It happens every year about this time. Stores stock up on the new clothes of the season, a quarterly ritual in which retailers convince shoppers (mostly women) of the new pieces that they absolutely must have. It’s not that our old spring or summer clothes are worn out. They’re just the wrong colour, or so the designers tell us.

But are economists any better? They’re just as fickle and trendy as anyone in the fashion industry. Consider the wild palette of economic colours to which we’ve been subjected lately.

Panic Pink made its debut on Wall Street in October 2008. It was all over the economic fashion runways that season. Fortunately that trendy colour peaked quickly, then died.

Credit Crunch Crimson, a nasty shade that didn’t look good on anyone, stuck around much longer. As 2009 settled in, business mavens paraded out a series of sobering economic colors like Post-Binge Beige, Grim Reaper Grey, and Loan Loss Lavender.

But economic fashion trend-setters are already bored. As we head into spring 2010, Canada’s business page fashionistas have moved on to a whole new set of trendy colours. The hot shades this season are Rebound Rose, Bull Market Brown, Profitable Peach, and Balance Sheet Black.

And just as fashion followers have their own bibles of style — Vogue, GQ — so too do followers of economic trends. According to Statistics Canada, most of the economic indicators in this country are solidly positive. Retail and wholesale activity, manufacturing shipments, residential housing, corporate profits — almost everything is on the rebound, and has been for the past several months.

Canada has also captured the attention of the global business big-wigs. The Paris-based OECD (the Louis Vuitton of economists) has gushed about Canada’s solid fiscal position. The particular shades and hues of our banking system are all the rage with designers at the World Economic Forum. Our dollar hit parity with its US counterpart this spring, causing a buzz in places like New York, London and Tokyo.

But can all of this good economic news last? The US economy is still draped in decidedly more subdued colours these days — more like Meltdown Mauve, Bail-out Banana, and Moribund Maroon. It’s still stinging from a slumping housing market, a huge consumer debt hangover and federal government deficits far into the future.

With our largest trading partner still wearing the shades of 2009, can Canada’s economy really ever embrace the recovery? How long until American-influenced colours like Mellow Yellow start creeping back north of the border?

Certainly no one wants to dredge up the silly concept of “decoupling” — the now-infamous suggestion that Canada’s economy is less influenced these days by American trends. But admittedly, with Canadian and US economic indicators pointing in opposite directions, it’s tempting to at least entertain the notion of decoupling.

By no means is Canada’s economy immune from the negative events and circumstances in the US. But fortunately, American business conditions are not the only factors. Several other hot trends are influencing Canada’s economy, and these are showing up in our much more upbeat and vibrant spring colours.

Most commodity prices are rising nicely. The housing market in Canada was never flattened like it was in the US, thanks partly to more conservative lending. Canadian consumers are more confident and optimistic in their financial positions, and this is boosting retail activity. The credit crunch has abated here more than it has in the US, so Canadian companies can (mostly) access credit. Our banks are in fine shape.

As well, markets mostly applauded Ottawa’s latest budget. Though some commentators have suggested that the budget was printed on paper of a peculiar colour (Rosy Outlook Rose), it is plausible that the federal budget could move back into surplus within the next five to seven years. That’s much better than the outlook for any other G7 country.

While we can enjoy the return to a much more vibrant Canadian economy this spring, we shouldn’t be so silly as to think that the current colours are here to stay. If Americans are still singing the blues through the summer and into the fall, our colours will lose some of their sheen.

But whatever shades we see in the coming economic seasons, let’s hope Recession Red stays in the back of the closet for a long, long time.

Photo: Shutterstock

Todd Hirsch
Todd Hirsch is the Calgary-based senior economist with ATB Financial and author of The Boiling Frog Dilemma: Saving Canada from Economic Decline.

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