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The Bank of Canada’s latest survey suggests the economy could see a growth surge of 10% for one or two quarters in 2010. But the loftiest private sector forecast, including Merrill Lynch’s conservative estimate, is well under 4%.

The Bank’s Business Outlook Survey did an abrupt about-face in the second quarter, with a read of +39.0 in the headline number after a -22.0 print in the first quarter and an epic -34.0 in the fourth quarter in the wake of the September credit crisis. The correlation with real GDP growth is quite strong at 60% and implies year-on-year growth in the 4 O range.

For the next couple of quarters, weak or even negative, quarterly-annualized GDP prints are a strong possibility since the auto sector is in the process of downsizing. That suggests that a burst of growth in the fourth quarter of 2009 or first quarter of 2010 would be necessary to get anywhere close to 4 O% year-on-year growth.

Fixed income and equity markets both have been disappointed by the recent data prints as they have failed to validate the 42% equity market run-up from early March to mid-June. However, the business outlook survey was taken between late May and mid-June, so is more up-to-date on the state of the economy than most of the recent data flow.

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Canadian energy companies expect prices to increase over the next year: PwC

While 2008 was a year of two extremes, with oil and gas producers experiencing boom and bust all within 12 months, many responded by cutting their capital spending plans for 2009. Seventy per cent of Canadian energy companies continue to plan for the future, as they expect prices to increase over the next year, according to survey by PricewaterhouseCoopers (PwC) and JuneWarren-Nickle’s Energy Group.

“The turbulent swing in energy prices from all-time highs in the summer of 2008 to four-year lows in December is a powerful reminder that the booms in commodities can quickly evaporate,” says John Williamson, partner and Canadian energy leader at PwC. “At the mid-way mark of 2009, while gas prices continue to languish, many believe natural gas fundamentals point to a recovery in 2010, which will lead to improved drilling activity levels. Crude oil prices have already rebounded from year-end 2008 levels.”

According to the survey, 72% of gas producers believe prices should recover within the next two years to a level that will lead them to increase their drilling programs.

The majority of respondents said oil prices will have to increase to at least US$70-$80 before they would consider increasing conventional drilling programs, although an almost equal number said prices will have to head north of US$80 before spending more on conventional drilling.

While the industry has cut staff, many energy companies prefer not to lay off employees because so much time has been spent on training. In the survey, attracting and retaining top talent was viewed by 68% of respondents as critical for their long-term growth.

The report surveyed 140 respondents, with 85% of the participants in senior roles within the energy sector.

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Russell replaces sub-advisors to U.S. Equity Portfolios

Russell Investments Canada Limited announced sub-advisor changes to its Russell Sovereign Investment Program and LifePoints Portfolios.

Legg Mason Capital Management and PENN Capital Management Company are the new sub-advisors to the Russell U.S. Equity Pool. These companies replace Turner Investment Partners Inc. and Fuller & Thaler Asset Management Inc.

The U.S. Equity pool is part of the Russell Sovereign Investment Program.

Legg Mason have also replaced Turner as the sub-advisor for the Russell U.S. Equity Fund.

The U.S. Equity Fund is part of the an underlying fund in LifePoints Portfolios

(07/15/09)