. i have heard about it from the manufacturers and exporters in this region. and the bank has heard about it from the financial community on bay street and from all types of business leaders in southern ontario who participate in the bank ’ s quarterly business outlook surveys. worst recession since the depression i probably don ’ t need to tell anyone in this room that the recent global recession was the worst downturn experienced since the great depression. in very short order, global gdp fell more than 3 per cent and millions upon millions of jobs were lost. in canada, 432, 000 jobs were lost and gdp fell 4. 2 per cent. the unemployment rate spiked to 8. 7 per cent. the severity of the global economic and financial crisis delivered a direct, sharp blow to canadian business. canada experienced a particularly deep contraction of investment and exports. the trauma was severe and long - lasting. its impact was felt by businesses across the country, businesses that saw their markets dwindle and their balance sheets deteriorate. in a downturn that lasts, say, nine months, a bank will likely let its clients ride out the recession. but in a prolonged crisis, the story is more complex. credit can become tough to find. anecdotally, we know that otherwise solvent and creditworthy firms were left with considerably less credit than they needed. in too many cases, temporary plant shutdowns were not sufficient to match the fall in demand or the decline in financing. some firms reduced their operations. others simply closed their doors. let ’ s look at some of the facts. during a normal growth period in canada, there is a steady increase in the number of businesses in operation. in short, creative destruction results in the net creation of new firms. but since the onset of the recession, there has been limited net creation of businesses. canada ’ s exporters have been particularly hard hit. the group most profoundly affected has been manufacturing exporters, whose ranks have continued to shrink. canada is not alone in this regard. in the united states, the dynamics were similar but even more dramatic. the net number of new establishments fell for three years in a row until 2011, when, finally, the trend turned around. bis central bankers ’ speeches the reconstruction challenge perhaps there should be no surprise, then, given the decline in global demand, the drop in the number of american companies to trade with, and the related drop in the number of canadian exporters, that canada ’ s export sector has la

chart 4 ). with household balance sheets becoming increasingly stretched and consumption unlikely to be bolstered by further gains in house prices, household spending is expected to moderate in line with income growth. but even with this moderation, the savings rate is projected to remain near historic lows, household debt near historic highs, and the share of the economy accounted for by household spending well above its historical average ( chart 5 and chart 6 ). prudent consumers should do no more and could well decide to do less. this leaves business investment and net exports to pick up the slack. the prospects for investment are very favourable, reflecting both propitious conditions and business imperatives. the financial positions of canadian firms are strong. borrowing costs for canadian businesses are exceptionally low, access to financing has continued to improve, and the canadian dollar has appreciated making imported machinery and equipment less expensive in canadian dollars. moreover, given the historically large drop in investment through the recession – almost 25 per cent – and the delayed recovery, firms have much depreciated capital to replace. this is reinforced by the imperative to improve productivity amid heightened pressures to become more competitive. surveys of business intentions, such as the bank of canada ’ s business outlook survey and the conference board ’ s survey, confirm that firms plan to invest heavily in the year ahead for a variety of purposes, but increasingly to seize new opportunities and improve productivity ( chart 7 ). reflecting all these factors, the bank is expecting a historically strong and sustained rebound in investment, with investment growing at more than 9 per cent this year and next ( chart 8 ). what about net exports? with the united states – our major trading partner – experiencing its worst recession since the great depression, our exports were particularly hard hit, falling more than 16 per cent ( chart 9 ). and with a moderate us recovery through 2010, an appreciating canadian dollar, and relatively strong domestic demand supporting imports, bis central bankers ’ speeches canada ’ s trade balance turned sharply negative, subtracting 2. 3 percentage points from growth in 2010. looking forward, the bank expects an improvement in net exports over the next two years as external demand continues to recover and domestic demand moderates from its previous rapid pace. nevertheless, competitiveness challenges are likely to mean that canada will benefit less from improved global demand than in past recoveries. consistent with the strong rebound in investment, this projection assumes a recovery in trend labour productivity growth from 0. 6 per cent in 2010 to 1.