Transcript No Slide Title

Navigating Through Volatile Times
Aron Gampel
Vice-President & Deputy Chief Economist
Toronto, Ontario
February 14, 2012
Global Output Moves To A Slower Growth Trajectory
Real GDP
12
annual % change
2004-07
2010
2011f
2012f
10
8
6
4
2
0
-2
China
India
Brazil
Mexico
Japan
Source: Scotia Economics, Bloomberg, BEA, Statistics Canada, Eurostat.
U.S.
Canada
Euro zone
America’s Growth Engine & Competitive Realignment
Uneven Sales Performance
Exports to High Growth Regions
200
150
index: January 2009 = 100
index: January 2009 = 100
190
Auto Sales
140
180
Pacific Rim
170
130
160
120
150
140
110
130
120
100
Rest of World
110
Total Home Sales
90
South & Central America
100
80
90
09
10
Source: Bloomberg.
11
12
09
10
Source: Bloomberg, NAR.
11
12
European Debt Fuels Economic And Market Volatility…
Fiscal Deficits
Debt
General Government, 2010, % of GDP
General Government, 2010, % of GDP
14
140
12
120
10
100
8
80
6
60
4
40
2
20
0
0
Greece
Ireland*
Spain
Portugal France
Italy
*2011f: 10.3%; 2010: 32% reflects extensive bank support.
Gross Debt
Net Debt
n/a
Greece
Italy
Portugal Ireland France
Source: IMF September 2011, Scotia Economics.
Spain
… That Will Impede Medium-Term Growth Internationally
Fiscal Deficits
12
Debt
General Government, 2010, % of GDP
220
General Government, 2010, % of GDP
200
10
180
160
8
Gross Debt
Net Debt
140
120
6
100
Emerging
Economies
4
80
60
Emerging
Economies
40
2
20
0
0
U.S.
U.K.
Japan
Canada Germany
Japan
U.S.
Source: IMF September 2011, Scotia Economics.
U.K.
Germany Canada
Canada Leads Most Major Nations In Fiscal Repair …
Looking Forward
Budget Balances
Target for
Balanced Books**
(FY11*, % of GDP)
2
Canada
Federal
forecast
0
Aggregate
Provincial
-2
NL
balanced
NS
FY14
SK***
balanced
AB***
FY14
BC
FY14
-4
FY15
MB
-6
QC
PE
U.S. Federal
ex. Social
Security
-8
FY14
Federal
-10
-12
FY14
FY17
NB
budget balances
% of GDP
FY95
99
FY15
FY18
ON
03
07
Source: Budget documents, Statistics Canada, BEA,
Scotia Economics.
11e
-3
-2
-1
0
1
2
*Final results except for NL. SK on a General Revenue Fund basis.
**Without using reserve funds. ***After transfers. Source: Budget
documents, Statistics Canada.
… And Has A Competitive Tax Advantage
Corporate Income Tax Rates*
Marginal Effective Tax Rates on Capital
45
45
2011, %
Japan
40
35
30
U.S.
40
France
Germany
Canada Italy
35
30
U.K.
2012, %
National
Average
assumes
10% Prov.
CIT rate
and crossCanada
HST
25
25
Small
Developed
Countries
20
20
U.S.
OECD
Canada
15
15
10
10
5
5
0
0
* Central plus sub-central rates. Source: OECD.
Source: Finance Canada, Finance Ontario.
Monetary Policies Geared To Reviving Growth
Central Bank Rates
10-year Bond Yields
6
6
%
yield
forecast
U.S.
5
5
4
4
Canada
U.S.
forecast
Euro
zone
3
3
2
Canada
2
1
1
0
0
04
05
06
07
08
09
10
11
12
13
Source: Bank of Canada, U.S. Federal Reserve,
European Central Bank, Scotia Economics.
14
Germany
04
05
06
07
08
09
10
Source: Scotia Economics, Bloomberg.
11
12
13
14
Canada’s Solid But Uneven Employment Recovery
... As Manufacturing Headwinds Rise
Employment Cresting ...
110
140
index: 2004 Q1 = 100
*
index: 2004 Q1=100
*
Construction
130
108
*
Canada
120
106
110
Euro
zone
104
Natural
Resources
*
Services
100
102
*
U.S.
100
Manufacturing
90
80
*
98
70
04
05
06
07
08
09
10
11
12
Source: Statistics Canada, Scotia Economics. *January 2012.
04
05
06
07
08
09
10
11
12
Canadian Household Debt Is A Source Of Concern
Canadians’ Debt-To-Income Now Higher
…
170 household* credit liabilities o/s
as % of PDY
155
… But Less Debt Used To Buy Assets
30
26
140
U.S.
125
U.S.
22
Canada
110
Canada
18
95
14
80
94
96
98
00
02
04
06
08
94
10
$000
units, 000s
600
6
300
200
400
MLS
Average
Price
300
200
95
00
00
02
04
06
08
10
05
U.S.
4
3
2
100
90
98
% of total loans past due
three or more months
5
500
MLS Sales
96
Mortgage Delinquencies
Existing Home Sales
400
household* debt o/s as % of assets
10
Canada
1
0
04
* Includes households and unincorporated business.
