Canadian economist says expect slow tech recovery

A Canadian economist remains optimistic about an economic recovery taking place next year, however, for those in the information technology sector the recovery will not be as quick.

Sherry Cooper, chief economist with BMO Nesbitt Burns Economics, released her report Financial Chartbook last week suggesting that both the economies of Canada and the United States will rebound thanks to the stock markets that tend to lead a rebound by a four to six months.

The U.S. economy will recover and, due to a weak Canadian dollar, manufacturers and exporters will be in a good position to benefit, Cooper said.

However, in an interview with IT World Canada Cooper said a recovery in the information technology sector will take longer as the industry recovers from its fall from grace and organizations struggle to make the Internet pay off dividends.

While the IT sector initially benefited from the Y2K hype by selling all kinds of equipment and upgrading of systems, this also contributed to the so called “ implosion.”

“In the second half of 1999 there was all of this panic about Y2K and everyone over invested in IT,” Cooper said. Even the government was helpful in doling out money to organizations to get them Y2K ready, Cooper pointed out.

The acceleration in IT spending continued through 2000 as executives looked to the Internet to provide greater profits through e-commerce and business-to-business initiatives. With the growth in Internet use everyone was saying they had an Internet strategy. Whether that was true or not was a different story, Cooper said.

All of this optimism and spending led to poor results and a lack of enthusiasm for technology when the crash finally did come early in January, Cooper said.

“The worst of it was in telecommunications there’ll be a year before we see double-digit growth again,” Cooper said.

Meanwhile, dot-coms still don’t know how to make money, Cooper said. The problem is that there is a lack of patience with regard to the new medium, but it will catch on, she insisted. Cooper suggested the Internet is similar to radio broadcasting which also took a long time developing but eventually caught on. It will not be long before the Internet will become of even greater importance for commerce, Cooper predicted.

One problem for Canadian dot-com hopefuls is they remain too focused on Canadian content and the regional market instead of focusing on the global economy and taking advantage of the much weaker Canadian dollar to export abroad.

Cooper has a book due out in September entitled Ride The Wave that will focus on the role of technology. Cooper said the book is not just about personal investing but also looks at success stories and provides case studies for business leaders to learn from.

BMO Nesbitt Burns Economics in Toronto can be reached at