2014 Outlook: The Economics of Hope. Warren Jestin. SVP & Chief Economist - Scotiabank

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1 1 Outlook: The Economics of Hope Warren Jestin SVP & Chief Economist - Scotiabank CBRE Southwestern Market Outlook Breakfast Kitchener, March 1, 1 Global Growth: Changing Gears Developed World Gears Up China Gears Down 1 annual % change 1 annual % change e 1f 15f 13e 1f 15f - Euro zone - China India Mexico Brazil Source: Bloomberg, BEA, Statistics, Eurostat, Scotiabank Economics. Forecasts at February, 1

2 Economy Begins To Play Catch-up Employment Growth 115 index: Q1 = 1 Unemployment Rate 1 % S.W. * * Includes Kitchener-Waterloo, Brantford, Guelph, London and Windsor. Source: Statistics, BEA, Scotiabank Economics. Forecasts at February, 1 Canadian Employment & Earnings the Job Market in Perspective Change in Canadian Employment net changes in jobs since October, s 3 Sectors paying above average wages Sectors paying below average wages Public Admin. Professional, Construction & SUCH* Scientific & Technical Finance & Manufacturing Real Estate Hospitality & Culture Business Support & Transport Trade * SUCH = schools, universities, colleges, hospitals/health authorities. Source: Statistics, Scotiabank Economics. Forecasts at February, 1

3 Pent-Up Demand Puts Shoppers In A Buying Mood Home Sales Motor Vehicle Sales 1 index, Q1 = 1 1 index, = * Includes Kitchener-Waterloo, Brantford, Guelph, London and Windsor. Source: Statistics, MLS, NAR, Scotiabank Economics. Forecasts at February, 1 Retail Sales Online Shopping In Perspective Retail Sales Growth Share of Retail Sales index: =1 Electronic Shopping & Mail Order % share of total retail sales 13 Electronic Shopping & Mail Order (7%) Total Retail Sales Other (93%) Source: Census Bureau, Scotiabank Economics. Forecasts at February, 1

4 Private Sector Revival Offsets Fiscal Drag Government Deficits general government net lending / borrowing, % of GDP Consumer Spending & Residential Investment 1 y/y % change Source: IMF, Statistics, BEA, Scotiabank Economics. Forecasts at February, 1 Residential Activity Adds To Growth In, Subtracts In Housing Starts 1 index, =1 1 Mortgage Arrears 5 % of total loans past due three or more months S.W. * Source: CMHC, Census Bureau, MBA, CBA, Scotiabank Economics. Forecasts at February, 1

5 The World Economy Is Changing Rapidly Growth In Personal Disposable Income index: = Motor Vehicle Sales* 3 millions of units China (Urban) 15 E.U. China Euro zone 9 1 U.K Source: IMF, Bloomberg, Scotiabank Economics. * Total cars and trucks. Source: Ward s Automotive, Scotiabank Economics. Forecasts at February, 1 Less Robust Emerging Market Growth Tempers Resource Prices Annual Growth 1 % change Commodity Prices 35 index: Q1 = China 3 5 Nickel Gold Copper India 15 Brazil 1 5 WTI Oil Source: Bloomberg, Scotiabank Economics. Forecasts at February, 1

6 .With Commodity Currencies Losing Some Of Their Luster Loonie & Aussie Move Back Below Parity exchange rate with US$ Canadian Dollar Australian Dollar s Trade Balance C$ billions, s.a. Commodities Merchandise Trade ex. Commodities Services 1 1 Source: Bloomberg, Statistics, Scotiabank Economics. Forecasts at February, 1 Energy Has Become s Export Leader Canadian Exports Trade Balance 1 1 $ bns, annualized, -quarter moving average Energy Products 7 $ bns, annualized, -quarter moving average Energy Products Autos & Parts 1 Autos & Parts Source: Statistics, Scotiabank Economics. Forecasts at February, 1

7 Low Inflation, Subdued Growth Keep Monetary Policy On Hold Consumer Price Inflation Central Bank Rates y/y % change, year-end % Source: Statistics, BLS, Scotiabank Economics Source: Bank of, Federal Reserve, Scotiabank Economics. Forecasts at February, 1 Toronto: Condo Boom Masks Tight Market For Single Family Homes Housing Starts Toronto 5 s of units Multis Average Annual Household Formation -11 = 3K Singles Unsold Inventory Toronto.5 s of units, year-end Multis Singles*. Near record low inventory of singles & semis * Includes semi-detached. Source: Statistics, CMHC, Scotiabank Economics. Forecasts at February, 1

8 Alberta Leads National Population Growth By A Wide Margin Population Gains by Region annual % change Net Interprovincial Migration 5 annual, s 3 Alberta 3 Alberta 1 1 Other Western Provinces Quebec + Atlantic Other Western Provinces Quebec + Atlantic 1 1 Source: Statistics, Scotiabank Economics. Forecasts at February, 1 Resource Sector Continues To Drive Canadian Job & Income Gains Average Weekly Earnings Private-Sector Paid Employment 1 11 C$ AB 15 1 Index, Q1=1, SA, four quarter moving average AB ON BC 11 BC QC 15 QC ON Source: Statistics, Scotiabank Economics. Forecasts at February, 1

9 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.