Look in the mirror

by Lou Smyrlis

For owner/operators and fleet executives finally starting to raise their heads above water, the latest news that we could be heading right back into recession, or at least a period of very slow growth, is hard to stomach.

Our economy ground to a halt in the second quarter and with the US economy also experiencing considerable growth challenges, there’s concern we could end 2011 in recession – defined as two straight quarters of negative growth.

I don’t think that’s going to happen – unless, we allow it to. Let me explain.

First, I don’t think Canada will experience recession in 2011 – not technically anyway even if it may feel that way – because we won’t have two straight quarters of negative growth. The Canadian economy took a step back in the second quarter but the numbers I’ve been looking at for the third quarter look better. The RBC Canadian Manufacturing Purchasing Managers Index provides an early warning about the health of our manufacturing sector; purchasing managers increase the purchases of goods and services they make for their companies when they sniff economic growth and curtail them if they expect the reverse. After several monthly declines in the spring, the Index showed solid improvement in both July and August. New work at Canadian manufacturers increased at a marked pace. So I don’t see Canada posting negative growth again in the third quarter.

Canada, however, is not an island and if I’m going to base my optimism on the results of the Purchasing Managers Index, I have to be fair and look at what similar indices look like at our other major trading partners. Unfortunately, from the US to Europe, the numbers don’t look as good.

Which brings me to my second point: I wonder how much we may contribute to bringing about another  recession by acting on our fears of the worst case scenario. We hear a report that the Canadian economy shrank and forget to take into account the impact all the supply chain disruptions – from the earthquake in Japan to flooding in the US – had on business. So perhaps we get pessimistic about future growth and decide against investing in our companies. We delay our purchases of that new IT platform; we put off purchasing a new truck.

We hear about more layoffs in the US and that job growth in Canada has stalled. We listen to economists downgrade their forecasts for future growth. We forget that every recovery is tumultuous and that it’s never a straight upward line of growth but rather a roller coaster ride. Attaching too much significance to the volatility around us, we hold off hiring the staff we had planned to take on this fall to help us service some new accounts. We delay that western expansion. In short, we play it safe. We place our dreams on hold, we purchase fewer things, we hire fewer people. Then we wonder how we ended up in another recession.

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