Highlights. Change from Previous Forecast

Transcription

1 Highlights May 18 The global economy continued to expand in the first quarter, albeit at a more moderate pace. The persistence of low inflation should limit the extent of monetary policy tightening by major central banks this year, while fiscal policy is also expected to remain stimulative in both advanced and emerging economies. As such, we expect world GDP to match last year s growth print of.8, although that assumes world governments successfully manage risks posed by trade protectionism and record debt levels. A good start to the year puts the U.S. economy firmly on track to grow about.8 in 18, the best performance in years. Solid fundamentals suggests an acceleration of growth after. A strong labour market, federal personal tax cuts, low interest rates, and easy access to credit are all positive for consumers. Solid profits, made even healthier by corporate tax cuts, will continue to lift business investment. But protectionist policies threaten to disrupt an otherwise promising economic outlook. A weaker-than-expected start to the year prompts us to downgrade our 18 forecast for Canadian GDP growth by three ticks to.. That assumes growth picks up in the second and third quarters as temporary factors which hurt, turn into tailwinds. We have also pushed to July the timing of an expected interest rate hike from the Bank of Canada amidst a persistently dovish tone from a central bank that continues to fret about economic uncertainties while shrugging off a higher-than-target inflation rate. Krishen Rangasamy Change from Previous Forecast United States GDP..8. unch unch CPI inflation.1.5. unch unch Fed Fund Target Rate* unch unch Ten-year bond yield* bp +9 bp Canada GDP pp +.1 pp CPI inflation unch unch Overnight rate* unch unch Ten-year bond yield* bp + bp * end of period

2 World: Fiscal boost The global economy continued to expand in the first quarter, albeit at a more moderate pace. The persistence of low inflation should limit the extent of monetary policy tightening by major central banks this year, while fiscal policy is also expected to remain stimulative in both advanced and emerging economies. As such, we expect world GDP to match last year s growth print of.8, although that assumes world governments successfully manage risks posed by trade protectionism and record debt levels. The world economy continued to expand in, albeit at a slower pace. After reaching a multi-year high the prior month, Markit s global composite purchasing managers index (PMI) fell back to 5. in March, the lowest since 16, but still consistent with expansion. The good news is that expansion remains broadbased as evidenced by above-5 prints for major advanced and emerging economies. World: Expansion but a slower pace Markit s Global composite purchasing managers index Despite plunging in March, Markit s composite PMI is still consistent with continued expansion NBF Economics and Strategy (data via Bloomberg) Mar. France Spain Germany WORLD Markit composite purchasing managers index for March 18 Expansion Russia China Japan The PMI s are also consistent with hard data which suggest continued global expansion in, albeit at a slower pace. Latest data from the CPB indeed points to a deceleration in world industrial output growth during the first quarter (+.7 annualized based on results for the first two months of the year) as stronger growth in emerging markets (particularly Asia) was offset by a moderation in advanced economies (including the U.S. Japan, and the eurozone). While world industrial production expanded at a slower pace, global trade volumes moved up a gear, growing in at the fastest pace in years, and topping the former s pace for the third consecutive quarter. So much so that, the ratio of world industrial production to global trade volumes, a proxy for world inventories, sank in to a 7- year low. That bodes well for restocking and hence production in subsequent quarters, although it s also possible producers opt to delay inventory rebuilding until the ongoing wave of protectionist threats subside. U.S. Italy UK Brazil India in major developed and emerging economies Index World: Inventories are relatively low 16 q/q chg. saar Global trade volumes Trade volumes expanded sharply in * * Assuming no change in March and no revisions in prior months NBF Economics and Strategy (data via CPB) * The strength observed in emerging economies during can be partly attributed to China s resilient economy which seems to be having positive spillovers through Asia via supply chains. China s real GDP reportedly grew 6.9 on a year-on-year basis during the first quarter and remains well on track to hit the government s annual growth target of 6.5. More importantly, Beijing seems to be succeeding in rebalancing its economy away from trade and investment the share of consumption and government spending in overall growth was near all-time highs in. China: Stable y/y growth q/q chg. saar Real GDP NBF Economics and Strategy (data via Datastream) y/y chg. True, much of that is due to fiscal stimulus. But there is reason to be optimistic about China s consumption growth as measures announced in the five-year plan continue to be implemented. For instance, Beijing s promises to increase pensions and healthcare coverage should widen the safety net and encourage consumers to save less and spend more. There are already positive signs about domestic demand as evidenced by imports which are now growing faster than exports, something that also explains Ratio of world industrial production to global trade volumes leaving producers with lean inventories Share of contribution to GDP growth Consumption & Government Investment Trade

