Transcript No Slide Title

New Year, New Promise
Aron Gampel
Vice-President & Deputy Chief Economist
Scotiabank Economics
March 5, 2013
Canada’s Growth Performance At High End Of G7 Trends
Cumulative Output Rise From 2009 Trough
Canada
9.2
Germany
8.8
U.S.
Canada
4.4
U.S.
2.5
Germany
7.5
Euro zone
(ex. Germany)
Cumulative Output Rise From Prior Peak
1.4
Euro zone
(ex. Germany) -4.7
0.6
% change
% change
0.0
2.0
4.0
6.0
Source: DataInsight, Scotiabank Economics.
8.0
10.0
-5.0
-2.5
0.0
2.5
5.0
Canada’s Performance Underpinned By A Diversified Economy
Canada’s Primary Sector Output
Canadian Output
130
index, 2004=100
130
Construction (6%)
index, 2004=100
Agriculture & Fishing (2%)
120
120
Services
(72%)
Total
110
Oil, Gas & Coal (3%)
110
100
Utilities (3%)
Mining (1%)
90
100
Primary (11%)
80
90
forecast
70
forecast
Forestry & Lumber (2%)
Manufacturing (9%)
60
80
04
06
08
10
Bracketed numbers represent share of total output.
Source: Statistics Canada, Scotiabank Economics.
12
14
04
06
08
10
12
14
Growth And Income Prospects Best In Canada’s Resource Regions
Nominal GDP Per Capita
200
Nominal GDP Per Capita
index: 2004=100
forecast
190
forecast
index: 2004=100
200
Newfoundland
and Labrador
190
180
180
Saskatchewan
170
170
160
160
150
Alberta
140
150
New Brunswick
140
Manitoba
130
130
120
120
P.E.I.
Quebec
B.C.
Ontario
110
110
Nova Scotia
100
100
04
06
08
10
12e
Source: Statistics Canada, Scotiabank Economics.
14f
04
06
08
10
12e
14f
Rebuilding Momentum, But Slowly
Real GDP
12
annual % change
2004-07
2012f
2013f
2014f
10
8
6
4
2
0
-2
China
India
Brazil
Mexico
U.S.
Source: Bloomberg, U.S. BEA, Statistics Canada, Eurostat, Scotiabank Economics.
Canada
Germany Euro zone
U.S. Begins To Play Catch-Up In Big-Ticket Purchases
Housing Starts
125
Motor Vehicle Sales
125
index: 2004=100
index: 2004=100
forecast
forecast
Canada
100
100
Canada
75
75
U.S.
50
50
U.S.
25
25
04
06
08
10
12
14
04
Source: Scotiabank Economics, CMHC, U.S. Census Bureau, Ward’s Automotive.
06
08
10
12
14
Canadian Housing Activity Adjusting Lower For Longer
Existing Home Sales
Existing Home Prices
600
400
000s of units, annualized
$000s, national average
550
350
500
10-year average
300
450
10-year average
400
250
350
200
300
250
150
04
06
08
Source: CREA, Scotiabank Economics.
10
12
04
06
08
10
12
From Fiscal Stimulus To Fiscal Drag
Real Government Spending – Canada
6
Real Government Spending – U.S.
6
annual % change
4
4
2
2
0%
0
0
-2
-2
-4
-4
08
09
10
11
12f
13f
14f
Source: Statistics Canada, U.S. BEA, Scotiabank Economics.
annual % change
08
09
10
11
12f
13f
14f
Faster Imports, Slower Exports Erode Canada’s Trade Performance
Canadian Merchandise Trade Balances
Canadian Dollar And Oil Prices
200
125
C$ billions, s.a.
CADUSD
WTI Oil US$/bbl
1.10
1.05
150
Parity
Commodities
100
1.00
$100/bbl
100
0.95
75
50
0
0.90
0.85
WTI Oil
(LHS)
50
0.80
Merchandise Trade
0.75
-50
-100
25
Merchandise Trade
ex. Commodities
0.70
Canadian Dollar
(RHS)
-150
forecast
0.65
0
04
06
08
10
12
Source: Statistics Canada, Bloomberg, Scotiabank Economics.
