1 Economic Update and Outlook NAIOP Vancouver Chapter Breakfast Seminar Thursday, November 17, 2011 Helmut Pastrick Chief Economist Central 1 Credit Union
2 Outline: Global and U.S. economies Canadian economy and forecasts B.C. and Vancouver economic conditions and trends Forecast and summary
Heightened market concerns on sovereign debt notably Greece, Italy problematic 3 10-year Govt. Bond Yields, Selected European Economies Per cent 35 30 25 20 15 10 5 0 1/4/10 8/9/10 3/14/11 10/14/11 Source: Bloomberg. Latest: 11/16/2011 Greece Portugal Ireland Italy Spain Germany
4 Higher financing needs in Italy, Spain, and others during 2012 25 20 Gross Financing Needs, Selected European Economies Per cent of GDP 15 10 5 2011 2012 2013 0 Greece Italy Belgium Portugal Spain Ireland Source: IMF Fiscal Monitor Sept. 2011.
5 Global economic slowdown underway Balance of opinion (%) 60 55 50 45 40 35 Global Manufacturing Purchasing Managers Index 30 Source: JP Morgan, Markit. Note: Seasonally adjusted. Latest: Oct-11
Emerging and developing economies lead recovery, industrialized economies lag 6 World Industrial Production, Selected Economies 2008=100 160 140 120 100 China Developing World OECD 80 Source: World Bank. Note: Seasonally adjusted. Latest: Aug-11
7 Government employment dropping, private sector expanding U.S. Private and Government Employment Trends 2007=100 104 102 Census hires 100 98 96 94 Private Government 92 Jan-07 Source: U.S. BLS, C1CU. Note: Seasonally adjusted Latest: Oct-11
Current U.S. economic recovery tracking close to past weak employment recoveries 8 115 Recoveries in U.S. Total Payroll Employment Cycle trough=100 110 105 100 Average Current Jobless 95-24 -12 0 12 24 36 48 60 Months from Trough = 0 Source: Central 1 Credit Union. Latest current: Oct-2011
Current U.S. economic recovery tracking close to past weak employment recoveries 9 115 Recoveries in U.S. Private Payroll Employment Cycle trough=100 110 105 100 Average Current Jobless 95-24 -12 0 12 24 36 48 60 Months from Trough = 0 Source: Central 1 Credit Union. Latest current: Oct-2011
10 U.S. economy expanded in October 2007=100 105 100 95 90 85 U.S. Industrial Production 80 Jan-07 Source: U.S. Federal Reserve. Note: Seasonally adjusted Latest: Oct-11
11 ECRI issues recession call for U.S. economy 1992=100 150 140 130 120 110 U.S. Weekly Leading Economic Indicator 100 5-Jan-07 22-Feb-08 10-Apr-09 28-May-10 15-Jul-11 Source: Economic Cycle Research Institute. Latest: 4-Nov-11
No recession forecast by economists, more sub-par growth in 2012 12 Percentage change at annual rate in real GDP 5 U.S. Economic Growth 0-5 High Median Low Actual Forecast -10 Q1-08 Q1-09 Q1-10 Q1-11 Q1-12 Source: U.S. BEA, WSJ November 2011 Survey. Latest actual: Q3-11
13 U.S. economy to grow above 3% after 2013 Per cent change in real GDP U.S. Long-term Economic Growth 6 4 2 0-2 Actual Forecast -4 1996 2001 2006 2011 2016 Source: U.S. BEA, Consensus Forecasts. Latest actual: 2010
14 Canadian economy rebounds from May's temporary decline, above trend growth in July and August Dollars - trillions chained 2002 1.28 1.26 1.24 1.22 1.20 1.18 Canada Gross Domestic Product, All Industries 1.16 Source: Statistics Canada. Seasonally adjusted annual rate. Latest: Aug-11