3 China s declining trade surplus. All in all, the world s second largest economy remains in good shape despite some downside risks (see further down) which for now are seemingly being managed well by Beijing. That bodes well for emerging Asia and the broader gobal economy. China: Imports growing faster than exports Exports and imports y/y chg NBF Economics and Strategy (data via Datastream) Exports Imports Also positive for growth is the continuation of accommodative policies. True, monetary policy is being tightened in some parts of the world to reflect diminishing economic slack or output gaps. But even then, monetary policy is unlikely to become overly restrictive anytime soon. Inflation, while up recently in the OECD, remains low. Price pressures also remain low in emerging economies. Perhaps more importantly, expectations of inflation remain stable and at a low level in both the OECD and emerging economies. That certainly limits the ability of central bankers to tighten policy. structural balance were partly due to the U.S. in light of tax cuts and increased spending from the Trump administration, although France, Germany and the UK were also deemed to have growth-oriented fiscal policy this year and next to a larger extent than what was expected back in October. Ditto for emerging economies whose fiscal policy is expected to be more stimulative than first thought especially in 19. World: Fiscal boost revised up for Change in structural primary fiscal balance in advanced economies NBF Economics and Strategy (data via IMF) Previous forecast New forecast Change in structural primary fiscal balance in emerging economies. Previous forecast New forecast That s not to say the world economy is in the clear. Threatening to derail growth are major downside risks, including the significant amount of leverage in the global economy. China comes to mind as a major risk in that regard considering that economy s high credit intensity. It now takes twice as much credit compared to pre-7 to generate an additional unit of GDP in China. Credit intensity has also increased significantly elsewhere in emerging markets, including Malaysia, Turkey and Russia. World: Inflation remains mild Core consumer price inflation, -month moving average annualized percentage change Consumer price inflation expectation World: Credit intensity has increased sharply over last decade Credit to GDP ratio China Mexico Malaysia Emerging..6. Emerging Colombia Indonesia While core inflation has been rising in the OECD NBF Economics and Strategy (data via IMF) OECD inflation expectations have remained stable OECD.8 16q1 16q 16q 16q 17q1 17q 17q 17q 18q1 India Turkey Brazil Russia NBF Economics and Strategy (data via IMF) Moreover, fiscal policy may not be as tight as first thought. In its latest World Economic Outlook, the International Monetary Fund estimated advanced economies will see more fiscal stimulus in 18 and 19 than previously forecast. The IMF s revised forecasts for changes in the Blame low interest rates for too long for this problem. Of course, emerging economies are not the only ones feasting on cheap credit. The OECD has also indulged in leveraging for years. For instance, corporate bond issuance have generally tilted towards low-rated names. So much so that