0.60
02
04
06
08
10
12
14
Canada’s Large Current Account Deficit Will Be Slow To Unwind
Canada's Current Account Balance
Canada's Goods Trade Balance
150
100
75
$bns
$bns
Goods Trade
Balance
25
50
0
0
-50
-100
-150
Goods
50
Energy
Farm & Fishing
Consumer goods
Metals & Mineral
Forestry
M&E, Electronics, & Autos¹
other²
82 85 88 91 94 97 00 03 06 09 12
Services
-25
-50
Investment
Income
Current Account
Balance
-75
82 85 88 91 94 97 00 03 06 09 12
¹ Includes industrial M&E, motor vehicles & parts, aircraft and other transportation equipment, ² industrial materials, special
transactions, and other items. Source: Statistics Canada, Scotiabank Economics.
Less Financial Strains In Canada, But Risks Persist
Mortgage Delinquencies
6
Government Budget Imbalances
2
% of total loans past due
by three or more months
forecast
Canada
Federal
0
5
-2
U.S.
4
Aggregate
Provincial
-4
3
-6
U.S. Federal
ex. Social
Security
2
-8
1
Canada
-10
budget balances
% of GDP
Fiscal year-ends: U.S. federal – Sept. 30, Canada – March 31.
0
-12
04
06
08
10
12
Source: CBA, MBA, CMHC, U.S. Census Bureau, Scotiabank
Economics.
FY95
97
99
01
03
05
07
09
11
13f
Source: U.S. BEA, Statistics Canada, Budget documents; Nominal
GDP and federal forecasts: Scotiabank Economics.
Global Industrial Activity Reviving, But Slowly
Global Orders And Production
60
Record Aircraft Backlog
14
index
10
10
6 month annualized
% change
backlog
Thousands
of Units
12
58
Global New
Orders (LHS)
8
8
10
56
8
54
6
6
Years
6
4
4
52
2
2
50
0
Global Industrial
Production (RHS)
48
-2
10
11
12
13
Aircraft
Deliveries
% Share
Asia
Europe
North America
Latin America
Middle East
Other
34
25
21
8
7
5
4
2
0
0
05
07
09
11
Source: Bloomberg, J.P. Morgan, CPB Netherlands Bureau for Economic Policy Analysis, Scotiabank Economics.
13
Profits And Large Cash Holdings to Underpin Investment Spending
… and Business Fixed Investment
Growth In Corporate Profits …
40
140
y/y % change
Canada
30
index, quarterly,
zero=recession trough
forecast
U.S. Historical Avg.
U.S. Current Cyclical
Cdn Historical Avg.
Cdn Current Cyclical
130
20
10
120
0
110
-10
United States
-20
100
-30
-40
90
00
02
04
06
08
10
12
14
Source: U.S. BEA, Statistics Canada, Scotiabank Economics.
-4
-2
0
2
4
6
8
10
12
14
Non-Residential Construction Much Stronger In Canada
Non-Residential Construction
180
Office Vacancy Rates
forecast
index: 2004Q1=100
18
%
170
15
160
U.S.
Calgary
150
Canada
12
140
130
9
Toronto
Canada
120
6
110
100
3
U.S.
90
80
Vancouver
0
04
06
08
10
12
14
04
06
Source: Statistics Canada, U.S. BEA, Cushman & Wakefield, CBRE, Scotiabank Economics.
08
10
12
Yield Curve – Flatter Now, Steeper Later
10-year Bond Yields
Central Bank Rates
6
6
yield
%
U.S.
forecast
5
5
forecast
U.S.
4
4
Canada
,3
Canada
3
2
2
1
1
Germany
Euro
zone
0
0
04
06
08
10
12
14
Source: Bank of Canada, U.S. Federal Reserve, European
Central Bank, Scotiabank Economics.
04
06
08
10
Source: Bloomberg, Scotiabank Economics.
12
14
Less Inflation Risk Now, More Later
Consumer Price Inflation
Central Bank Rates
6
5
%
Average annual % change
U.S.
forecast
5
forecast
4
U.S.
