Toronto real estate. THINGS ARE DIFFICULT BUT BETTER THAN IN US

Gloomy economic predictions are making us a lot more depressed than we need to be. That's a view expressed by several policy analysts in the latest issue of Policy Options, a Montreal-based journal.With so much attention in Canada paid to American news, it's easy to see why Canadians have been spooked.

But while things are difficult here -- as this week's news of 129,000 lost jobs in January underscored -- the writers argue Canada will experience the current global recession much differently than the United States will. Unlike Canadians, Americans have used home equity wealth to support consumer spending. Plagued by the sub-prime mortgage mess, that wealth declined nearly 15 per cent since 2007.

In Canada, the housing sector is healthier. In fact, residential mortgage delinquency is on the decline. Besides which, Canadian consumer spending has been supported by income growth, rather than home equity. Also, while the U.S. personal savings rate has averaged below one per cent of disposable income since 2005, Canadians -- with average savings between two and three per cent -- have more cash to sustain spending during a recession.

Economist Jeremy Leonard acknowledges that Canada is hurt whenever U.S. market demand declines because we export so much south. But the decline has occurred mainly in the manufacturing sector. And while this sector accounts for the lion's share of exports to the U.S., manufacturing represents only 15 per cent of Canada's overall GDP. The story is different when it comes to the commodities sector, which has fuelled the boom in Canada's economy in recent years. That sector has lately flattened but will certainly revive.

Canada's longer term outlook looks positive, asserts Leonard, with emerging markets such as Brazil, India and China continuing their development. These countries, at an early stage in their economic evolution, "tend to see per-capita consumption of lumber, metals, crude oil and other commodities increase sharply as the infrastructure of an industrial economy is built."

Canada's recession will be both "shorter and shallower" than the one in the States.The message for Canadians would appear to be "Shed a tear for the Americans and perk up."

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