Bank of Canada Governor Stephen Poloz will head to New York to be part of the panel discussion at the Bloomberg Americas Monetary Summit. The topic of his speech will be ‘Navigating the Commodity Supercycle.’ The BOC Governor is scheduled for two events this week. He opens the schedule in New York on Monday and will end his U,S. trip with an appearance at the Export-Import Bank of the United States, in Washington DC.
The so called ‘Commodity Supercycle’ is the period from 2002-2008 when commodity prices doubled or more following the rise of Emerging markets, most notably China. Energy, metals and agricultural products all of which are produced by Canada helped the country navigate the 2008 credit crisis. The price of commodities has been on the decline ever since, with a slight recovery in 2010. The Canadian economy as a main exporter of natural resources has been left further exposed to the headwinds from other major economies. Lower demand from China has hit commodity producers such as Australia and Canada. The price of oil has been caught in a market share squabble between the OPEC and the rest of the world that have driven up production to record levels.
Low food and energy prices have keep global inflation under control, but have put economic pressure on commodity dependent nations. The BOC Governor has urged Canadian manufacturing to take advantage of the weaker currency and recapture lost marketshare. Easier said than done as manufacturing investment has been reduced after the CAD reached parity with the USD.
The main draw of the Bloomberg event will be to see what Governor Poloz thinks about the Supercycle. The quarterly monetary policy report published by the Bank of Canada this week paints an optimistic picture for the economy, which implies a recovery of energy prices. The central bank forecasts this recovery as early as 2016, but the calculations might be based on the current rise of crude and not fully price in the effects of lower demand being the new normal or shifts such as Iran’s return to oil production.