By now there’s little debate: the global economy is slowing. The deleveraging process has been slow, with business leading the way, followed by the consumer. That leaves only the government sector to clean up its balance sheet.

Fortunately, business and consumers may be ready to shoulder more of the economic burden.

“In the U.S. we are starting to see some positive signs coming from the consumer,” says Benjamin Tal, chief economist at CIBC. “This is not to say that the U.S. economy is strong—it’s not, it’s relatively weak—but at the margin we are starting to see movement in the right direction.”

The U.S. consumer will have to step up, he says, because the government will “become a negative force” in 2013. Regardless of who wins the presidential election in November, belts will be tightened. Growth will be no more than 2%, which Tal admits is nothing to write home about.

“What we are seeing in the U.S. is a shift away from leverage toward investment. Business investment and exports are the main drivers of economic growth, as opposed to the consumer and housing.”

With business spending expected to rise, economic growth will be more sustainable than an economy driver simply by consumption.

“The recession of 2008-2009 was not a made in Canada recession; it was a made in U.S. recession—we were basically secondhand smokers,” Canada will be able to outperform most of the other G7 countries, but it’s not going to be a very strong performance—maybe 2%, maybe 2.5%—it’s going to be like putting an average student into a class of mediocre.”

He says that over the past five or six years, the government accounted for roughly 40% of the economy. With a Conservative majority now at the helm in Ottawa, Tal says this contribution will fall off and the private sector will have to step up to replace the government’s spending.

“The consumer in Canada is not ready to take over. The consumer is starting to slow down, consumer confidence is now 10% below the long term average, so we see the consumer segment softening.”

Fortunately, corporate Canada is sitting on a massive hoard of cash, and Tal says business spending will take up some of the slack. Growth will be slower, but healthier as the economy turns from leveraged consumption to investment.

To find out how this all affects investors, listen to Tal’s podcast.

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