Euro
zone
3
4
Canada
3
2
2
1
1
0
Canada
Euro
zone
0
-1
04
06
08
10
12
14
Source: Bank of Canada, U.S. Federal Reserve, European
Central Bank, Scotiabank Economics.
04
06
08
10
12
Source: Statistics Canada, U.S. BLS, Bloomberg, Scotiabank
Economics.
14
Canada – Solid Fundamentals, Better Long-Term Growth Prospects
Employment
Unemployment Rate
14
110
index, 2004 Q1=100
%
Canada
12
108
Germany
10
106
8
104
6
U.K.
4
102
2
100
Euro zone
(ex. Germany)*
U.S.
0
Germany
Canada
U.K.
U.S.
Euro zone
(ex. Germany)
98
04
06
08
10
* index 2005Q3=100, Q3/Q3, NSA. Source: Statistics Canada, U.S. BLS, Eurostats, Bloomberg, Scotiabank Economics.
12
Canada – Solid Fundamentals, Better Long-Term Growth Prospects
Population Growth
1.2
Net Immigration
140
population growth rate,
2000-2011
000s
120
Ontario
100
1.0
Western
Canada
80
60
Quebec
40
0.8
20
Atlantic
0
00
01
02
03
04
05
06
07
08
09
10
11
10
11
0.6
Net Interprovincial Migration
50
0.4
Western
Canada
000s
25
0.2
Atlantic
0
0%
Quebec
0.0
Germany
U.K.
Euro zone
U.S.
Canada
(ex. Germany)
Source: Statistics Canada, IMF, Scotiabank Economics.
Ontario
-25
00
01
02
03
04
05
06
07
08
09
Canada – Solid Fundamentals, Better Long-Term Growth Prospects
Bank Share Price Performance
15
•
% change
5-year
10-year
10
•
5
•
0
-5
Source: Bloomberg, Scotiabank Economics.
Japan
Germany
Switzerland
U.S.
U.K.
Australia
Canada
-10
•
Canada’s banking system ranked the
world’s soundest for the 5th
consecutive year -- World Economic
Forum’s Global Competitiveness
Report, 2008-11.
Canadian financial institutions make
up 7 of the world’s 50 safest banks -Global Finance’s World’s 50 Safest
Banks, 2012.
Canada is one of 11 countries (in
addition to Australia, Denmark,
Norway, Singapore, Sweden and
Switzerland) whose sovereign debt is
‘AAA’ rated with a stable outlook, and
one of 13 ‘AAA’ countries which
includes The Netherlands with either
stable or negative outlooks.
Scotiabank named 2012 Bank of the
Year by FT’s The Banker.
Canada – Solid Fundamentals, Better Long-Term Growth Prospects
Corporate Income Tax Rates*
Marginal Effective Tax Rates on Capital
45
45
40
35
2012, %
Japan
U.S.
40
France
35
Germany
30
30
Italy
Canada
25
U.K.
20
2012, %
National
Average
assumes
10% Prov.
CIT rate
and crossCanada
HST
25
U.S.
Small
Developed
Countries
20
OECD
Canada
15
15
10
10
5
5
0
0
* Central plus sub-central rates. Source: OECD, Scotiabank
Economics.
Source: Finance Canada, Finance Ontario, Scotiabank
Economics.
Canada – Solid Fundamentals, Better Long-Term Growth Prospects
Commodities Dominate Exports
International Investment In Canada
1000
% share of total export receipts, 2012.
C$ billions
900
Portfolio Inflows
800
All Other Goods
35%
700
Vehicles &
Parts
14%
600
Foreign Direct
Investment
500
AgriFood 7%
Forest
Products 5%
Mining
14%
Energy
24%
400
Commodities 55%
300
00
02
04
06
08
Source: Statistics Canada, Scotiabank Economics.
10
Canada Must Focus More On Global Markets For Long-Term Growth …
Canadian Exports
World Exports
50
% of GDP, 2011
80
% share of total exports, 2012
40
60
30
40
20
20
10
0
0
U.S.
