2016-17 Economic Outlook
Jean-François Perrault
SVP & Chief Economist - Scotiabank
September 2016
Exports: it isn’t just the global economy that matters
Real Quebec Exports: Q1 2016
Real Quebec Exports: 2000
share of total goods & services
share of total goods & services
Interprovincial
Interprovincial
International
International
Source: Scotiabank Economics, Haver Analytics.
Jean-François Perrault
1
September 14, 2016
Forecasts at a glance
Source: Scotiabank Economics.
Jean-François Perrault
2
September 14, 2016
Reasonably strong US growth expected
U.S. GDP and Domestic Demand
6
GDP
q/q % saar
Domestic Demand
forecast
4
2
0
-2
12
13
14
15
16
17
Source: Scotiabank Economics, U.S. Bureau of Economic Analysis.
Jean-François Perrault
3
September 14, 2016
Good employment and wage gains boosting disposable income
Average Hourly Earnings
Nonfarm Employment
4
y/y % change
y/y % change
3
4.5
4.0
2
3.5
1
0
3.0
-1
2.5
-2
2.0
-3
1.5
-4
-5
1.0
95
98
01
04
07
10
13
16
95
98
01
04
07
10
13
16
Source: Scotiabank Economics, U.S. Bureau of Labor Statistics .
Jean-François Perrault
4
September 14, 2016
Leading to strong auto sales…
20
millions of units, annualized
18
16
14
12
10
8
95
98
01
04
07
10
13
16
Source: Scotiabank Economics, Ward’s Automotive Group.
Jean-François Perrault
5
September 14, 2016
… and a pick-up in the housing market
House Prices
Housing Starts and Sales
2.5
15
millions of units
Housing Starts*
10
2.0
5
1.5
0
S&P/Case-Shiller
Home Price Index
-5
1.0
-10
0.5
-15
New Home Sales
y/y % change
0.0
95
98
01
04
07
10
13
95
16
98
01
04
07
10
13
-20
16
Source: Scotiabank Economics, U.S. Census Bureau, S&P, Case Shiller .
*annualized
Jean-François Perrault
6
September 14, 2016
Globally, trend growth is lower
10
annual % change
Emerging Market &
Developing Economies
8
World
6
4
2
0
-2
World
Advanced Economies
Emerging Economies
-4
2000-07
4.5%
2.7%
6.6%
Advanced
Economies
2009-15
3.3%
1.1%
5.1%
-6
80
85
90
95
00
05
10
15
Source: IMF, Bloomberg, Scotiabank Economics.
Jean-François Perrault
7
September 14, 2016
Global activity remains subdued
Global Industrial Production
15
y/y % change
10
5
0
-5
-10
-15
95
98
01
04
07
10
13
16
Source: Scotiabank Economics, CPB Netherlands Bureau for Economic Research, Bloomberg.
Jean-François Perrault
8
September 14, 2016
Oil prices: some reason for optimism going forward
150
USD/bbl, eop
120
forecast
Brent
90
WTI
60
30
05
07
09
11
13
15
17
Source: Scotiabank Economics, Bloomberg.
Jean-François Perrault
9
September 14, 2016
Low inflation and low growth have resulted in very low interest rates
10 Year government bonds
6
% yield, end of period
U.S.
Canada
5
Japan
U.K.
4
Germany
3
2
1
0
-1
05
07
09
11
13
15
Source: Scotiabank Economics, Bloomberg.