4 the share of low-rated nonfinancial corporate bond issuance in total nonfinancial corporate bond issuance is now near multi-year highs in places such as the UK and the eurozone, and remains high in the U.S. In other words, the world economy could be in for a rough ride if there is a deleveraging process similar to the one seen during the Great recession of 8-9. OECD: Low-rated corporations dominate nonfinancial bond issuance Low-rated nonfinancial corporate bond issuance as a share of total nonfinancial corporate bond issuance Eurozone NBF Economics and Strategy (data via IMF) The rise of protectionism arguably remains the most pressing threat to global prosperity over the near to medium term. An increasingly inward-looking U.S. administration has moved beyond protectionist rhetoric and proposed tariffs on some imports, particularly from China. The latter has not surprisingly retaliated with tariffs of its own on imports of some U.S. goods should the U.S. government go ahead with its proposal. Should the current trade spat escalate into a full-blown trade war (one that covers most goods), global trade volumes will be curtailed. And if history is any guide, that would hurt world GDP growth. As such, investors will be hoping for some deescalation of the situation sooner rather than later. UK U.S. Japan World Economic Outlook Forecast Advanced countries...1 United States..8. Euroland Japan UK Canada Australia..7.8 New Zealand..8.7 Hong Kong.8..7 Korea Taiwan Singapore.6..8 Emerging Asia China India Indonesia Malaysia Philippines Thailand.9..7 Latin America Mexico... Brazil Argentina Venezuela Colombia World: Economic prosperity hinges on trade Global real GDP versus World trade volumes Real GDP SER1 chg Eastern Europe and CIS.8..9 Russia Czech Rep...5. Poland.6.. Turkey Middle East and N. Africa...6 Sub-Saharan Africa Trade volumes NBF Economics and Strategy (data via IMF, CPB) Advanced economies...1 Emerging economies World Source: NBF Economics and Strategy

5 U.S.: Solid prospects for 18 A good start to the year puts the U.S. economy firmly on track to grow about.8 in 18, the best performance in years. Solid fundamentals suggests an acceleration of growth after. A strong labour market, federal personal tax cuts, low interest rates, and easy access to credit are all positive for consumers. Solid profits, made even healthier by corporate tax cuts, will continue to lift business investment. But protectionist policies threaten to disrupt an otherwise promising economic outlook. The U.S. economy started 18 rather well according to the Bureau of Economic Analysis (BEA), the latter showing a consensus-topping. annualized print for real GDP growth. Part of the upside surprise was due to trade which contributed to growth despite monthly reports suggesting otherwise. Domestic demand also contributed thanks to business investment, government and consumption, although the latter s growth softened significantly as Americans opted to save more the savings rate rose half a percentage point to.1 in the first quarter. Nominal GDP rose a solid., the fourth consecutive quarter of above growth. All in all, the good start to the year puts the U.S. economy firmly on track to grow about.8 in 18, the best performance in years. That should close the output gap this year (based on the Congressional Budget Office s estimates of potential GDP) and hence allow for more sustained upward inflation pressures. U.S.: Economy grew. in the first quarter of 18 Real and Nominal GDP Contributions to real GDP U.S.: Credit still growing at healthy pace Loans and leases 1 y/y chg NBF Economics and Strategy (data via Federal Reserve) Commercial real estate Consumer loans TOTAL Residential real estate Commercial & Industrial Don t read too much into the moderation in business loan growth. Firms may be finding it cheaper to tap financial markets directly instead of relying on banks (see World section). More importantly, the moderation in loan growth is not reflective of business confidence, the latter in fact still near multi-year highs largely due to tax cuts dished out earlier this year by Congress. Flush with cash courtesy of solid after-tax profits, repatriated dollars, and access to cheap financing, firms are likely to increase investment spending further this year, although we re cognizant of risks the windfall may be used instead on stock buybacks. U.S.: Business confidence remained strong in NFIB small business optimism index at the end of NFIB respondents who think taxes are the single most important problem 8 7 q/q chg. saar 18 17Q GDP Strong confidence for small businesses 8 6 fueled largely by tax cuts Nominal GDP Real GDP Consumption.7.8 Business investm. Equip./Intell...7 Business investm. Struct... Residential investm...5 Government..5 Domestic Demand Exports.6.8 Imports Trade. -1. Final sales 1.9. Inventories NBF Economics and Strategy (data via Datastream) NBF Economics and Strategy (data via Datastream) Economic fundamentals remain strong and policy highly stimulative, which should assist growth going forward. Credit continues to grow at a healthy pace. An apparent moderation in business credit growth (particularly commercial and industrial loans) is seemingly being more than offset by higher growth for consumer and residential loans. Despite the blip, the outlook for consumption spending, which accounts for nearly 7 of U.S. GDP, remains positive. Consumer confidence is high, no doubt thanks to support from federal personal income tax cuts, still-low interest rates, easy access to credit, and of course a buoyant labour market. For the second consecutive quarter, non-farm payrolls reportedly rose more than 6, in. 5

