Highlights

  • Global GDP and international trade are gradually approaching their pre-recession levels. Chinese exports are already there. We see the global economy remaining robust in the coming quarters. Our outlook for global growth in 2010 is unchanged this month at 4%-plus.
  • In the U.S., the growth of domestic demand, in both household spending and business investment, has become distinctly more encouraging. We expect first-quarter consumer spending growth in the neighbourhood of 3%. The U.S. recovery is increasingly self-sustaining. We maintain our outlook of 3.4% growth in 2010.
  • The Canadian economy is moving briskly from recovery to expansion. Domestic demand is now only 0.6% below the pre-recession peak. The labour market shows a similar dynamic for workers aged 25 and older. Our outlook of 2010 growth in excess of 3% is on track.

World: Closer to previous peaks

Global GDP and international trade are gradually approaching their pre-recession levels. Chinese exports are already there.

The latest report on international trade flows from the CPB Bureau for Economic Policy Analysis shows an unprecedented monthly rise of 4.8% in December. The surge was broad-based: exports from developed countries were up 3% while imports by emerging countries jumped 8%. Global trade is still 8% off peak, but is up a solid 15% from last March. The 12- month rise of 8.1% shows an agreeably V-shaped recovery.

A similar pattern appears in global industrial output, which expanded 0.7% in December for a ninth straight monthly gain. Industrial production is now back to the level of mid-2007, only 5% off the prerecession peak. In regions such as emerging Asia, it is now 5% above the previous peak. In the same vein, the Semiconductor Industry Association reports that world chip sales in January were back to peak. With global leading indicators signalling above-trend growth in the months ahead, this climb is likely to continue.

Chinese indicators remain very robust. Retail sales are up 18% from a year ago, industrial production up 21%. China’s trade minister said its exports will take at least two years to return to pre-recession volumes, but this remark is better seen as jawboning to deflect upward pressure on the yuan. When exports are seasonally adjusted for the effect of the Chinese New Year, they are already back to the previous peak.