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Queen’s School of Business experts make economic predictions for 2015

Posted on December 8, 2014

Stronger U.S. economy and increased consumer spending driving 2015 growth

KINGSTON, ON - Despite falling energy prices and a weak Canadian dollar, 2015 promises increased growth and opportunities, advised Queen’s School of Business faculty at the 33rd annual Business Forecast Luncheon held Thursday, December 4, in Kingston, Ontario.

This year’s panel analyzed the macroeconomic outlook, state of the financial markets and the local Kingston economy to make predictions for 2015. New to the panel this year was a special presentation on the reputational implications of employee behaviour outside of work.

Macroeconomic Outlook
“Falling energy prices and a weaker Canadian dollar are finally providing some good news for Ontario—a boost to manufacturing and exports,” said Lynnette Purda, Associate Professor of Finance and panel moderator. Ontario growth in 2015 is forecast to be above 2.5% following strong growth in 2014.

Some improvement in the labour market has led to strong consumer spending, but continued high debt burden and risk of higher interest rates should temper enthusiasm. “Canadians should be beware of the risks of an economy fuelled by consumer spending. Debt burdens are still high and a correction in housing prices or an increase in interest rates may quickly change spending patterns.”

With steady growth in the U.S. and Canada, Purda questioned whether 2015 will be the year interest rates show some upward revisions. “Businesses should be contemplating who will move first, the Bank of Canada or the U.S. Federal Reserve, and when?” said Purda.

“To extend growth beyond 2015, Ontario cannot rely on the temporary reprieve from lower energy costs and a weaker dollar,” said Purda. “A focus on increasing productivity now can set the scene for continued growth in mid- to late-2015, when energy prices are expected to stabilize.”

Financial Markets Outlook
Andrew Miskiewicz, a fourth-year Commerce student at Queen’s School of Business, reviewed the financial markets on behalf of the Queen’s University Investment Club (QUIC), a student-managed investment portfolio with close to $800,000 in assets, of which he is CEO.

Miskiewicz and his QUIC team questioned whether or not corporate profit margins can continue to grow in 2015, given that most increases since the financial crisis were driven by expense reductions. “With all the low hanging fruit picked on the cost side, investors must look for companies that can grow revenue,” said Miskiewicz.

The QUIC team advised managers to watch for the U.S. economy to really take off in 2015, bringing Canada along for the ride. “Investors should pay particular attention to low- and middle-income consumers as they have the potential to drive GDP growth through their increased spending.”

Cheaper oil prices likely mean capital expenditures will be cut as oil firms try to preserve their dividends. Though the QUIC team doesn’t recommend trying to call the bottom on oil prices, they do see attractive buying opportunities in the energy sector in 2015. Lower oil prices mean more money in consumers’ pockets, again pointing towards increased strength from the low- and middle-income consumers.

“Overall, investors should be cautiously optimistic for 2015, and pay special attention to companies that have exposure to the U.S. consumer and are able to drive revenue growth,” said Miskiewicz.

Kingston Outlook
“The last years have not been kind to the Kingston economy,” said marketing professor Ken Wong. “They haven’t been punitive either. Just ‘middle of the road’.”

Unfortunately for Kingston, economic growth indicators, such as real GDP, employment, retail sales and housing starts, do not look promising for 2015. Despite this, Wong said, there are some encouraging signs of economic improvement with recent announcements from public and private sources, such as Bell Fibre’s planned $40M investment in hi-speed fibre technology for Kingston, and Grafoid providing an economic stimulus of $32M and 160 new professional jobs.

He is also hopeful that, after lackluster retail sales on Black Friday and Cyber Monday, consumer spending will increase as Christmas approaches.

Wong feels strongly that in order to move out of this middle of the road’ territory, Kingston needs to become more appealing to entrepreneurs and youth, and increase immigration. He is, however, optimistic, given that the priorities of Kingston’s new mayor and city council are “bang on for what the city needs.”

Lynnette Purda added that many regional events in 2015, such as the Pan Am Games and FIFA Women’s World Cup, may provide a boost to local tourism, especially if visitors are encouraged by the low dollar.

“Kingston’s dominant industries rely on a healthy consumer,” she said. “Rising interest rates mean consumers will feel the pinch, leading to significant consequences for Kingston.”

Organizational Outlook
Organizational behavior professor Kate Rowbotham shared practical advice on how organizations can manage the impact of employees’ behaviour outside of work.

“It can be a great advantage for organizations to celebrate employees’ accomplishments outside of work, such their participation in a marathon or a successful fundraising initiative,” said Rowbotham. She cautioned, however, that sometimes there can be significant negative repercussions if an employee exhibits undesirable, or even illegal, behavior.

Rowbotham’s key take-away for managers: “You can’t ignore what happens outside of work. Be clear about your expectations for employees, especially now that social media broadcasts behaviours that would have previously gone unnoticed.” She explained that in today’s workplace, managers need to develop—and implement—policies and procedures to address behaviours that may have a negative impact on the organization’s reputation.

The Business Forecast Lunch was founded 33 years ago by Queen’s School of Business professor emeritus Merv Daub to establish an important link between the School and the Kingston business community.


About Queen’s School of Business
Queen’s School of Business is one of the world’s premier business schools—renowned for exceptional programs, outstanding faculty and research, and the quality of its graduates. Canadian executives regard Queen’s as Canada’s most innovative business school, offering students academic excellence and a superior overall experience. Queen’s School of Business—where Canada’s first Commerce program was launched in 1919—is located at Queen’s University in Kingston, Ontario. The School also delivers programs at locations across Canada, as well in the U.S., the Middle East and North Africa (MENA) region and China.

For more information, please contact:
Amber Wallace:  613.533.3151 /
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