6 But the jobless rate has failed to break below.1 due to a rising participation rate, the latter boosted by prime-age workers who now seem to be rejoining the labour force. That s good news for spending, particularly on durable goods and housing. U.S.: Another strong quarter of employment creation 1, , -1,5 -, Non-farm payrolls and Jobless rate q/q chg. thousands Employment (L) -, NBF Economics and Strategy (data via Datastream) Jobless rate (R) But not all is rosy in the U.S. The favourable near to medium term growth outlook has been made possible by borrowing from longer term growth courtesy of ill-timed fiscal stimulus from Congress. As we ve pointed out before, fiscal multipliers tend to be small when the economy is at capacity. So, while growth rewards of fiscal stimulus are small and temporary, the budget deficit it creates could be large and permanent. According to the Congressional Budget Office s latest estimates, the U.S. budget deficit will be over US$1 trillion by, or more than 5 of GDP. Those fiscal projections would be even more dire should expiring policies be extended to soothe beneficiaries or if there is a recession. When Washington eventually addresses this unsustainable fiscal stance via spending cuts and tax hikes, perhaps after the elections, economic growth is likely to slow down sharply. That s not to say all is clear over the near term. It s always possible a fickle Congress will alter its fiscal stance sooner All workers (L) Participation rate Prime-age workers, i.e 5-5 years (R) CBO expects deficit to deteriorate sharply, even assuming no recession U.S. budget balance of GDP Shaded areas are U.S. recessions NBF Economics and Strategy (data via Congressional Budget Office) CBO forecasts Protectionist measures from the Trump administration could also wreck the mood of businesses and consumers alike, with devastating consequences. Higher prices for imported goods (due to tariffs) may hurt consumers, while jobs in the export sector could be at risk if trade partners impose retaliatory measures. The impact on the corporate bottom line should also not be underestimated, especially considering a larger share of profits now comes from abroad. Recall that last year, growth in corporate profits was driven primarily by the rest-of-the-world component which again outperformed domestic profits. That allowed the rest-of-the-world component to increase its share of overall U.S. corporate profits to a four-year high of in 17. U.S.: Increasing share of corporate profits coming from abroad Corporate profits from rest-of-the-world component.5 y/y chg. Thanks to the best performance in seven years NBF Economics and Strategy (data via Bureau of Economic Analysis) Policy error should also not be excluded as a growthbusting possibility. Buoyed by solid economic activity and its confidence it will hit its inflation target, the Federal Reserve is focused on monetary policy tightening. One can only hope that amidst Fed over-exuberance, the U.S. yield curve does not invert in the past an inverted yield curve has often preceded recessions. Recall that the yield spread between 1-year and -year Treasuries is now less than 5 basis points, the tightest in over a decade. U.S.: Yield curve flattest in more than a decade 1-yr Treasury yield minus -yr Treasury yield Share of overall corporate profits attributed to rest-of-the-world component foreign operations have increased their share of overall U.S. corporate profits Shaded areas are U.S. recessions NBF Economics and Strategy (data via Datastream) 6

