Canadians $14,000 poorer, but economy shows signs it's 'better than horrible'

By Julian Beltrame, The Canadian Press

OTTAWA - The bad news continued to mount Monday with new reports showing the average Canadian was about $14,000 poorer at the end of 2008 while business activity plunged to a new low as the recession entered its darkest period so far.

Statistics Canada said household wealth fell a massive $252 billion - or 4.4 per cent - at the end of 2008. On a per capital basis, the average individual worth fell to $165,300 from $179,300 in the second quarter.

With stock prices having fallen since, the likelihood is that net household worth has also continued to shrink.

As well, the agency said industries operated at 74.7 per cent of their capacity during the period, the lowest utilization rate since it began keeping records more than two decades ago.

But if it's darkest just before dawn, some economists are wondering if the same can be said about the current economy.

Amid the rubble, they are detecting what U.S. Federal Reserve chairman Ben Bernanke called the odd green sprout that could presage the coming of the economic spring.

"We've seen some progress in the financial markets, absolutely," Bernanke said in a rare television interview broadcast Sunday night.

"I do think we will get it stabilized, and we'll see the recession coming to an end probably this year."

Bernanke also said he believed the United States is no longer in danger of falling into a depression, good news for Canada, since a recovery south of the border is believed to be a prerequisite for recovery north of the border.

Several reports in Canada have also suggested that while the economy is not yet at the point of turning the corner, the news in the past week or so has been less bleak.

The most encouraging sign has been in investor confidence. After hitting multi-year lows, North American markets staged a mini-rally in the past week, with the Toronto exchange recording five consecutive days of advances.

Toronto's S&P/TSX composite index finished up 83.32 points Monday at 8,386.71, a pick-up of almost 11 per cent from last Monday.

Even the bad news contains the odd nugget of hope. House prices fell 9.2 per cent and sales were well down 27 per cent in February, according to the Canadian Real Estate Association, but the month's resale market was better than January.

Equally, the U.S. industrial production drop for the month of 1.4 per cent was less than the 1.9 retreat of the previous month.

And U.S. retail sales - a major segment of the economy - recorded two relatively healthy months to start 2009 after a significant fall-off in the second half of 2008.

"It's not yet a good news story, it's just a better-than-horrible news story," said CIBC economist Meny Grauman.

"For the U.S. consumer, things are picking up. There is quite a bit of support coming from the federal government in the U.S. for the consumer."

Economists are in agreement that neither Canada nor the U.S. has yet seen the bottom of what has become a deep recession that likely will cause up to 600,000 Canadians and six million Americans to lose their jobs.

Economist John Clinkard of Deutsche Bank of Canada says he now expects Canada to contract by six per cent in the current quarter - a view shared by several of Canada's leading banks - almost double the 3.4 retreat of the fourth quarter last year.

Even Bank of Canada governor Mark Carney, who raised eyebrows with his January prediction of a strong 3.8 per cent bounce-back in 2010, suggested this weekend that the recovery will be more muted, explaining "the risks are breaking on the downside."

Bank of Montreal deputy chief economist Douglas Porter said the safe bet is still toward the pessimistic view.

It is encouraging that equity markets have fared better of late since stock prices will likely be one of the first indicators that the economy is beginning to turn, he said.

But he cautions that equity markets can also be false prophets. North American markets rallied before, from November to early January, only to lose all their gains and more.

"I think it's a bit early to be waving the all-clear sign," he said.

"There are some U.S. numbers that suggest things aren't falling as quickly as before, but I would like to see employment stop deteriorating and unfortunately there hasn't been a let-up there."

And in that important indicator, it remains a case of the economy at its darkest hour with the U.S. continuing to shed over 600,000 jobs monthly and Canada dropping a massive 212,000 jobs in the first two months this year.