Horror? Romance? Comedy? Stephen Poloz says the Canadian economy is like a movie: Don Pittis

"It's not a picture," said Bank of Canada Governor Stephen Poloz, describing the bank's process of figuring out the direction of the Canadian economy. "It's a movie."

Presumably what our chief central banker meant was that, with constant twists and turns in the plot, there is no way for even the smartest forecasters to describe the Canadian economy in a single snapshot.

• Bank of Canada keeps benchmark interest rate at 0.5%
• IMF downgrades forecast for Canada's economy in 2016 and 2017

The questionleft for those of us listening to the governor's cinematic, and sometimescontradictory, review ofthe country's economic future was, "What kind of movie is it?"

Gloomy as Bergman

In some ways the bank's outlook on the economy wasasgloomy as a foreignfilm by IngmarBergman. You know the kind, with long shots ofbarren landscapes andlonelypeople staring out windows.

"Projected global economic growth has once again been taken down a notch," said Polozduring one of the more depressing moments of his presentation. ToaBergman aficionado as the cultured Poloz no doubt is such misfortunes are only tobe expected.

"The world has disappointed us multiple times," he said wearily. "And the global economy retains the capacity to disappoint further."

America's decline

The problem isn'tjust the Far East and South America,it's our closest neighbour too. Perhaps the Canadian economic movie is Denis Arcand's classic The Decline of the American Empire, sincePoloz worried aloudthat even the U.S. powerhouse economy was failing tomeet his previous expectations.

"We areforecasting a slightly slower growth rate because of the downgrade in the U.S.," he said. "That's not just U.S. growth but it comes from a reassessment ofhousing which is an important export destination for us."

Until recently the bank hadbeen anticipating that Canadian manufacturers of things like wood and doors and windowframes would have gone from using up existing capacityto creating new plants and jobs to serve a renewed housing boom.

Beware the woods

But unfortunately, like one of those horror movies where a group of good-lookingyoung people heads off to a cabin only to be murdered horribly, Poloz saidwe are not yet out of the woods.

There are "contrary winds" howlingthrough the forest of Canadian growth and "there are many downside risks."

But then, as Poloz says, the risks are balanced, and otherthreats such as the kind of overheating that might lead to inflation aren't going to offerscenes that will have youhiding under your blanket. Those scenes of the movie just aren'tso horrible.

"The positive risks don't look very scary," said Poloz.

Or could the genre bea romance betweenthe Bank of Canada and the Ministry of Finance?

Some of the reporters attending the briefing asked if the bank and ministry were maybe a bit too close, because Poloz and his team used the federal government's own optimistic estimates of how much federal fiscal spending would boostthe economy.

Bromance?

Polozsaid the bank has its own views on the multiplier effect of fiscal spending. It's just thatthey areclosely aligned with thoseof the government. Bit of a bromance perhaps, but nohanky panky here, he said.

In fact, according to the bank, the new round of fiscal spending seemed to be the one thing most likely to turn theCanadian economy into a blockbuster.Poloz seemed unwilling to accept the ravereviews of the economyoffered from other recent statistics, includingstunning growth figures from January and last month's bumper crop of jobs.

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In fact maybe the Canadian economy is a Hollywoodmash-up whereaWestern like The Good, The Bad and the Ugly meets Mary Poppins.

Despite a rebound in oil prices, the Bank of Canada thinksinvestment in the western oil business will continue to shrinkas energy companies cut investment even further.The happy musical portion of the movie will only start oncethe non-resource economic picks up enough to overwhelm that decline.

Poloz obviously sees it witha filmmaker's eye:"Given what we've been through, we have to think of the policy risk through a different lens."

Happy ending

While the rising loonietakes some of the advantage away from exporters that they had a few months ago, Polozwas quick to remind us that even at these levels the crashing energy economy means the shock absorber effect of a low Canadian dollar provides a 20 to 25 per cent advantage for exporters compared to when the looniewas at its peak.

All that means there is stillno reason to alter Canada's low, low overnight interest rate of 0.5 per cent, and that slowly but surely likely by mid- to late 2017 we can expect the economy to creep back into normal robust health. But be patient.

"It's a very slow movie," Poloz said. "It's one of those very long movies and the director keeps giving us surprises along the way."

But ultimately, he said,he's expecting a happy ending:"Based on what we've got in front of us, the movie ends well."

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