7 Canada: 18 downgrade A weaker-than-expected start to the year prompts us to downgrade our 18 forecast for Canadian GDP growth by three ticks to.. That assumes growth picks up in the second and third quarters as temporary factors which hurt, turn into tailwinds. We have also pushed to July the timing of an expected interest rate hike from the Bank of Canada amidst a persistently dovish tone from a central bank that continues to fret about economic uncertainties while shrugging off a higher-than-target inflation rate. Growth seems to have remained soft in the first quarter of 18, with a third consecutive sub- print. While February output grew a decent. (thanks to contributions from both goods and services), the prior month s weakness makes it difficult to have a strongerthan- first quarter growth, even assuming a good month of March. Canada: Economic growth likely soft again in Real GDP by industry q/q chg. saar 17q1 17q 17q 17q 18q1 NBF Economics and Strategy (data via Statistics Canada) Assume March m/m chg.: flat -.1 There were strong headwinds hitting the economy during. Some of those, including plant shutdowns in the auto sector and disruptions to pipeline operations in the energy sector, temporarily restrained goods sector output and exports, and should reverse and turn into tailwinds later in the year. But other headwinds that hurt may persist for longer. Take NAFTA renegotiations for example. While there have been positive signals from trade negotiators, a formal agreement remains elusive. Related uncertainties seem to be trumping the improved profit outlook of corporations and hence restraining overall business investment outlays. The housing market s woes could also have more lasting impacts. Recall that home sales sank to multi-year lows in places such as Toronto. Resale prices in Canada s largest city have accordingly dropped about 7 since last summer, the worst slump since the recession of 9. The impact of negative wealth effects on consumption (which accounts for roughly 6 of GDP) should not be underestimated, more so after the sharp moderation in spending observed in. Canada: Toronto house prices sank following Non-Resident Spec. Tax Seasonally adjusted monthly home sales and House Price Index monthly change m/m Average sales from May 15 to April 17 Number of homes sold Average sales from May 17 to March Teranet-National Bank HPI NBF Economics and Strategy (data from Teranet National Bank House Price Index, CREA and TREB data seasonally adjusted by NBF) 1,5 1, 9,5 9, 8,5 8, 7,5 7, 6,5 6, 5,5 On net, we expect tailwinds to lift the economy and allow Canada s growth to accelerate in the second and third quarters. But that will not fully compensate for the poor start to the year, which is why we are revising down our 18 Canadian GDP growth forecast by three ticks to.. Like us, the IMF and Bank of Canada lowered their 18 forecasts in light of the weak start to the year. While the central bank acknowledged the economy is near capacity, it left monetary policy unchanged in April on account of the slow start to the year and ongoing uncertainties with regards to trade and investment. We have accordingly pushed to July the timing of the next expected interest rate hike from the Bank of Canada (see May s edition of the Monthly Fixed Income Monitor). But comes a point, the Bank of Canada will have to ditch its dovish language, even if that means the Canadian dollar appreciates a bit, and assume its responsibilities as an inflation-targeting central bank. To be sure, there are more than just temporary factors pushing up prices. For months, core prices have been on the rise, reflecting the erosion of economic slack. Note that the consumer price index excluding food and energy grew.9 in March on a six-month annualized basis, the highest in 15 years. Canada: Excluding food and energy, inflation highest in 15 years Ex-food/energy CPI, 6-month annualized chg NBF Economics and Strategy (data via Statistics Canada) Highest since February Mar. 7