Jean-François Perrault
10
September 14, 2016
Canadian and provincial forecast
Provincial, annual % change except where noted
Real GDP
CA
NL
PE
NS
NB
QC
ON
MB
SK
AB
BC
2000-14
2015*
2016f
2017f
2.2
1.1
1.2
2.0
2.8
-2.2
0.1
-1.2
1.8
1.5
1.2
1.3
1.4
0.8
1.3
1.2
1.2
1.9
0.4
0.5
1.8
1.1
1.4
1.7
1.9
2.5
2.5
2.3
2.4
2.3
2.0
2.1
2.3
-1.4
-0.5
1.8
3.5
-4.0
-2.5
2.1
2.6
3.0
2.7
2.5
4.6
0.5
1.8
4.2
6.9
-8.7
-1.8
1.9
4.4
2.9
2.5
2.8
3.4
2.3
2.8
2.7
3.3
3.3
1.3
1.8
3.7
2.7
2.8
3.4
3.7
4.3
4.0
4.3
4.6
4.0
3.2
3.9
6.7
-4.8
-3.2
3.9
8.0
-11.1
-4.4
5.6
4.4
4.8
4.2
4.4
Nominal GDP
2000-14
2015f
2016f
2017f
Source: Scotiabank Economics.
Jean-François Perrault
11
September 14, 2016
Canada: undergoing massive transition
Canadian GDP
110
Non-Energy
Commodity-Related
Industries
index: Jan.2013 = 100,
3-month moving average
108
106
Rest of the
Economy
104
102
100
Oil & Gas
Related
Industries
98
96
94
92
13
14
15
16
Source: Scotiabank Economics, Statistics Canada.
Jean-François Perrault
12
September 14, 2016
Canadian outlook: headwinds, but generally solid growth
Canadian GDP and Domestic Demand
5
q/q % saar
GDP
Domestic Demand
4
forecast
3
2
1
0
-1
-2
12
13
14
15
16
17
Source: Scotiabank Economics, Statistics Canada.
Jean-François Perrault
13
September 14, 2016
Record Canadian auto sales
2.2
millions of units,
annualized, 3mma
2.0
1.8
1.6
Canada
1.4
1.2
Motor Vehicle Sales
(units, 000s)
2015
2016f
2017f
1,898
1,955
1,945
NL
PE
NS
NB
35
8
54
43
34
8
55
43
32
7
55
43
QC
ON
444
761
470
801
467
795
MB
SK
AB
BC
56
54
236
207
56
53
220
215
56
54
222
214
1.0
95
98
01
04
07
10
13
16
Source: Scotiabank Economics, Statistics Canada.
Jean-François Perrault
14
September 14, 2016
Divergent housing markets…
Home Sales
Home Sales
45
000s units
000s units
4.5
14
000s units
000s units
1.4
St. John’s (RHS)
Ottawa (RHS)
40
4.0
35
3.5
30
3.0
Toronto (LHS)
25
12
1.2
10
1.0
2.5
20
Regina (RHS)
8
0.8
6
0.6
2.0
15
Montreal
(LHS)
10
1.5
1.0
Calgary (LHS)
4
5
0.4
0.5
Vancouver (LHS)
0
0.0
95
98
01
04
07
10
13
2
16
0.2
95
98
01
04
07
10
13
16
Source: Scotiabank Economics, CREA, QFREB.
Jean-François Perrault
15
September 14, 2016
Scratching beneath the surface reveals much
Canadian Housing Market
Canadian Housing Starts
260
12
000s units
y/y % change
y/y % change
100
10
240
120
Home Prices
(LHS)
80
220
8
200
6
60
180
4
40
160
2
20
140
0
0
120
-2
100
-4
95
98
01
04
07
10
13
Home Sales
(RHS)
-40
95
16
-20
98
01
04
07
10
13
16
Source: Scotiabank Economics, Statistics Canada, CREA.
Jean-François Perrault
16
September 14, 2016
Large regional differences as the transition unfolds
Housing Starts
Housing Starts
100
60
000s units
000s units
000s units
12
Saskatchewan (RHS)
90
Ontario
50
80
10
Alberta (LHS)
70
40
8
30
6
20
4
10
2
Quebec
60
50
40
30
20
Newfoundland (RHS)
10
B.C.
0
0
95
98
01
04
07
10
13
0
95
16
98
01
04
07
10
13
16
Source: Scotiabank Economics, Statistics Canada.
Jean-François Perrault
17
September 14, 2016
Same is true of employment...
