Corporate Canada has never been in a better position to capitalize on a U.S. economic recovery, says CIBC World Markets Inc.’s ‘Composite Indicator of Corporate Canada’s Strength.’ “While it is widely expected that stronger growth in the U.S. next year will have an upside benefit for Canada, what might surprise many is how quickly and significantly corporate Canada will ramp up spending to capitalize on the long awaited rebound in global demand,” says Benjamin Tal, deputy chief economist at CIBC. Using the bank’s indicator, he finds that, while softening somewhat recently, the index is still hovering around an all-time high and is almost a full point above its long-term average. “That’s important since the higher the level of our index, the more responsive corporate Canada has been to a shift in U.S. demand.” On average, a one per cent change in U.S. growth has led to a full three-percentage-point change in capital expenditures by Canadian corporations. However, during periods of high-index readings like we have currently, the same increase in U.S. demand has translated into a four-percentage-point acceleration in capital spending by Canadian companies,” he says. CIBC Economics is calling for the U.S. economy to expand by 3.2 per cent in 2014, more than double the projected pace in 2013, with the global economy growing by four per cent next year.
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