You're listening to Taking Stock with Pim Box and Kathleen has on Bloomberg Radio, a live broadcast today as we broadcast live from Bloomberg World Headquarters at the fourth Annual Canadian Fixed Income Conference sponsored by National Bank of Canada Financial Markets. The health of the Canadian economy, it's a big question for developed nations around the world. Of central banks except for the federal reserves, still seem to be looking at more interest rate cuts, and investors wonder where
to put their money among their many choices. Joining us now as Stefan Mariani's chief economist and strategist at National Bank of Canada and National Bank Financials defend, welcome, nice
to have terrific conference today. We're learning a lot about Canada and so are our listeners, but mostly kind of some different comments we've had today about the Canadian economy that it is uh, that it is not, that is still weak at the employment rate still around seven percent, kind of not too much progress since the Great Recession in a financial crisis. What do you see for the Cannadian economy now? Lackluster growth if you look at the
national average, but that masks tremendous regional divergences. For example, we have three provinces that presented today Quebec, BC and Ontario. They have a good fiscal stands balanced budget or or surplus is so uh that says a lot. If we were weak across the board, you wouldn't have this this, this, this type of dynamics. So clearly regional divergence. Some countries are growing above potential, some below, but obviously with the massive drop in oil prices, oil producers are dragging down
the national average. If that's the case, then why hold that overnight lending rate to just a half a percent at the Bank of Canada If it's really not as weak as many people speculate. I think that from the bank again at the standpoint, I mean they need to look at the national average. Obviously, Uh, they managed their national average and uh for the other provinces, Uh, they can put in place some of their fiscal stimulus if needed.
So I take from a bank account of perspective. There's also the realization that so is it a global malaise with the commodity prices, and as all of the central banks would argue, they probably want a cheaper currency. So I think of for all of these reasons, the bank cats keeping rate slow, and then macro predential policies are being put in place in cant to slow the housing sector,
et cetera. So the exchange rate weaker. Looney, we just had a guest too said it, it hasn't done that much yet to stimulate Canadian exports to stimulate Canadian manufacturing. Is that true? And if so, why I would disagree on that Because exports are back to the pre recession peak, non energy exports. That is, so we've seen a substantial rebound um. What we haven't seen yet is a currency
that entices corporations to start investing again. It's as if corporations are still uh shocked by what happened in two thousand or twelve or thirteen where the currency and went above parody, so they don't have good visibility on that. But I would assume that if the currency stays in the one dirty range one one thirty five range for a little while longer, we might see more business investment, and businesss investment would create more capacity that would help
us build more on exports. So it's just that it's not that we haven't seen to pick up an export. We haven't seen a rebound as uh forceful as we normalcy would if you expected more corporate activity by non Canadian investors in Canada. Since the looney has the Canadian currency has declined by about thirty going back about a year and a year and a half. Why why are there not more foreign buyers, Let's say, have Canadian assets.
Canadian companies have been going on a buying released in the United States to a certain extent, foreigner has been buying Canadian Uh, anything other than the houses. No, but seriously, you've seen that situation there. I think with the drop in commodity prices, right, I mean a lot of the foreign purchases were in the energy sector. So at this point in time we were seeing perhaps we we could see more ferns coming back with the currency at one dirty.
Now we are becoming more competitive for sure. Uh. So I think that's a story that might unfold in the next few years or next couple of years or so. So. Um, we've had a big route in global bond markets. How is this washing over the Canadian bar market? Uh? Because we're unlikely, uh to the bank hands unlikely to hike interest rates anytime soon. Uh, the route won't be as
big at the short end and the curve. One thing that we need to watch the mccinnian perspective, if the five year bond yield was to rise by a hundred business points or so, that would significantly reduce your attractive if the housing sector, so that could undermine your canting economy. So if you want, there's not gonna be any tightening by the bank candor per se, but we need to be wary of a steepening of the global yield curve
that would impact a caning housing sector. Do you believe that the new government of a Prime Minister Trudeau that the stimulus packages and proposals will in fact increase economic growth because right now it's a sluggish what GDP one point one percent? Yeah. I think that's really important because that actually might entice the private sector to invest a bit more if they believe that potential output will be
growing faster down the road. I think given the fact that fifteen percent of Kansas GP relate is related to construction, we cannot afford to have that sector UH lose too much UH strength in the next the next few years. I think the fiscal stimulus is welcome used and if it spreads to other countries, maybe the US, then we should see a rebound in Canadian road and commodity prices. I want to thank you very much for spending time
with us. Stefan Marion. He is the chief economist and strategist for National Bank of Canada and the National Bank of Financial giving us his perspective on the Canadian economy. We're broadcasting live from the fourth Annual Canadian Fixed Income Conference. This is Bloomberg