Telecom markets slowly improving, new surveys by two banks say

The slowdown in the telecom sector has hurt the Canadian economy in the short term, but prospects in the long run are much more hopeful, two major banks predict. Plans by provincial and federal governments to spend billions on new broadband infrastructure is expected to help fuel a recovery. The Toronto Dominion Bank bases its findings on two different studies, the Provincial Economic Update and the TD Quarterly Economic Forecast. The Bank of Nova Scotia presents its numbers in the Financial Pulse document, The Provincial Budgets…Caution in 2001. The crisis in the telecom area is obvious. "Cutbacks in investment spending prompted a stunning 67 per cent drop (at annual rates) in output of telecommunications equipment between October 2000 and March 2001," the TD bank states. "Over the same period, IT services powered ahead at a rate of 7.5 per cent, although this was only half of the 15 per cent pace posted in the previous nine month stretch." The bank notes that the softness in the sector was narrowly focused, which bodes well for an economic recovery. TD predicts the market will bottom out later this year, with recovery beginning early in 2002.The Scotiabank survey cites public spending as one of the bright spots on the telecom horizon. It, too, views the new economy as the catalyst. "In addition to provincial e-government commitments, high-tech remains a focus of economic development," the paper offers. "Achieving Ottawa’s goal of high-speed Internet service across Canada by 2004 should involve some co-ordinations with existing provincial initiatives." The current market slump is expected to stunt provincial growth in the short run, but there is light at the end of the tunnel, tied in to foreign success. "By late 2001, an anticipated bounce-back in U.S. orders should pave the way for brighter prospects in the provincial manufacturing sectors in 2002, with the all-province average rate of output growth estimated at almost three per cent next year," the TD’s Provincial Economic Update predicts. "Notably, Ontario is expected to rejoin Alberta at the top of the pack, spurred by a snap back in conditions in the province’s important automotive and information-technology manufacturing sectors." All of the provinces are expected to avoid recession in 2001-02, the TD Bank says. By the fourth quarter of this year, inventory adjustments on the manufacturing side should be finished, paving the way for a jump in output afterwards. The results are similar to findings from the National Bank of Canada released earlier this year (NL, June 4/01). It is also hopeful about long-term prospects for the telecom industry.

Telecom markets slowly improving, new surveys by two banks say

News | July 17, 2001

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