Warren Jestin SVP & Chief Economist
22
Warren Jestin SVP & Chief Economist As The World Turns Presentation to: Appraisal Institute of Canada National Conference May 28, 2009 Mont Tremblant
description
As The World Turns. Warren Jestin SVP & Chief Economist. Presentation to: Appraisal Institute of Canada National Conference May 28, 2009 Mont Tremblant. The Global Economy Approaches a Turn . G7 Set for Slow Recovery. Emerging Nations Remain Growth Leaders. - PowerPoint PPT Presentation
Transcript of Warren Jestin SVP & Chief Economist
Warren JestinSVP & Chief Economist
As The World Turns
Presentation to:
Appraisal Institute of CanadaNational Conference
May 28, 2009Mont Tremblant
-6
-4
-2
0
2
4
6
8
10
Mexico Russia Brazil India China
20082009f2010f
Emerging Nations Remain Growth Leadersreal GDP, annual average % change
-6
-4
-2
0
2
4
6
8
10
Japan Euro-zone
U.S. Canada
20082009f2010f
G7 Set for Slow Recovery
real GDP, annual average % change
The Global Economy Approaches a Turn
-35
-30
-25
-20
-15
-10
-5
0
5
10
JAPA
NSI
NG
APO
RE
ITA
LYG
ERM
AN
YB
RA
ZIL
RU
SSIA
FRA
NC
EM
EXIC
OU
KK
OR
EAC
HIL
EU
SC
AN
AD
AIN
DIA
CH
INA
Commodities Show Early Signs of Revival
Industrial Production
% change between Oct ‘08 & Mar ‘09
Blue bar represents price at May 26, 2009.Historical end of day observations; Source: Bloomberg.
Price Fluctuations Since January 2007
HighLow
US$/bbl145.2962.38OIL 33.87
HighLow
US$/mmbtu13.58
NATURALGAS
Low High
US$/lb4.082.06COPPER 1.26
Low High
US$/lb 24.595.814.00NICKEL
3.533.25
The Freefall is Ending in U.S. Housing and Autos …
0
3
6
9
12
15
02 03 04 05 06 07 08 090.4
0.8
1.2
1.6
2.0
2.4months’ supply
Housing Starts (RHS)
mn units
Housing Starts & Inventories
Inventories (LHS)
Vehicle Sales & Inventories
60
65
70
75
80
85
90
95
100
Jan 07 Jul 07 Jan 08 Jul 08 Jan 098
9
10
11
12
13
14
15
16
17
US New Vehicle Sales
(RHS)
US Dealer Inventories
(LHS)
days’ supply millions of units
. . . But U.S. Private & Public Financial Strains Remain Intense . . .
U.S. Federal Revenues SlideRising U.S. Foreclosures
-40
-30
-20
-10
0
10
20
30
40
06 07 08 09
12-month moving sum, y/y % change
Personal Income Tax
Total Revenues
Corporate Income Tax
Source: U.S. Treasury.Source: Global Insight.
. . . & Auto Producers Face Major Structural Adjustments
Motor Vehicle Production
0 4 8 12 16 20 24
WesternEurope
Japan
China
U.S.
India*
Canada
Mexico
Russia*
2008 Production
millions of units
Motor Vehicle Sales
0 4 8 12 16 20 24
WesternEurope
U.S.
China
Japan
Russia
Canada
India
Mexico
2008 Sales
millions of unitsChange, 2000-08
24%
11%
-30%
153%
-32%
351%
14%
-5%
Change, 2000-08
18%
115%
6%
165%
- 1%
722%
-32%
-8%
*2007 data. Source: Scotia Economics.
