Forecaster Says U.S. Economy Will Turn Around in Summer; Remains Cautious in Regards to Housing Market

John Johnston, chief strategist for RBC Dominion Securities, spoke Thursday in Toronto at Win-door North America and tried to give attendees some hope regarding the current economic climate and the housing crisis. Although speaking before a mainly Canadian audience, his presentation, "The Sun Always Rises," focused on the state of both the U.S. and Canadian markets while also touching briefly on the global economy.

Regarding the U.S. housing market he believes the worst is over. "However, inventory is still a huge problem and new mortgage applications are still falling, so, for that reason, I remain very cautious," he said.

While Canada isn't experiencing a deep decline in the housing market as in the United States, Johnston did say the housing market will decline, but he doesn't expect it to be as bad as what occurred in the early 1990s.

"There will be an unpleasant period [in Canada] and housing will be part of that," he said.

Regarding the U.S. economy Johnston said that the United States is in a recession but did offer some hope.

"Things are going to get a lot worse, but a recession, not a depression," he said. "Throughout history, we've always gotten out of these."

His prediction is that sometime between spring and summer of 2009 the economy will turn around. But until then, Johnston said that we're heading into a global recession, which, for Canadians, translates into the Canadian dollar being down.

"We're getting a recession in Canada," said Johnston. "We have less debt but we're not that much better than the United States."

He said that in both the United States and Canada the governments will become more proactive.

"Overall [regarding economic policy], [the government is] doing all the right things," Johnston added.

One attendee asked Johnston's opinion on the automakers' current crisis.

"If those companies go down it's a huge hit," he said. "You have to bail them out. The question is, should Canada participate to keep the Canadian operations of those companies going? You have to put them on life support so they don't take us all down. That goes for Canada as well."

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