8 Despite the rough start to the year, the outlook remains positive, at least according to the Bank of Canada s own Business Outlook Survey whose aggregate indicator fell slightly in but was nonetheless the third highest since 11 (topped only by Q and Q last year). While concerned about protectionism, firms still expect sales growth to accelerate over the next year, sentiment reinforced by improved foreign orders. A significant 7 of respondents still had some or significant difficulties in meeting an unexpected increase in demand, and roughly a quarter of respondents said they faced labour shortages. The majority of respondents still expect to increase employment and investment over the next 1 months, not surprising in light of capacity and labour pressures. The Beveridge curve, the relationship between the jobless rate and the job vacancy rate the number of job vacancies as a share of the sum of all occupied and vacant jobs, is indeed moving closer to the origin. Recall that the jobless rate has managed to fall by half a percentage point since 17Q, even with an unchanged job vacancy rate. The country s largest provinces are seeing a similar phenomenon. In other words, workers are finding jobs without needing a higher vacancy rate, a sign that labour market mismatches are diminishing. Canada: Is the labour market becoming more efficient?. Canada: Jobless rate versus Job vacancy rate. Four largest provinces: Jobless rate versus Job vacancy rate Canada: Businesses still keen to hire and invest.9 17Q 17Q 17Q 15Q. BC. 17Q 17Q Business Outlook Survey indicator Business sentiment remains positive NBF Economics and Strategy (data via Bank of Canada) 18 Balance of opinion on employment and investment intentions, i.e. percentage of firms expecting higher minus the percentage expecting lower 6 Employment 5 As such, we don t believe the employment slump (-K in total or -69K in the private sector) is the start of a concerning trend. Note that despite the first quarter s challenges in the labour market, hourly earnings still managed to grow. on a year-on-year basis in, the fastest since 15. The tilt towards full-time positions clearly helped in that regard, something that adds to evidence that Canada s labour market remains in good shape Another reason why we remain positive on employment prospects is the improved efficiency of the labour market Investment and that s reflected in still-high intentions to hire and invest Canada: Wages heat up as share of full-time employment surges Full-time share of total employment versus Average hourly wage rate of employees Full-time positions as a share of total employment (L) NBF Economics and Strategy (data via Statistics Canada) Hourly earnings (R) y/y chg Job vacancy S E R 9 rate () Unemployment rate () SER1 15Q 16Q 16Q NBF Economics and Strategy (data via Statistics Canada) 16Q 15Q Employment creation will not top last year s blistering pace, but will still provide support to consumption and housing, both of which are nonetheless expected to soften somewhat in 18 after years of unsustainable debt-fuelled growth. We are still counting on fiscal stimulus to provide a lift to domestic demand as pre-election handouts in Quebec and Ontario complement an expected uptick in infrastructure spending at the federal level. Trade is likely to remain a drag on growth again this year as Canadian exporters of non-energy goods continue to struggle amidst competitiveness challenges. But we continue to expect a turnaround in 19 as exporters are better able to exploit opportunities brought by a revamped NAFTA, and other trade agreements including CETA and CPTPP. Job vacancy rate () AB ON QC 17Q 17Q 17Q 17Q 17Q Unemployment rate () Canada: Exports of non-energy goods have stagnated over last four years Real exports of goods Index=1 in April NBF Economics and Strategy (data via Statistics Canada) 17Q Energy TOTAL Non-energy 8

9 United States Economic Forecast Q/Q (Annual change)* Gross domestic product (9 $) Consumption Residential construction Business investment. (.6) Government expenditures Exports. (.) Imports Change in inventories (bil. $) Domestic demand Real disposable income Household employment Unemployment rate Inflation Before-tax profits (1.1) (.1) Federal balance (unified budget, bil. $) (8.) (586.) (666.) (8.) (1,.) Current account (bil. $) (.6) (51.7) (66.) (97.5) (51.) * or as noted Financial Forecast** Current Q 17 Q 18 Q Q 18 Q 18 Q Fed Fund Target Rate month Treasury bills Treasury yield curve -Year Year Year Year Exchange rates U.S.$/Euro YEN/U.S.$ ** end of period Quarterly pattern Q 17 Q 17 Q Q 18 Q 18 Q actual actual actual actual forecast forecast forecast forecast Real GDP growth (q/q chg. saar) CPI (y/y chg.) CPI ex. food and energy (y/y chg.) Unemployment rate () National Bank Financial 9

10 Canada Economic Forecast Q/Q (Annual change)* Gross domestic product (7 $) Consumption Residential construction (.).7 (1.8) (.) Business investment (11.) (9.) Government expenditures Exports Imports.7 (1.) (.).7 Change in inventories (millions $), ,75, ,87-1,581 9 Domestic demand Real disposable income Employment Unemployment rate Inflation Before-tax profits (19.8) (1.9) Current account (bil. $) (71.5) (65.) (6.9) (55.) (.) * or as noted Financial Forecast** Current Q 17 Q 18 Q Q 18 Q 18 Q Overnight rate month T-Bills Treasury yield curve -Year Year Year Year CAD per USD Oil price (WTI), U.S.$ ** end of period Quarterly pattern Q 17 Q 17 Q Q 18 Q 18 Q actual actual actual forecast forecast forecast forecast forecast Real GDP growth (q/q chg. saar) CPI (y/y chg.) CPI ex. food and energy (y/y chg.) Unemployment rate () National Bank Financial 1