For Canada, These Trends Point to Big Competitive Challenges . . .Major Canadian Exports
0
40
80
120
160
200
240
280
320
00 01 02 03 04 05 06 07 08 09ytd
index: 2000=100Crude
Petroleum
Forest Products
Vehicles & Parts
MiningNatural Gas
5
10
15
20
00 01 02 03 04 05 06 07 08 09ytd
U.S. Imports% share of total
Canada
Euro zone
Mexico
China
Japan
Canadaex. Energy
Agriculture
. . . & Rising Dependence on Global Demand for Commodities
-8
-4
0
4
8
12
ForestProducts
Vehicles& Parts
Other Agri-Food
Energy Mining
Growth in Export Receipts: 2002 - 2008average annual % change
Exports – Shares
% share of total export receipts, 2008
Commodities50%
All Other Goods37%
Vehicles & Parts 12% Energy
25%
Mining14%
Forest Products 5%
Agri-Food 7%
85
100
115
130
145
160
02 03 04 05 06 07 08 09 10
forecastindex: 2002=100
Canada
U.S.
Export Volumes
Central Banks Signal Commitment to Ultra-Low Rates . . .
-3
-1
1
3
5
02 03 04 05 06 07 08 09 10
CPI
forecasty/y% changeU.S.
Canada
0
1
23
4
5
6
02 03 04 05 06 07 08 09 10
Canada
U.S.%
Central Bank Rates
forecast
-7.0
-3.5
0.0
3.5
7.0
10.5
14.0
Gas MortgageInterest
PropertyTaxes
Total MotorVehicles
% change, 2007-08
Canada
0
1
2
3
4
5
6
02 03 04 05 06 07 08 09 10
Canada 10-yr Gov’t. Bond
U.S. 10-yr T-Bond forecast
Bond Yields
0
2
4
6
8
10
05/08 07/08 09/08 11/08 01/09 03/090
2
4
6
8
10
02 03 04 05 06 07 08 09
%, spread
AAA & BAA Rated Corporate Bonds vs. U.S.10-yr Treasury
‘BAA’ Rated
‘AAA’ Rated
Source: PC Bond.
… But Credit Spreads Remain Elevated …
RioCan 3.5% due
2013
TransCanada 5.65% due 2014
Canadian Tire 4.95% due 2015
%, spread
Canada Securities vs. Comparable Canadian Bond
-15
-10
-5
0
5
10
15
20
25
00 01 02 03 04 05 06 07 08 09
… & Business Lending Has Tightened
-40
-20
0
20
40
60
80
100
00 01 02 03 04 05 06 07 08 09
Short-term Commercial &
Industrial Lending
Business Conditions Business Lending
Tightening
Easing
Canada
U.S.
Canada
U.S.
y/y % changebalance of opinion
U.S. Fiscal Deficit Soars
-2200
-2000
-1800
-1600
-1400
-1200
-1000
-800
-600
-400
-200
0
02 03 04 05 06 07 08 09 10-2200
-2000
-1800
-1600
-1400
-1200
-1000
-800
-600
-400
-200
0
US$ billions forecast
Balance ex. Social SecurityFederal Budget Balance
U.S. Dollar Remains on Shaky Ground
US$ Shows Signs of Weakening
CAD
$
Yuan
元
Yen ¥
Euro
€
Blue bar represents spot price at May 26, 2009.Historical end of day observations; Source: Bloomberg.
Trade Balance
Low High
1.090.89
Low
1.601.39
1.26124 95 87
Low
6.816.837.81
High
High
HighLow
1.25
US$ Exchange Rates Since January 2007
0.77
-50
-40
-30
-20
-10
0
10
20
30
40
50
60
70
80
02 03 04 05 06 07 08 09 10
C$ billions
Trade Balance
forecast
The Swooning Loonie Begins to Take Flight
Energy Balance
Provincial Balance
Federal Balance
Motor Vehicles & Parts
0.60
0.65
0.70
0.75
0.80
0.85
0.90
0.95
1.00
1.05
1.10
02 03 04 05 06 07 08 09 10
CAD/USD
20-year Average
(1988-2008)
Canadian Dollar
forecast
Commodity Revival Will Boost Canadian Export Earnings …
… & Underpin the Canadian Dollar
-4-3-2-10123
02 03 04 05 06 07 08 09 10
CanadaU.S.
annual y/y % change
-2
0
2
4
6
CanadaU.S.
Spending Stronger in Canadaannual y/y% change
Real Consumption forecast
Employment
Canada Leads in Jobs & Consumer Spending
4045505560657075
98 99 00 01 02 03 04 05 06 07 08
Canada
U.S.
