CIBC chairman predicts that a recession is near.

CIBC chairman predicts that a recession is near

The top man at the Canadian Imperial Bank of Commerce believes the country is very close to a recession, and it won't be a short one.

"I think we're damn close to the official definition of a recession now," said Donald Fullerton, chairman and chief executive officer of the CIBC.

Speaking in Sudbury on Sept. 12, Fullerton also warned that the economy will be slow in coming out of a recession, since the downturn will not simply be a shallow valley.

"I think we'll have quite a difficult 1991," he said.

Noting that the bank has some pretty good information about the Canadian economy, Fullerton said there are mixed conditions across the country.

Ontario is being hurt by high interest rates, the strong dollar, slowing demand in the housing sector and weakness in the resource, automotive and manufacturing sectors, he said. "All of those things are real."

In a region-by-region analysis, he said things are reasonably buoyant in British Columbia, quite buoyant in Alberta, difficult in the Prairies and promising in the Maritimes, if there is a resolution of problems in the fisheries industry.

Fullerton said there are several "awkward" situations around the globe which will affect the Canadian economy. One is the reunification of East and West Germany, and another is continuing high interest rate levels in Japan.

Fullerton explained that Canada and the United States are big borrowers of foreign capital.

Canada could act independently and reduce the rates here, he said, but the Bank of Canada realizes the problems of putting interest rates "off side" with world rates when the country is a massive borrower.

It would make the country less attractive for international investors, he explained.

"Investors are not known to be philanthropic," according to Fullerton. He said they seek out the best rates of return on their money.

While he predicted that interest rates would come down because of the weaker economy, Fullerton believes they will not fall a long way.

However, he said the country is experiencing enough difficulty to warrant reduced rates.

While Fullerton said no one really can precisely predict what international investors will do, he said there is good support for Canada.

The country is regarded as having a good history and good government, and it is trusted, he said. "I think we've still got that trust."

NEW FOCUS

Fullerton was in Sudbury, along with a few of the bank's senior vice-presidents, to meet corporate clients, visit local bank branches and employees and meet customers.

He described the new focus for the bank, including longer hours of service and a better product mix, as a recognition that the customer is going to drive the financial services industry.

The CIBC decided to change by dedicating entire bank branches to specified local needs. For example, a branch in Victoria, B.C. is geared towards older people.