11 Provincial economic forecast e 18f 19f e 18f 19f Real GDP ( growth) Nominal GDP ( growth) Newfoundland & Labrador Prince Edward Island Nova Scotia New Brunswick Quebec Ontario Manitoba Saskatchewan Alberta British Columbia Canada Employment ( growth) Unemployment rate () Newfoundland & Labrador Prince Edward Island Nova Scotia New Brunswick Quebec Ontario Manitoba Saskatchewan Alberta British Columbia Canada Housing starts () Consumer Price Index ( growth) Newfoundland & Labrador Prince Edward Island Nova Scotia New Brunswick Quebec Ontario Manitoba Saskatchewan Alberta British Columbia Canada e: estimate f: forecast Historical data from Statistics Canada and CMHC, National Bank of Canada's forecast. 11

12 Economics and Strategy Montreal Office Toronto Office Stéfane Marion Marc Pinsonneault Kyle Dahms Warren Lovely Chief Economist and Strategist Senior Economist Economist MD, Public Sector Research and Strategy Paul-André Pinsonnault Matthieu Arseneau Jocelyn Paquet Senior Fixed Income Economist Senior Economist Economist Krishen Rangasamy Senior Economist Angelo Katsoras Geopolitical Analyst General This Report was prepared by National Bank Financial, Inc. (NBF), (a Canadian investment dealer, member of IIROC), an indirect wholly owned subsidiary of National Bank of Canada. National Bank of Canada is a public company listed on the Toronto Stock Exchange. The particulars contained herein were obtained from sources which we believe to be reliable but are not guaranteed by us and may be incomplete and may be subject to change without notice. The information is current as of the date of this document. Neither the author nor NBF assumes any obligation to update the information or advise on further developments relating to the topics or securities discussed. The opinions expressed are based upon the author(s) analysis and interpretation of these particulars and are not to be construed as a solicitation or offer to buy or sell the securities mentioned herein, and nothing in this Report constitutes a representation that any investment strategy or recommendation contained herein is suitable or appropriate to a recipient s individual circumstances. In all cases, investors should conduct their own investigation and analysis of such information before taking or omitting to take any action in relation to securities or markets that are analyzed in this Report. The Report alone is not intended to form the basis for an investment decision, or to replace any due diligence or analytical work required by you in making an investment decision. This Report is for distribution only under such circumstances as may be permitted by applicable law. This Report is not directed at you if NBF or any affiliate distributing this Report is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that NBF is permitted to provide this Report to you under relevant legislation and regulations. National Bank of Canada Financial Markets is a trade name used by National Bank Financial and National Bank of Canada Financial Inc. National Bank Financial Inc. or an affiliate thereof, owns or controls an equity interest in TMX Group Limited ( TMX Group ) and has a nominee director serving on the TMX Group s board of directors. As such, each such investment dealer may be considered to have an economic interest in the listing of securities on any exchange owned or operated by TMX Group, including the Toronto Stock Exchange, the TSX Venture Exchange and the Alpha Exchange. No person or company is required to obtain products or services from TMX Group or its affiliates as a condition of any such dealer supplying or continuing to supply a product or service. Canadian Residents NBF or its affiliates may engage in any trading strategies described herein for their own account or on a discretionary basis on behalf of certain clients and as market conditions change, may amend or change investment strategy including full and complete divestment. The trading interests of NBF and its affiliates may also be contrary to any opinions expressed in this Report. NBF or its affiliates often act as financial advisor, agent or underwriter for certain issuers mentioned herein and may receive remuneration for its services. As well NBF and its affiliates and/or their officers, directors, representatives, associates, may have a position in the securities mentioned herein and may make purchases and/or sales of these securities from time to time in the open market or otherwise. NBF and its affiliates may make a market in securities mentioned in this Report. This Report may not be independent of the proprietary interests of NBF and its affiliates. This Report is not considered a research product under Canadian law and regulation, and consequently is not governed by Canadian rules applicable to the publication and distribution of research Reports, including relevant restrictions or disclosures required to be included in research Reports.

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