North American Economies Experiencing Growth

Away from Wall Street, the story of the real American economy has steadily improved in recent weeks. After several false starts, companies are finding their footing and preparing for future growth.

Several indicators – from home prices to jobless claims to government deficits – point to an economy that is healthier than it has been since the financial crisis. The improvement is showing up in places like Michigan, where builders are now complaining of a lack of skilled workers to keep up with demand for new construction, and Ohio, where unemployment has dropped to 7 percent from a post-recession peak of 10.6 percent a few years ago.

As the U.S. economy goes, so goes Canada’s. Though a decoupling appeared between Canada and its largest trading partner in the direct aftermath of the financial crisis, future growth will again depend on business investment and exports-- and both are contingent on the strength of the US recovery.

For Canadians, this is good news: Canada is overexposed to the industries leading the U.S. rebound, most notably the automotive and lumber industries-- both of which boost the trucking industries through LTL freight from Canada to the US. The Bank of Canada predicts US residential investment will grow at an annual average rate of 12.5 percent between now and 2015, which is estimated to generate export growth in Canada of about one percentage point a year, based on historical relationships.

Though the budget cuts in Washington could reduce the US's economic expansion by as much as 1.75 percentage points this year, there’s reason to think the US will have its swagger back by the year's second half. Every economic rebound needs a housing boom, and the US finally has one: New home sales were almost 30 percent higher in April than a year earlier. According to the Bank of Nova Scotia, Americans purchased automobiles at an annual rate of 15.3 million units in May, roughly the average pace between 2002 and 2010.

Additionally, the economy has created private-sector jobs for more than 30 months. The US increased its oil production by more than one million barrels a day in 2012-- the most significant gain ever. All of these factors suggest consumer demand will continue to gather strength. As more money flows into consumers' pockets, so will the trade between the US and Canada rise.