October employment down 54k, reversing most of 61k gain in September 15 Labour Market, Canada Persons - millions Per cent of labour force 17.5 17.4 17.3 17.2 17.1 17.0 16.9 16.8 16.7 9.0 8.5 8.0 7.5 7.0 6.5 6.0 5.5 Employment U. Rate Source: Statistics Canada. Latest: Oct-11
16 Temporary surge in headline CPI and core inflation Per cent change year-over-year 4 3 Inflation Measures, Canada 2 1 0 CPI Core CPI -1-2 Source: Statistics Canada. Latest: Sep-11
17 Canada's growth to slow, no sign of recession 1992=100 260 250 240 230 220 Leading Economic Indicator, Canada 210 Source: Statistics Canada. Latest: Sep-11
18 GDP to rebound in Q3-2011, slow into 2012 and gain momentum in second half Percentage change at annual rate in real GDP 6 Canada's Economic Growth 3 0-3 -6 Actual Forecast -9 Q1-08 Q1-09 Q1-10 Q1-11 Q1-12 Q1-13 Consensus BoC C1CU Source: Statistics Canada, Bank of Canada, C1CU. Latest actual: Q2-11
19 Low interest rates in 2012, Bank of Canada on hold until early 2013 Interest Rate Forecasts, Quarterly Per cent 8 6 Actual Forecast 5y mortgage Prime 4 5y GIC 2 Target 0 Q1-08 Q1-09 Q1-10 Q1-11 Q1-12 Q1-13 Source: Bank of Canada, C1CU. Note: Averages. Latest actual: Q3-11
20 Mixed views on Canadian dollar near term, higher later in 2012 Exchange Rate Forecasts, Canada USD per CAD 1.10 1.00 0.90 0.80 Actual Forecast 0.70 Q1-08 Q1-09 Q1-10 Q1-11 Q1-12 C1CU BMO CIBC RBC Scotia TD Source: Bank of Canada, C1CU survey. Latest actual: Q3-11
21 Population growth slowing, large downshift in B.C. Per cent change at annual rate 2.0 B.C. Population Growth, Quarterly 1.5 1.0 0.5 0.0 Q1-03 Q1-05 Q1-07 Q1-09 Q1-11 Source: Statistics Canada, C1CU. Latest: Q2-11
One-off drop in net international migration, interprovincial migration turns negative 22 Persons - thousands 20 15 B.C. Net Migration by Type, Quarterly 10 5 Net international Net interprovincial 0-5 Q1-03 Q1-05 Q1-07 Q1-09 Q1-11 Source: Statistics Canada, C1CU. Note: Seasonally adjusted. Latest: Q2-11
Weak job growth in 2011, September job spike an outlier 23 B.C. Labour Market, Monthly Persons - millions 2.32 2.30 2.28 2.26 2.24 2.22 2.20 Per cent of labour force 2.18 10 9 8 7 6 5 4 3 Employment (L) U. rate (R) Source: Statistics Canada. Note: Seasonally adjusted. Latest: Oct-11
Vancouver employment drives provincial gains, unlikely result in September (+44k) 24 2007=100 110 Employment Trends, Vancouver CMA and Rest of B.C. 105 100 Vancouver Rest 95 Source: Statistics Canada, C1CU. Note: Seasonally adjusted. Latest: Oct-11
25 Office Employment Proxy: Vancouver rising, Abbotsford not Persons - thousands 330 325 320 315 310 305 300 Metro Vancouver 295 Source: Statistics Canada, C1CU. Persons - thousands 18 17 16 15 14 Abbotsford CMA 13 Note: Seasonally adjusted. Latest: Oct
Retail & Wholesale Trade Employment: Declining trend in Vancouver 26 Persons - thousands 220 210 200 190 180 Metro Vancouver 170 Source: Statistics Canada, C1CU. Persons - thousands 17 16 15 14 13 Abbotsford CMA 12 Note: Seasonally adjusted. Latest: Oct