Employment
6
y/y % change
y/y % change
Oil Producing
Provinces
NL SK AB
5
4
6
5
4
Quebec
3
3
2
2
1
1
0
0
-1
-1
Oil Consuming
Provinces
PE, NS, ON,
NB, MB, BC
-2
-2
-3
-3
95
98
01
04
07
10
13
16
95
98
01
04
07
10
13
16
Source: Scotiabank Economics, Statistics Canada.
Jean-François Perrault
18
September 14, 2016
… and unemployment
Unemployment Rate
13
% of labour force
% of labour force
12
11
10
11
9
10
Quebec
Oil Producing
Provinces
NL SK AB
9
8
8
7
7
6
6
Oil Consuming
Provinces
PE, NS, ON,
NB, MB, BC
5
5
4
4
95
98
01
04
07
10
13
16
95
98
01
04
07
10
13
16
Source: Scotiabank Economics, Statistics Canada.
Jean-François Perrault
19
September 14, 2016
With implications for labour income
Labour Income
Labour Income
15
y/y % change
y/y % change
10
15
10
Canada
5
Canada
B.C.
Ontario
5
Quebec
0
0
-5
-5
Alberta
-10
-10
07
08
09
10
11
12
13
14
15
16
07
08
09
10
11
12
13
14
15
16
Source: Scotiabank Economics, Statistics Canada.
Jean-François Perrault
20
September 14, 2016
The dollar has been affected by this transition
Canadian Dollar
Dollar FCST
110
USD cents
USD/bbl
110
140
forecast
105
index
Real Effective
Exchange Rate
(LHS)
105
120
WTI (RHS)
100
100
100
95
90
80
85
60
80
75
40
USD cents
CADUSD
(LHS)
65
0
98
01
04
07
10
100
95
90
90
85
85
80
80
75
75
CADUSD
(RHS)
70
20
60
95
105
95
70
70
110
13
65
65
60
60
95
16
98
01
04
07
10
13
16
Source: Scotiabank Economics, Bloomberg, Bank for International Settlements.
Jean-François Perrault
21
September 14, 2016
Canadian dollar has moved in line with key drivers
Monetary Policy Expectations;
A Major Determinant of CAD
1.0
110
spread
USD cents
Canadian Dollar and Oil
140
USD/bbl
USD cents
Canadian Dollar and Copper
110 12
120
0.5
100
100
000 USD/MT
USD cents
10
110
100
100
8
0.0
90
CADUSD
(RHS)
-0.5
80
90
80
60
CADUSD
(RHS)
90
6
CADUSD
(RHS)
80
80
4
40
CDN 2y2y US 2y2y
(LHS)
-1.0
-1.5
70
60
95 98 01 04 07 10 13 16
WTI (LHS)
70
20
0
60
95 98 01 04 07 10 13 16
2
Copper (LHS)
0
70
60
95 98 01 04 07 10 13 16
Source: Scotiabank Economics, Bloomberg.
Jean-François Perrault
22
September 14, 2016
Important, given it’s link to our trade balance
Quebec
Canada
150
2007 chained dollar billions
CADUSD,
inverted
30
0.60
2007 chained dollar billions
CADUSD,
inverted
0.60
20
100
0.70
0.70
Canadian
Dollar (RHS)
Net Exports
of Goods &
Services
(LHS)
50
Canadian
Dollar (RHS)
10
0.80
0
Net Exports
of Goods &
Services
(LHS)
0
-10
0.90
0.80
0.90
-20
-50
1.00
1.00
-30
-100
1.10
95
98
01
04
07
10
13
-40
1.10
95
16
98
01
04
07
10
13
16
Source: Scotiabank Economics, Haver Analytics, Bloomberg .
Jean-François Perrault
23
September 14, 2016
Reminder: the structure of trade is changing…
Real Quebec Exports: Q1 2016
Real Quebec Exports: 2000
share of total international trade
share of total international trade
Services
Services
Goods
Goods
Source: Scotiabank Economics, Haver Analytics.
Jean-François Perrault
24
September 14, 2016
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