Japan
Canada
U.K.
Germany
* Excluding Mexico. Source: WTO, IMF, Strategis, Scotiabank Economics.
U.S.
Asia
Western
Europe
Other
Latin
America*
… But Competitive Challenges Persist …
Wages
Productivity
2000-2011 % change,
compound annual
growth
Unit Labour Costs (local currency)
U.S.
Unit Labour Costs (USD)
Wages
Productivity
Unit Labour Costs (local currency)
Canada
Currency (against USD)
Unit Labour Costs (USD)
Wages
Productivity
Unit Labour Costs (local currency)
0
Germany
Currency (against USD)
Unit Labour Costs (USD)
-2
0
Source: U.S. BLS, Scotiabank Economics.
2
4
6
8
10
… And Trade Prospects Internationally May Be Slightly Tempered
The 3 Percentage Point Gap ...
... Will Likely Narrow
16
y/y % change
Global Output And Trade
12
forecast
8
Expansion
Periods
4
1983-89
3.9
5.9
2.0
1992-00
3.3
7.6
4.3
2002-07
4.5
7.5
3.0
2010-12e
4.1
7.2
3.1
2013-17f
4.0
6.5
2.5
Growth¹
0
-4
-8
Global Output Global Trade
Growth (%)
(%)
Differential
(percentage
points)
Trade²
-12
80
85
90
95
00
05
10
15f
¹ volumes, real GDP. ² volumes of goods & services. Source: IMF, Scotiabank Economics.
Emerging Market Economies – Consensus Growth Leaders
Real GDP, average annual % change
Asia Pacific (32%)
U.S. / Canada (27%)
Western Europe (27%)
Latin America (8%)
Eastern Europe (7%)
1980s
1990s
2000s
2010s
4.3
5.4
3.4
4.9
1980s
1990s
2000s
2010s
1.8
3.1
3.1
2.4
1980s
1990s
2000s
2010s
1.5
2.3
2.2
1.4
1980s
1990s
2000s
2010s
3.0
2.1
3.0
4.1
1980s
1990s
2000s 0.5
2010s
0
4.4
2.5
3.9
1
Bracketed figures represent percent share of the global economy.
Source: Consensus Forecasts Global Outlook, October 2012.
2
3
4
5
6
Emerging Market Economies Have More Financial Flexibility
Current Account Balance
Gross & Net Debt
180
160
4
General Gov’t, 2012, % of GDP
140
120
100
Gross Debt
Net Debt
2
Germany
0
2012, % of GDP
80
60
40
-2
20
0
-4
Greece
Italy
U.S.
Euro
zone
Canada
China
Emerging*
Gross National Savings
60
Japan
Euro
zone
Brazil
U.S.
Canada
India
Euro Canada
zone
U.S.
Foreign Reserves
3.5
2012, % of GDP
50
3.0
40
2.5
2012 Q4, US$ trillions
2.0
30
1.5
20
1.0
10
0.5
0
0.0
China
India
Japan Canada Euro
zone
Brazil
U.S.
China
Japan Brazil
* Emerging and Developing markets. Source: IMF, Bloomberg, Scotiabank Economics.
India
Emerging Market Economies’ Have Stronger Growth Dynamics
Per Capita
GDP*
Motor
vehicles per
1000 people
Number of
Airports
Health Care
Expenditure
% of GDP
Services
Share % of
GDP
India
1,514
20
352
2
65
China
5,417
70
497
5
44
Brazil
12,789
174
4,105
9
67
Canada
50,496
621
1,453
11
70
United
States
48,328
793
15,079
16
80
*Market exchange rate, USD.
Source: IMF WEO October 2012 (estimates), Ward’s Automotive Reports, CIA World Factbook.
Demographics Will Continue To Drive Emerging Market Economies …
Population
Demographic Trends
billions, 2010*
1.5
Change in Population 2011 – 2030 (millions)
Korea
India
China
Brazil
Mexico
U.S.
