Alternative Facts Benjamin Tal February 217
US Manufacturing Jobs Were Falling Way Before China Entered WTO 1 25.% Share of Manufacturing Employment in Total Employment 2.% 15.% China entered WTO 1.% 5.%.% 8 82 84 86 88 9 92 94 96 98 2 4 6 8 1 12 14 16 Source: BLS, CIBC
Not All is Well in US Labour Market 2 68 67 66 65 % Participation Rate 5 45 4 35 3 % 27 Wks+ Unemployment Rate 64 25 63 62 61 2 15 1 5 6 88 91 94 97 3 6 9 12 15 88 91 94 97 3 6 9 12 15 Source: BLS, CIBC
Americans Receiving Disability Benefits 3 1 8 mn 1. 9. 8. mn 216 6 7. 6. 4 5. 4. 2 2 4 6 8 1 12 14 16 3. People receiving disability benefits Production workers Source: SSDP, CIBC
Canada: Share of Low-Paying Jobs - Rising 4 61% Share of Below Average Wage Jobs 6% 59% 58% 57% 56% 55% 97 98 99 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 Source: Statistics Canada, CIBC
Surprise Indexes Show 217 Starting Strong 5 35 3 25 2 15 1 5-5 -1-15 Economic Surprise Index readings at Start of Year Major Economies Developing 213 214 215 216 217 Source: Bloomberg, Citi, CIBC
Slower Speed Limits: GDP Bar is Lower for Full Employment 6 3. 2.5 2. 1.5 1..5 Potential GDP (Real, %) 22 24 26 28 21 212 214 216 218 12 1 8 6 4 2 Canada United States Euro area China (Right)
2 22 24 26 28 21 212 214 216E China: Growth Less Reliant on Investment Recently (L), Credit to Non-Financials Rising Fast (R) 7 1 Contribution to GDP Growth (%) 25 Total Credit to Private Non-Financials (% GDP) 8 Avg 211-14 Avg 216 2 6 15 4 2 Consumption Investment 1 5 China World Source: NBS, BIS, CIBC
China s Export Dependence on US Picking Up Again (L), But Canada and Mexico Have More to Lose Than China (R ) 8 24% 22% China Exports to US (% of total China exports) 3 25 Share of Exports to the US in GDP 2% 2 18% 15 1 16% 5 14% 2 4 6 8 1 12 14 16 Canada Mexico China Source: BIS, NBS, CIBC
Shale Marginal Supplier in the Medium Term 9 Production (mn bbl/d) 12 Cdn Oil Sands 1 Global Oil Demand 218 8 6 4 2 Middle East North American Shale 2 4 6 8 1 $/bbl Source: BP, CIBC
Energy CapEx Returns (L), While Production Set for Strong 17 & 18 (R ) 1 1 Oil and Gas Industries: Capital Expenditures (C$ bn) 3 Canadian Crude Prod Growth (K bbl/d) 8 6 4 2 ~1% Growth per Annum 25 2 15 1 5 13 14 15 16E 17F 18F Source: Statistics Canada, CIBC
1/1/216 1/17/216 1/24/216 1/31/216 11/7/216 11/14/216 11/21/216 11/28/216 12/5/216 Not Exactly Green 11 It s freezing and snowing in New York We Need Global Warming! Donald Trump 12 116 112 18 14 1 S&P5 Alternative Energy Index Nov 8 election date
The Power of the Pen 12 Kill TPP Infrastructure Deregulation Energy Keystone Personal tax cuts Corporate tax cuts Cash repatriation Building a Wall Trade Easy Difficult
The Infrastructure Bonanza 13 3,, 2,5, 2,, 1,5, 1,, 5, Estimated infrastructure job creation per year Total US job creation in 216 Source: CIBC
Windfall from Income Tax Cuts Will Boost Savings Not Consumption 14 8 Distribution of Windfall from Income Tax Changes (%) 8 7 Uses of Income Tax Windfall (%) 7 6 5 4 3 2 6 5 4 3 2 1 1 Top 1% Rest Cons. Savings Source: Department of the Treasury Internal Revenue Service, CIBC
Cash Repatriation Positive for Valuations Not So Much for Employment 15 4 3 2 Change for Top 15 Companies Receiving 24 Repatriation Holiday (%) Repatriation Tax Holiday 1-1 23 24 25 26 27 Stock Repurchases Employment Source: US Senate Staff Report, CIBC
Trump Is Not Reagan 16
He Simply Can t Pay For It 17 12 1 $ Trillion 8 6 4 2 Revenue lost from tax cuts in the coming decade (Brookings) Maximum borrowing allowed in the coming decade
Tax Equivalent Tariff 18 Top 1% income deciles Source: CEA, CIBC Bottom 1%.%.5% 1.% 1.5% 2.% % of after tax income
21 23 25 27 29 211 213 215 US Auto Exports At Risk From Trade War With China 19 2 Share of China in US Exports (%) 1 Chg in Annual US Auto Exports Since 28 ($ bn) 16 12 Autos Total 8 6 4 8 2 4-2 -4 Total To China To ROW Source: Trademap, CIBC
The Mexican Peso is Down by 15% Already 2.55 MXN/USD.53.51.49.47.45 Sep-16 Oct-16 Dec-16 Jan-17 Source: Bloomberg, CIBC
198 1984 1988 1992 1996 2 24 28 212 216 Mar- Nov-2 Jul-5 Mar-8 Nov-1 Jul-13 Mar-16 Mexico Has Also Gained Market Share (L) Cdn Plants Near Full Capacity; Investment Needed to Lift Exports(R) 21 25% Proportion of US Goods Imports (% 12mma) 9 Cdn Manufacturing Capacity Use (%) 2% 85 15% 8 1% 5% % Canada Mexico 75 7 65 Avg Last Expansion Source: BEA, Statistics Canada, CIBC
Government CapEx Tracking Slow Pace (L), Despite Commitments for Significant New Infrastructure Dollars (R ) 22 4 Change in General Gov't Cap Ex From Year-Ago (C$ Bn) 7 Social, Transist, Green & Trade Infrastructure (New Spending, C$ bn) 3 6 5 2 4 3 1 2 1 15Q4 16Q1 16Q2 16Q3 Source: Statistics Canada, CIBC
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