Business Incorporations: Mild revival from recession lows 27 Greater Vancouver RD Fraser Valley RD Thousands Number 2.5 2.0 Actual Trend 140 120 1.5 100 80 1.0 0.5 Source: Statistics Canada, C1CU. 60 Actual Trend 40 Latest: Aug-11
28 Large gain in September, previously exports posting moderate gains Dollars - billions 3.3 3.0 B.C. International Merchandise Exports 2.7 2.4 2.1 Current $ 2002 $ 1.8 1.5 Source: Statistics Canada, C1CU. Note: Seasonally adjusted. Latest: Sep-11
29 Lower international tourist activity Persons - thousands 440 420 400 380 360 340 320 B.C. International Tourist Entries 300 Source: Statistics Canada. Note: Seasonally adjusted Latest: Aug-11
Little growth in retail activity since early 2010 30 Dollars - billions 5.2 5.0 B.C. Retail Sales 4.8 4.6 4.4 Current $ 2002 $ 4.2 4.0 Source: Statistics Canada, C1CU. Note: Seasonally adjusted. Latest: Aug-11
Metro Vancouver retail sales up less than 1% this year 31 Dollars - billions 2.4 Metro Vancouver Retail Sales 2.2 2.0 Current $ 2002 $ 1.8 Source: Statistics Canada, C1CU. Note: Seasonally adjusted. Latest: Aug-11
32 Metro Vancouver Non-residential Building Construction Investment Spending Dollars - millions 800 700 600 500 400 300 Private Current $ 2002 $ 200 Q1-08 Q1-09 Q1-10 Q1-11 Source: Statistics Canada. Dollars - millions 200 180 160 140 120 Public Current $ 2002 $ 100 Q1-08 Q1-09 Q1-10 Q1-11 Note: Seasonally adjusted. Latest: Q3
Abbotsford CMA Non-residential Building Construction Investment Spending 33 Dollars - millions 60 50 40 30 20 10 Private Current $ 2002 $ 0 Q1-08 Q1-09 Q1-10 Q1-11 Source: Statistics Canada. Dollars - millions 25 20 15 10 5 Public Current $ 2002 $ 0 Q1-08 Q1-09 Q1-10 Q1-11 Note: Seasonally adjusted. Latest: Q3
Recent housing sales fairly stable at moderate levels 34 Units - thousands 6 5 4 3 2 MLS Residential Sales, Lower Mainland 1 Source: REBGV. Note: Seasonally adjusted. Latest: Oct-11
Lower Mainland Housing Prices: Average sales price can mis-represent underlying price trend 35 Dollars - thousands 750 700 650 600 550 500 MLS Average Sale Price 450 Source: REBGV. Latest: Oct-11 2002=100 260 250 240 230 220 210 Housing Price Index 200 Note: Seasonally adjusted.
36 Housing market supply-demand indicator points to further price easing MLS Residential Sales-to-active Listings Ratios by REB Per cent 40 35 30 25 20 15 10 5 0 GV FV Source: REBGV, C1CU. Note: Seasonally adjusted. Latest: Oct-11
37 Moderate growth in 2012 B.C. Economic Outlook Indicator 2010 2011f 2012f Real GDP, % change 3.0 1.8 2.2 Nominal GDP, % change 5.9 4.2 5.0 Personal income, % change 4.0 5.0 5.5 Employment, % change 1.7 0.8 1.5 Unemployment rate, % 7.6 7.6 7.4 Corporate profits, % change 21.5 9.5 8.0 Source: Statistics Canada, C1CU forecast.
38 Housing market holds up, modest gains in 2012 B.C. Economic and Housing Outlook Indicator 2010 2011f 2012f Population growth, % change 1.5 1.2 1.2 CPI, % change 1.3 2.6 1.4 Retail sales, % change 5.3 1.8 3.0 Housing sales*, % change -12.2 4.0 5.0 Housing prices*, % change 8.5 11.0-2.0 Housing starts, % change 64.7-2.0 5.0 Source: Statistics Canada, CREA, CMHC, C1CU forecast. * MLS residential