Public opinion steers economy, says pollster

(January 7, 2004) The views of Canadian consumers don’t count for much when economists do their annual number-crunching and forecasting, but pollster Michael Marzolini believes that public opinion is a significant economic driver.

Marzolini, chair of Pollara, presented the results of his firm’s annual economic survey this morning in Toronto, accompanied by a blue-ribbon panel of big-bank economists, who also offered their predictions for 2004.

“Canadians are not economists and they can’t accurately predict the future but they do always have an opinion and attitude,” Marzolini said. “This attitude impacts on collective spending, investing and saving and often forces government and business to react to, not necessarily the reality of the situation, but the perceived reality, which is often a self-fulfilling prophecy.”

Having said that, the consumer outlook for the economy in 2004 isn’t much different than the professional pundits, with six in 10 Canadians predicting moderate growth in the year ahead, the Pollara poll indicates.

Marzolini says Canadians’ collective optimism about the economy has rebounded following the challenges of 2003, such as severe acute respiratory syndrome, mad cow disease and the blackout.

But that confidence doesn’t extend to the personal situation of the average Canadian. Four in 10 believe their household income will fall behind the cost of living, and 25% are worried about losing their jobs in 2004, Marzolini said.

The bank economists, representing TD, CIBC, BMO, Scotiabank and RBC, repeated their consensus of an average 3% growth for the Canadian economy in 2004.

TD’s Don Drummond characterized that performance as mediocre, especially when compared to the U.S.

“The U.S. has the edge in the current year,” agreed CIBC’s Avery Shenfeld, who points out that this is the first time that’s happened since 1998.

Canada’s weaker growth is often attributed to the Canadian dollar, which surged 22% against the greenback in 2003. The loonie’s meteoric rise likely won’t be repeated in 2004, the economists said, but most expect a modest increase to around 80 cents US by year’s end.

The dollar’s bounce will likely force the Bank of Canada’s hand on interest rates, said Shenfeld, who predicts a 75-basis-point cut in the central bank’s key lending rate by the end of 2004.

“The Bank of Canada will try to take the momentum out of the rising currency,” added Scotiabank’s Warren Jestin.

On fiscal issues, the five economists agreed that there is little public appetite for tax cuts, with Shenfeld noting that most of the large provinces are currently in a restraint mode. When it comes to government spending priorities, “the common denominator is healthcare,” said Drummond.

Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com