There was an interesting article in the Globe last week referring to Cheryl King’s (Merrill Lynch) comments on a report from the Bank of Canada.
Investors should brace themselves for explosive economic growth in the coming quarters as trade with the United States rebounds, Merrill Lynch said Tuesday.
Economist Sheryl King said the latest Bank of Canada report suggests the economy could bounce back with several quarters of 10 per cent growth in the next year. Her report is titled: “Are markets ready for 10 per cent GDP?” The answer to her question is a solid “no.”
“The markets are far too fixated on the slow, halting, return to growth scenario, in our opinion – especially since recoveries virtually never have that nice linear trajectory,” she said.
She said the survey’s correlation with real GDP growth is “quite strong” at 60 per cent and implies year-on-year GDP growth in the 4.25 per cent range.
Douglas Porter, a senior economist at BMO Nesbitt Burns Inc., said it would be possible for a quarter or two of rapid growth “if everything went absolutely perfect in terms of stimulus spending and recovery,” but cautioned the global economy is still on very shaky ground.
A double-digit recovery wouldn’t be without precedent, Mr. Porter said. Singapore’s economy staged an unexpected recovery in the second quarter, with government data showing the economy grew at an annualized 20.4 per cent from April through June compared to the previous three months after double digit declines in previous quarters.
“I do think we’re going to start seeing things like this happening around the world in the coming quarters,” Mr. Porter said. “But there are still very severe headwinds for the global economy.”