Household Equity % of household real estate
14
18
22
26
30
98 99 00 01 02 03 04 05 06 07 08
Canada
U.S.
Household Debt% of household assets
Canadian Households Are in Better Shape …
25
50
75
100
125
02 03 04 05 06 07 08 09 10
U.S.
CanadaHousing Starts index: 2002=100
forecast
60
80
100
120
02 03 04 05 06 07 08 09 10
Motor Vehicle Salesindex: 2002=100
U.S.
Canada
70
80
90
100
110
120
130
02 03 04 05 06 07 08 09 10
Motor Vehicle Sales - Provincialindex: 2002=100
Ontario
30
65
100
135
170
205
02 03 04 05 06 07 08 09 10
Housing Starts - Provincial
index: 2002=100
Ontario
B.C.
Alberta B.C.Alberta
forecast
-12 -10 -8 -6 -4 -2 0
. . . But Spending has Weakened in All Regions
Retail Sales
B.C.
Atlantic
Saskatchewan
Ontario
Alberta
Manitoba
CANADA
-80 -70 -60 -50 -40 -30 -20 -10 0
Urban Housing Starts
Atlantic
Sask.
Quebec
Ontario
Alberta
Manitoba
B.C.
% change, 2009 ytdQuebec
CANADA
% change, 2009 ytd
85
100
115
130
145
02 03 04 05 06 07 08 09 100
3
6
9
12
15
02 03 04 05 06 07 08 09
Non-res Construction Better on this Side of the Border . . .
forecast
0
2
4
6
8
10
12
14
02 03 04 05 06 07 08 090
5
10
15
20
25
02 03 04 05 06 07 08 09
Vancouver
Calgary
Canada
U.S.
Non-Residential Constructionindex: 2002=100 %
Canada
U.S.
Office Vacancy Rates
Non-Residential Construction Price Indexy/y% change %
Office Vacancy Rates
Vancouver
CalgaryToronto
Toronto
. . . But C & I Construction Weakens in Major Markets
5060708090
100110120130
02 03 04 05 06 07 08 09
index: 2002Q1=100Commercial
Ontario
Industrial
5060708090
100110120130
02 03 04 05 06 07 08 09
Quebec
5075
100125150175200225
02 03 04 05 06 07 08 09
Alberta
5075
100125150175200225
02 03 04 05 06 07 08 09
British Columbia
index: 2002Q1=100
index: 2002Q1=100index: 2002Q1=100 Commercial
Commercial
Commercial
Industrial
Industrial
Industrial
Ottawa Avoids Washington’s Mega-Deficits…
-16
-14
-12
-10
-8
-6
-4
-2
0
2
FY03 04 05 06 07 08 09 10 11
% of GDP
U.S. (ex. Social Security Surplus)
forecast
Canada Still Has a Big Fiscal Advantage . . .
Canada
-2,000 -1,000 0 1,000 2,000 3,000
FY 2007/08FY 2009/10f
…But Fiscal Pressures Hit All Governments
budget balance, $ per capita
FED
Federal Budget Balance
*Balanced budgets assumed for FY10, **FY09.
SK
MB
AB*
NS*
BC
PE**
QC
NB
ON
NL
-3
-2
-1
0
1
2
3
4
5
SK MB NB NS PE BC AB QC NL ON
20082009f2010f
real GDP, annual % change
. . . But All Canadians Face a Long Road to Recovery . . .
Federal Government’s Projected Carbon Prices
0
10
20
30
40
50
60
70
2010 2012 2014 2016 2018 2020
1
6
11
16
21
26
31
36
41
46
51
1990 2015
years
Source: IMF Source: Environment Canada
marginal emissions price, $/tonne of CO2 equivalent
0
20
40
60
80
SK AB NB CA NS NL MB ON PE BC QC
19902007
tonnes of CO2 equivalent per capita
Median Age Climbs
Provincial GHG Emissions
. . . & Big Environmental & Demographic Challenges on the Horizon
Disclaimer
This report has been prepared by Scotia Economics as a resource for the clients of Scotiabank and Scotia Capital. 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.