Source: U.S. Federal Reserve, Statistics Canada, Scotia Economics.
05
06
07
Source: MBA, CBA.
08
09
10
11
Loonie Strength, U.S. Weakness Hit Canadian Exports
The Loonie Continues to Fly High …
125
WTI Oil US$/bbl
CADUSD
WTI Oil
(LHS)
… Despite Weaker Trade Balances
1.10
200
C$ billions, s.a.
1.05
Commodities
150
100
1.00
0.95
75
100
0.90
50
0.85
50
0.80
Merchandise Trade
0
0.75
-50
Canadian Dollar
(RHS)
25
0.70
forecast
0.65
0
0.60
04
05
06
07
08
09
10
11
12
13
-100
Merchandise Trade ex.
Commodities
-150
04
05
Source: Scotia Economics, Statistics Canada, Bloomberg.
06
07
08
09
10
11
Focus On Global Markets For Long-Term Growth
Exports (Goods & Services)
World Exports
35
50
% of world GDP
% of GDP, 2010
40
30
30
25
20
20
10
15
0
80
83
86
89
92
95
98
01
04
07
10
U.S.
Source: World Bank, Scotia Economics. World exports for 2011 is an estimate.
Japan
U.K.
Canada Germany
Focus On Global Markets For Long-Term Growth
Canadian Exports
World Exports
35
80
% of world GDP
30
% share of total exports, 2011 ytd
60
25
40
20
20
15
0
80
83
86
89
92
95
98
01
04
07
10
U.S.
Asia Western Other Latin Germany
Europe
America
Source: World Bank, Strategis, Scotia Economics, ytd = Jan - Nov. World exports for 2011 is an estimate.
Emerging Market Strength Is Helping To Rebalance Growth …
Population
1.5
Global GDP (PPP)
billions, 2010*
Korea
Thailand
% of global GDP, 2010*
Vietnam
1.2
Indonesia
Other
America
0.9
Canada
U.S./Canada
0.6
0.3
U.S.
Rest
of Asia
(ex.
Japan)
India
Other
Asia/Oceania
Europe
Euro
area
Brazil
Africa
Russia
Japan
0.0
Rest of
Asia
China
China
* 2010 IMF forecast.
India
Mexico
Japan
Emerging Market Strength Is Helping To Rebalance Growth …
Population
1.5
Per
Capita
GDP*
Motor
vehicles
per 1000
people
Number
of
Airports
India
1,000
17
350
China
4,000
58
500
Brazil
10,000
158
4,050
Canada
46,000
619
1,400
United
States
47,000
766
15,100
billions, 2010*
Korea
Thailand
Vietnam
1.2
Indonesia
0.9
Canada
0.6
0.3
U.S.
Rest
of Asia
(ex.
Japan)
Euro
area
Brazil
Russia
Japan
Mexico
0.0
Rest of
Asia
China
* 2010 IMF forecast.
India
*Market exchange rate, USD. Source: Bank of Canada, IMF WEO
estimates, World Bank Development Indicators, CIA Factbook.
… But Is Reshaping The Global Manufacturing Landscape
Motor Vehicle Production
Motor Vehicle Sales
forecast
millions of units
25
millions of units
EU &
Japan
20
Europe
20
16
North America*
North America*
15
12
10
8
forecast
Brazil, Russia,
India & China
China
5
4
0
0
02
03
04
05
06
07
08
09
10
11
12
04
05
06
07
08
09
*Includes light trucks in North America. Source: Scotia Economics, Ward’s Automotive.
10
11
12
… But Is Reshaping The Global Manufacturing Landscape
Housing Starts
Motor Vehicle Sales
25
EU &
Japan
20
16
millions of starts, 2011e
forecast
millions of units
20
North America*
15
12
10
8
Brazil, Russia,
India & China
5
4
0
0
02
03
04
05
06
07
08
09
10
11
12
Source: Scotia Economics, IMF, Bloomberg.
G7
China
… But Is Reshaping The Global Manufacturing Landscape
Global Oil Consumption
Motor Vehicle Sales
forecast
millions of units
EU &
Japan
20
16
230
210
North America*
1999 = 100
China
190
170
12
150
8
Emerging Asia
130
Brazil, Russia,
India & China
4
110
United States
90
0
02
03
04
05
06
07
08
09
10
11
12
99 00 01 02 03 04 05 06 07 08 09 10
*Includes light trucks in North America. Source: Scotia Economics, Ward’s Automotive.
Ontario’s Trade Needs More East-West, Less North-South
International Trade Balance
Ontario Exports Beyond the U.S.
30
EU27
14
Other Asia
Mexico
2002
Latin America
Japan
2011ytd
China
% of international
merchandise trade receipts
India
-2
-18
-34
-50
$ billions
00 01 02 03 04 05 06 07 08 09 10 11*
0
4
Source: Strategis trade data.
