Economic outlook Trump: Taxes, Trade & Treasuries

Transcription

1 Economic outlook Trump: Taxes, Trade & Treasuries January 17, 2017 Douglas Porter, CFA Chief Economist, BMO Financial Group Please refer to the next page for Important Disclosures A presentation of BMO Economics

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3 Election 2016 Presidential election United States Potential economic impact: Tax cuts Infrastructure spending Bigger deficits Less regulation Protectionism Higher interest rates? 1 election: Potential impact on Good Mixed Bad Fiscal stimulus Energy Protectionism + Growth boost + Keystone XL Carbon pricing Higher rates Stronger $ Trade hit Tax cuts Competitiveness issues 2

4 Post-election markets: Trumped up (as of January 13, 2017) Stocks (Dow Jones Industrial Average) Record 115 dollar (November 1, 2016 = 100) Record 2.7 Bonds (10-year Treasury yield : %) 2-year high vs Mexican Peso vs C$ Election Day Nov 1 17 Dec 3 19 Jan 4 95 Nov 1 17 Dec 3 19 Jan Nov 1 17 Dec 3 19 Jan Confidence booster United States ( January 2004 = 100) 125 Consumer Confidence¹ Highest since: Small Business Optimism Index² Housing Market Index³ Sources: ¹ The Conference Board, ² National Federation of Independent Business, ³ National Association of Home Builders 4

5 Global GDP: Mixed and still sluggish 2016:Q3 (y/y % chng) Real GDP India 7.3 China 6.7 UK 2.2 Mexico 2.0 Australia 1.8 Euro Area Japan Russia Brazil World Emerging markets G Average growth : 4% 5 North American growth: A better 2017? (y/y % chng) Real GDP Fiscal stimulus forecast 6

6 Jobless rates: still falling stuck Unemployment rate (percent) [33-year low] 5.8% 10.0% 8.7% 4.4% forecast 6.9% 4.7% Greece 23.0 Spain 19.2 Italy 11.9 Portugal 10.5 France 9.5 Ireland Australia 5.7 UK Germany 4.1 Japan 3.1 Victoria British Columbia Oil price collapse in perspective ($/bbl) Crude oil price¹ Real² Nominal recession ¹ West Texas Intermediate ² December 2016 dollars Long-term average price = $55 (today s dollars) forecast 8

7 Regional outlook: Ch-Ch-changes Real GDP (y/y % chng) BC 3.0 BC 2.5 ON 2.6 ON 2.2 MB 2.4 AB 2.0 QC 1.8 MB 2.0 NS 1.0 SK 1.6 PE 1.0 QC 1.6 NB 0.5 NS 1.2 SK NL AB Oil producers PE NL NB Source: BMO Economics forecasts 9 Everyone told me the housing bubble would burst 2016: Party will end in the Toronto and Vancouver housing markets this year 2015: is in serious trouble 2014: Why isn t immune to a -style housing crash 2013: Inside the great real estate crash of : s housing crash begins 2011: s housing bubble deemed close to bursting 2010: s housing bubble: An accident waiting to happen 2009: Why s housing bubble will burst 2008: s housing bubble could soon burst Canadian bank Deutsche Bank 2015 Maclean s Maclean s Canadian Business CBC News CCPA The Tyee investment firm 10

8 Canadian house prices: Location, location, location Toronto Victoria Vancouver Ottawa Montreal Winnipeg Edmonton Saskatoon Calgary 2 2 (y/y % chng : nsa : as of December 2016) Existing home prices¹ Average home price (ann avg) $730,000 $586,000 $1,017,000 $490,000 $374,000 $349,000³ $285,000 $369,000 $339,000 $463, ¹ HPI composite benchmark where available ² Average home price ³ November 2016 Ottawa moves to cool market 11 Canadian dollar: Where next? Canadian dollar ( : as of January 16, 2017) 110 Poloz takes over at BoC (June 1, 2013) Year-end parity Bank of Governor Stephen Poloz Similar to other commodity currencies lines: weekly averages dots: daily closes forecasts: BMO Economics 12

9 trade trends United States Goods trade balance with ($ blns : 12-mnth ms) 75 Exports to: Imports from: Total trade Mexico ($ blns : 12-mnth total)¹ Mexico China China ¹ (to November 2016) 13 Inflation edging up Consumer price index (y/y % chng) 4.5 United States 4.5 Total CPI (latest month) Brazil % % India % Core Total Core Total 1.2% China UK Euro Area 1.1 forecast Japan British Columbia: 1.6% 14

10 Interest rates: More rate hikes coming (% : as of January 16, 2017) Overnight rate 10-year bonds Current End End forecast Current End End BoC: On hold Record spread Global stocks: Tables turn Equity markets (% chng) 2015 Since January 1, 2016 (as of January 16, 2017) Germany Japan Nasdaq Russia Brazil TSX China 5.6 UK 17.4 S&P DJIA 14.1 Australia -0.8 Nasdaq 11.3 DJIA -2.2 S&P Russia -4.3 Australia 8.6 UK India TSX Brazil Germany India Japan China