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 getting ready for future growth.
A number of 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 per cent from a post-recession peak of 10.6 per cent a few years ago.
As the U.S. economy goes, so goes Canada’s. Though a decoupling appeared to occur 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 that are leading the U.S. rebound, most notably the automotive and lumber industries-- both of which boost the trucking industries through LTL shipping from Canada to the US. The Bank of Canada predicts US residential investment will grow at an annual average rate of 12.5 per cent 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 second half of the year. Every economic rebound needs a housing boom, and the US finally has one: New home sales were almost 30 per cent higher in April than a year earlier. Americans purchased automobiles at an annual rate of 15.3 million units in May, roughly the average pace between 2002 and 2010, according to Bank of Nova Scotia.
Additionally, the economy has created private sector jobs for more than 30 consecutive months, while the US increased its oil production by more than one million barrels a day in 2012-- the biggest gain ever. All of these factors suggest consumer demand will continue to gather strength. As more money flows in the pockets of consumers, so too will the trade between the US and Canada rise.