Canada
Japan
Russia
Europe
Thailand
Vietnam
1.2
Indonesia
0.9
Canada
15-24 yrs
12
-63
-4
-1
4
-1
-2
-3
-9
25-64 yrs
218
47
21
17
8
1
-10
-11
-33
65+ yrs
73
136
20
10
37
5
14
9
58
Change in Urbanized Population
0.6
1600
U.S.
Rest
of Asia
(ex.
Japan)
1200
Euro
area
0.3
Brazil
Japan
0.0
China
India
1000
800
Russia
Rest of
Asia
millions of people
1400
600
More Developed
Regions
Less Developed
Regions
400
Mexico
200
0
2011-2030
Source: Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat, World Population
Prospects: The 2010 Revision. *IMF estimate.
… Spending Power …
Population
Growth In Personal Disposable Income
billions, 2010*
1.5
index: 2004=100
Korea
225
Thailand
Vietnam
1.2
200
Indonesia
China
(Urban)
0.9
0.6
Rest
of Asia
(ex.
Japan)
Canada
175
U.S.
150
Canada
Euro
area
0.3
Euro zone
Brazil
U.S.
125
Russia
Japan
0.0
Rest of
Asia
China
Mexico
India
Source: Population Division of the Department of Economic and
Social Affairs of the United Nations Secretariat, World Population
Prospects: The 2010 Revision. *IMF estimate.
Germany
U.K.
100
04
05
06
07
08
09
10
11
Source: Bloomberg, IMF, Statistischen Bundesamtes, Scotiabank
Economics.
… And Oil Consumption …
Population
Global Oil Consumption
billions, 2010*
1.5
230
Korea
Index, 1999=100
Thailand
China
210
Vietnam
1.2
190
Indonesia
0.9
170
Canada
Emerging Asia
150
0.6
U.S.
Rest
of Asia
(ex.
Japan)
130
Euro
area
0.3
Brazil
Russia
Japan
0.0
Rest of
Asia
China
Mexico
India
Source: Population Division of the Department of Economic and
Social Affairs of the United Nations Secretariat, World Population
Prospects: The 2010 Revision. *IMF estimate.
110
United States
90
99
01
03
05
07
09
11
13f
Source: Statistics Canada, Bloomberg, Scotiabank Economics.
… Reshaping The Global Manufacturing Landscape
Auto Sales
Motor Vehicle Production
25
25
millions of units
millions of units
Europe
20
20
Europe
North America*
15
15
North America*
10
forecast
10
forecast
5
5
China
China
0
0
04
06
08
10
12
14
04
06
*Includes light trucks in North America. Source: Scotiabank Economics, Ward’s Automotive.
08
10
12
14
Trends In Canadian Exports By Product
Canada's Top 15 Merchandise Exports - Product Performance
Compound Annual Growth Rates, %
Total Exports
Oil & Gas
Motor Vehicles
Machinery & Equipment
Precious Stones & Metals
Electronic Equipment
Plastics
Aircrafts & Aerospace
Wood
Mining
Aluminum
Paper
Oil Seeds
Cereals
Fertilizers
Iron & Steel
Sub-Total
2012
1.6
1.0
17.0
5.3
-13.3
-1.4
-0.7
6.2
10.3
-1.7
-12.7
-13.3
23.2
7.7
-7.6
-5.6
2.4
Source: Industry Canada, Scotiabank Economics.
