Blogs & Comment

2012 could be when Canada loses its shine

Canadians have been patting themselves on the back for their strong banking system and economy—but it could come to an end in 2012.

(Photo: Steven Puetzer)

Canada has held up remarkably well compared to the U.S. and Europe since the global meltdown of 2008, but one wonders if the Cinderella story will fade in 2012. Demand for Canadian commodity exports seems likely to ebb as the Chinese economy and property market come off the boil.

Indeed, over the past few weeks, I’ve noticed a ramp up in the number of news reports about Chinese economic growth and property prices winding down. There is a list (and links) of some of the articles in a Dec. 15 post on the Saskatoon Housing Bubble blog.

Some of the highlights in the pieces include a 30% drop in the Shanghai Composite Index since April, house prices in some cities collapsing by more than 30% on a month-to-month basis, and manufacturing activity indexes suffering substantial declines in November.

Investor Kevin Graham writes on his blog, Canadian Value Investor: “I am worried about Canada and the long term implications of the commodities bubble. If it does pop quickly the restructuring would be hard on our economy.” Among the causalities could be the overvalued Canadian housing market. The Toronto Stock Exchange could in the line of fire too, especially stocks in the real estate, banking, energy and mining sectors.