing region, will see growth dip to 3.8 percent from 5 percent in 2000, predicted CBC.
One processor in Canada's major grain-growing region of the prairie provinces said sales to the agricultural sector have been slow and probably will remain slow in 2001.
Acrylon Plastics MB (1983) Inc. rotational molds and thermoforms for the farming sector and for original equipment manufacturers. Sales manager Garth Suppes said the firm's business with bus manufacturers has helped offset the agricultural downturn. Unlike the automotive market, bus sales are steady, he said by telephone from Acrylon's plant in Winnipeg, Manitoba.