2009-12
8.2
12.2
16.8
3.2
20.7
-2.5
5.2
-1.9
10.4
15.2
4.4
-7.7
15.3
2.0
15.5
12.6
9.7
2008-09
-25.6
-38.5
-28.8
-17.8
-6.8
-15.5
-22.6
8.0
-24.3
-14.6
-35.6
-18.1
-8.2
-19.2
-38.9
-43.3
-27.9
2000-08
2.3
13.6
-6.6
0.3
14.8
-6.8
2.7
0.2
-9.6
14.8
5.8
-4.2
16.7
10.3
13.7
13.1
2.5
% Share of 2012
Exports
100.0
25.5
13.5
7.2
5.0
3.3
2.7
2.3
2.2
1.9
1.9
1.9
1.8
1.7
1.6
1.6
74.0
Outlook for 2013
5.0
Underperform
Underperform
Overperform
Underperform
Underperform
Underperform
Overperform
Overperform
Overperform
Underperform
Underperform
Overperform
Overperform
Underperform
Underperform
Trends In Canadian Imports By Product
Canada's Top 15 Merchandise Imports - Product Performance
Compound Annual Growth Rates, %
Total Imports
Motor Vehicles
Machinery & Equipment
Oil & Gas
Electronic Equipment
Precious Stones & Metals
Plastics
Medical Equipment
Pharmaceutical Products
Articles of Iron & Steel
Furniture
Iron & Steel
Rubber
Organic Chemicals
Aircrafts & Aerospace
Paper
Sub-Total
2012
3.5
11.2
5.9
-3.0
0.7
-12.1
4.8
7.8
-0.8
11.2
10.9
0.0
4.3
-0.7
-1.6
-6.5
3.3
Source: Industry Canada, Scotiabank Economics.
2009-12
8.1
12.7
8.4
14.4
5.7
17.5
7.5
6.2
-2.4
13.5
8.3
16.0
10.6
-1.1
-3.0
-3.1
9.1
2008-09
-15.8
-21.9
-16.8
-36.0
-9.6
4.4
-13.8
-3.5
15.9
-22.9
-14.5
-41.5
-4.9
-18.4
-17.0
-4.6
-18.2
2000-08
2.8
0.3
-0.6
16.4
-2.2
21.6
2.8
-1.1
12.0
6.2
5.3
6.5
1.3
6.4
2.0
0.4
2.7
% Share of 2012
Imports
100.0
15.3
14.6
11.1
9.8
3.3
3.3
2.9
2.7
2.6
1.9
1.8
1.6
1.3
1.2
1.2
74.8
Economic & Market Outlook
12f
13f
14f
REAL GDP, annual average
12f
13f
14f
CURRENCY, end of period
U.S.
2.2
2.0
2.7
Canadian Dollar (CADUSD)
1.01
0.99
1.01
Canada
1.9
1.6
2.4
Brazilian Real (USDBRL)
2.05
2.00
1.96
U.K.
0.2
0.9
1.4
Euro (EURUSD)
1.32
1.27
1.25
Euro zone
-0.5
-0.3
1.0
Mexican Peso (USDMXN)
12.85
12.93
13.14
Brazil
1.0
3.3
4.0
Chinese Renminbi (USDCNY)
6.23
6.10
6.04
Mexico
4.0
3.6
3.9
China
7.8
8.1
8.3
3-MONTH T-BILLS, end of period
India
5.1
6.0
6.5
Canada
0.93
1.00
1.10
U.S.
0.04
0.10
0.10
INFLATION, end of period
U.S.
1.9
2.0
2.0
10-YEAR BONDS, end of period
Canada
0.9
1.7
2.0
Canada
1.80
2.25
3.35
U.K.
2.7
2.9
2.4
U.S.
1.76
2.25
3.50
Euro zone
2.2
1.7
1.7
Brazil
5.8
5.8
5.5
COMMODITIES, annual average
Mexico
3.6
3.8
3.8
WTI Oil (US$/bbl)
94
94
96
China
2.5
3.3
3.9
NYMEX Natural Gas (US$/mmbtu)
2.83
3.75
4.00
India
7.2
7.0
6.1
Gold, London PM Fix (US$/oz)
1,670
1,690
1,650
Source: Scotiabank Economics, Bloomberg.
Forecasts at February 28, 2013
Disclaimer
•
TM Trademark
of The Bank of Nova Scotia. Used under license, where applicable.
This report has been prepared by Scotiabank Economics as a resource for the clients of
Scotiabank. Opinions, estimates and projections contained herein are our own as of the
date hereof and are subject to change without notice. The information and opinions
contained herein have been compiled or arrived at from sources believed reliable but no
representation or warranty, express or implied, is made as to their accuracy or
completeness. Neither Scotiabank nor its affiliates accepts any liability whatsoever for any
loss arising from any use of this report or its contents.