Finance Minister Jim Flaherty has a message for anyone ready to declare victory over the recession: Curb your enthusiasm.
Mr. Flaherty, who rarely shies away from a chance to remark on the strength of the economy he has overseen for more than three years, pointedly declined to call an end to the recession Tuesday - even though the Bank of Canada says gross domestic product will resume growing this quarter, about three months sooner than expected.
"There are good signs that the economy has stabilized and that there are the beginnings of a recovery," Mr. Flaherty told reporters outside a meeting of the Conservative Party caucus. "I wouldn't put it any stronger than that."
Mr. Flaherty, like so many policy makers elsewhere, is becoming distinctly cautious, even as evidence mounts that their extraordinary efforts to reverse the deepest global recession since the Second World War are working.
Speaking in Coeur d'Alene, Idaho, Tuesday, Janet Yellen, the president of the Federal Reserve Bank of San Francisco, said she is seeing the "first solid signs" that the U.S. economy is about to resume growing since that country's recession began in December, 2007.
Yet she too refused to let go a sigh of relief. "That recovery is likely to be painfully slow," said Ms. Yellen, who has a vote on the committee of central bankers that sets U.S. monetary policy.
"A gradual recovery means that things won't feel very good for some time to come."
After spending much of the financial crisis trying to project confidence, policy makers now find themselves playing the role of killjoy.
It's a reversal made necessary by the need to avoid what some economists say was one biggest mistakes of the Great Depression: Uncomfortable with their heavy intervention in the economy, U.S. politicians reversed course before a rebound took hold, extending the misery.
"We have to be careful," Mr. Flaherty said. "We have to continue with the stimulus to the economy to avoid the danger of some slowness recurring."
Tuesday's comments from Mr. Flaherty and Ms. Yellen - who also told her audience that "this is not the time" to raise interest rates - echo those made last week by Bank of Canada Governor Mark Carney and Federal Reserve Chairman Ben Bernanke.
The reason for the steady drumbeat is to drown out growing calls from investors and politicians to unwind the stimulus programs.
Critics say the governments of the Group of 20 major economic powers have gone too far, flooding the global economy with cash that is bound to spark a surge of inflation. There is also concern that U.S. President Barack Obama's administration and others have run up more debt than their economies can handle, unfairly burdening the next generation of taxpayers, who will be forced to pay it off.
"He has reason to be happy, but people have learned that taking too optimistic a view can blow up in your face," Glen Hodgson, chief economist at the Conference Board of Canada and a former finance official, said of Mr. Flaherty's apparent lack of enthusiasm about a potential recovery. "As soon as you declare victory, some people are going to look for the end of the stimulus package, which is only just starting to kick in."
Policy makers contend that they can't yet reverse course because their extraordinary stimulus measures are the only thing that's giving the economy life.
A Statistics Canada survey released yesterday showed that public institutions and industries backed heavily by government funds are virtually alone in planning to spend on capital upgrades this year.
"Public administrations" will spend $41.2-billion on capital projects in 2009, a 14.8 per cent increase from last year and more than companies in the mining and oil and gas industries said they would spend.
But government spending can make up for only so much lost demand. The $41-billion that miners and oil and gas companies plan to invest is 32.9 per cent less than in 2008. Overall, the $227.9-billion that companies and institutions said they will invest in capital in 2009 is 10.4 per cent less than last year, according to the StatsCan survey, which was based on polling done between mid-May and the end of June.
Rising unemployment is another reason to stay the course. In May, 778,700 Canadians received unemployment benefits, a 9.2 per cent increase from the previous month, and the most on record dating back to 1997.
"The fact that the economy appears to have stopped contracting isn't necessarily a reason to change our policy stance," said Stephen Gordon, an economics professor at Laval University in Quebec City. "There is still significant slack in the economy, and it will take many months of recovery before we can safely rescind the various anti-recessionary measures that governments have undertaken."
With a report from Bloomberg News