Interprovincial Trade Balance
40
$ billions
30
20
10
0
00 01 02 03 04 05 06 07 08 09 10 11*
8
12
Trade With Asia*
45
40
35
30
25
20
15
10
5
0
% of total, 2011ytd
BC
MB
SK
QC
AB
AT
ON
Source: Statistics Canada, Ontario Economic Accounts. *ytd, 2011Q3 * Excludes Middle East; domestic basis. Source: Strategis trade data.
2011ytd = Jan-Nov.
Canada’s Competitive Challenge
U.S.
Wages
Canada
2000-2010 % change,
compound annual growth
Germany
-2
Source: Scotia Economics.
0
2
4
6
Canada’s Competitive Challenge
U.S.
Wages
Productivity
Canada
2000-2010 % change,
compound annual growth
Germany
-2
Source: Scotia Economics.
0
2
4
6
Canada’s Competitive Challenge
U.S.
Wages
Productivity
ULC
Canada
2000-2010 % change,
compound annual growth
Germany
-2
Source: Scotia Economics.
0
2
4
6
Canada’s Competitive Challenge
U.S.
Wages
Productivity
ULC
FX
Canada
2000-2010 % change,
compound annual growth
Germany
-2
Source: Scotia Economics.
0
2
4
6
Canada’s Competitive Challenge
U.S.
Wages
Productivity
ULC
FX
US$ULC
Canada
2000-2010 % change,
compound annual growth
Germany
-2
Source: Scotia Economics.
0
2
4
6
Auto Industry Investment Shifts Away From Canada
Investment Slumps in Canada, But Has
Stabilized in the U.S. & Mexico*
Mexico – The Big NAFTA Winner
20
2
000s of USD
% of North American output
18
Canada
Canada
1.5
16
U.S.
14
1
12
0.5
Mexico
Mexico
10
8
0
00
02
04
06
08
10
00
02
04
06
*Investment per vehicle produced in each country. Source: Scotia Economics, Global Auto Report.
08
10
Growth And Income Prospects Best In Resource Regions
Nominal GDP Per Capita
Nominal GDP Per Capita
180
180
index: 2004=100
index: 2004=100
forecast
forecast
170
170
Saskatchewan
160
160
150
150
140
140
Newfoundland
and Labrador
Manitoba
130
130
120
Alberta
New
Brunswick
120
B.C.
Quebec
P.E.I.
110
110
Nova Scotia
Ontario
100
100
04
05
06
07
08
09
10
11e
12f
13f
04
05
06
Source: Statistics Canada, Scotia Economics.
07
08
09
10
11e
12f
13f
Demographic Trends Favour Western Canada
Interprovincial Migration
0.5
International Migration
1.4
% of population, 2011 ytd
0.4
% of population, 2011 ytd
1.2
0.3
1.0
0.2
0.1
0.8
0.0
0.6
-0.1
0.4
-0.2
0.2
-0.3
-0.4
0.0
ATL
QC
ON
MB
SK
AB
Source: Statistics Canada, ytd = 2011 Q1-Q3.
BC
ATL
QC
ON
MB
SK
AB
BC
ECONOMIC OUTLOOK
11e
12f
13f
MARKET OUTLOOK
11
12f
13f
CURRENCY, end of period
REAL GDP, annual average
U.S.
1.7
2.0
2.2
USDCAD
0.98
1.02
1.04
Canada
2.3
1.9
2.2
USDBRL
1.87
1.75
1.85
Brazil
2.8
3.8
4.5
EURUSD
1.30
1.25
1.29
Mexico
3.9
2.9
3.7
USDYEN
75
84
88
U.K.
0.9
0.7
1.8
USDMXN
13.9
13.1
13.4
Euro zone
1.6
-0.5
0.9
USDCNY
6.30
6.07
5.84
Japan
-0.4
2.2
1.7
3-MONTH T-BILLS, end of period
China
9.2
8.6
8.9
Canada
0.86
0.95
1.55
India
7.2
7.4
7.6
U.S.
0.05
0.10
0.20
INFLATION, end of period
10-YEAR BONDS, end of period
U.S.*
3.3
1.6
2.3
Canada
1.93
2.05
2.95
Canada*
2.7
1.9
2.1
U.S.
1.83
2.00
3.00
Brazil
6.5
5.5
5.0
COMMODITIES, annual average
Mexico
3.6
4.1
4.1
WTI Oil (US$/bbl)
95
100
105
U.K.
4.2
2.1
2.3
NYMEX Natural Gas (US$/mmbtu)
4.03
3.25
4.00
Euro zone
2.7
1.5
1.7
Gold, London PM Fix (US$/oz)
1,569
1,750
1,650
Japan
-0.1
0.0
0.2
China
4.1
4.5
4.3
India
7.5
6.5
6.0
* Annual averages. Source: Scotia Economics, Bloomberg. Forecasts as of February 2, 2012 .
Disclaimer
This report has been prepared by Scotia 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 Group nor its affiliates
accepts any liability whatsoever for any loss arising from any use of this
report or its contents.
Navigating Through Volatile Times
Aron Gampel
Vice-President & Deputy Chief Economist
Toronto, Ontario
February 14, 2012