New World Realities Warren Jestin SVP & Chief Economist Presentation to: Atlantic Real Estate Forum June 22, 211
The Global Economy Is Reviving Real GDP 12 1 8 annual % change 24-7 21 211f 212f 6 4 2 China India Brazil Mexico Japan Euro zone Source: Scotia Economics, Bloomberg, BEA, Statistics, Eurostat.
Driven By Robust Emerging Market Growth Commodities Prices Motor Vehicle Sales* 4 35 prices, index:24q1=1 WTI Oil 2 millions of units EU & Japan 3 Copper Gold 16 North America 25 12 2 8 15 1 5 NYMEX Natural Gas Wheat 4 5 6 7 8 9 1 11 4 Brazil, Russia, India & China 4 5 6 7 8 9 1 11f Source: Scotia Economics, Bloomberg. *Includes light trucks in North America. Source: Scotia Economics, Ward s Automotive Reports.
But the Recovery is Uneven Employment Growth Construction & Services Lead in 11 employment, Index: 24Q1=1 14 employment, Index: 24Q1=1 13 Construction 15 Maritimes 12 Services 11 1 1 Newfoundland 9 8 Manufacturing 95 4 5 6 7 8 9 1 11 7 4 5 6 7 8 9 1 11 Source: Statistics, BEA, Scotia Economics.
Financial Strains Remain Intense Foreclosures Near Record Highs 16 % of total loans Federal Spending Far Exceeds Revenues 3.6 US$ trillions 14 12 3.2 Total Expenditures 1 8 Subprime Foreclosures 2.8 6 2.4 4 2 Prime Foreclosures 2. Total Revenue 4 5 6 7 8 9 1 11 1.6 FY4 5 6 7 8 9 1 Source: Bloomberg. Source: Treasury.
& Fiscal Repair Will Temper Growth Beyond Mid-Decade Fiscal Deficits 14 General Gov t, 211, % of GDP Net Debt 14 General Gov t, 211, % of GDP 12 12 1 1 8 8 6 6 4 4 2 2 Japan U.K. Germany Emerging Economies Japan U.K. Germany Emerging Economies Source: IMF.
The Dollar Remains on Shaky Ground Dollar Expected to Edge Lower Again Commodity-linked Currencies Perform Well 16 March 1973 = 1 cents 16 11 cents 11 14 Euro, RHS 14 1 9 Canadian Dollar 1 9 12 12 8 8 1 1 7 7 8 Dollar Trade- Weighted, LHS 6 98 2 4 6 8 1 12f 8 6 6 Australian Dollar 5 98 2 4 6 8 1 12f 6 5 Data to June 15, 211: Euro US$1.4165; Cdn$1.23; Australian$1.54. Canadian dollar expected to appreciate further over the next 12 months. Source: Bloomberg, Scotia Economics.
Loonie Strength, Weakness Has Hit Our Exports The Loonie Continues to Fly High Despite Weaker Trade Balances 125 WTI Oil US$/bbl CADUSD 1.1 25 C$ billions, 4-quarter moving average 1 Parity $1/bbl 1.5 1. 2 15 75.95.9 1 Commodities.85 5 5 WTI Oil (LHS).8.75-5 Tourism Balance 25 Canadian Dollar (RHS).7.65-1 -15 Merchandise Trade ex. Commodities 4 5 6 7 8 9 1 11 12.6-2 4 5 6 7 8 9 1 11 Source: Scotia Economics, Statistics, Bloomberg.
Big-Ticket Sales Have Held Up Better In Motor Vehicle Sales 15 index: 24=1 15 Housing Starts index: 24=1 125 Newfoundland Maritimes 125 Newfoundland 1 1 Maritimes 75 75 5 5 25 4 5 6 7 8 9 1 11 12 25 4 5 6 7 8 9 1 11 12 Source: Statistics, Scotia Economics. Source: CMHC, NAHB, Scotia Economics.
Despite Rising Debt, Canadian Finances Are in Better Shape Canadians Use Less Debt to Buy Assets 3 household* debt o/s as % of assets 28 But the Gap is Closing on Debt to Income 17 household* credit liabilities o/s as % of PDY 16 26 15 24 14 22 2 13 12 11 18 1 16 9 14 94 96 98 2 4 6 8 1 8 94 96 98 2 4 6 8 1 * Includes households and unincorporated business. Source: Federal Reserve, Statistics, Scotia Economics.
Non-res Construction Also More Resilient Here Non-Residential Construction Office Vacancy Rates* 15 18 index: 24Q1=1 % 14 15 13 12 12 9 Saint John 11 1 6 Halifax 9 8 4 5 6 7 8 9 1 11 12 3 St. John s 4 5 6 7 8 9 1 11 * Cities = 4-quarter moving average. Source: Statistics, CBRE, Cushman & Wakefield, Scotia Economics.
But Inflation Risks Are Rising s Consumer Price Index 4 y/y % change s Inflation Dichotomy 175 index: January 24=1, 12 month moving average 15 3 Gasoline 2 1 Core* 125 1 75 Total Food Motor Vehicles Headline 5 25 Personal Computers -1 4 5 6 7 8 9 1 11 4 5 6 7 8 9 1 11 * CPI ex-8 most volatile components & impact of indirect tax changes. Source: Scotia Economics, Statistics.
& Interest Rates Have Nowhere To Go But Up Central Bank Rates 1-year Bond Yields 6 5 % 6 5 yield 4 4 3 2 3 2 1 1 4 5 6 7 8 9 1 11 12 Source: Bank of, Federal Reserve, European Central Bank, Scotia Economics. 4 5 6 7 8 9 1 11 12 Source: Scotia Economics, Bloomberg.
Growth & Income Prospects Best in Resource Regions 18 Nominal GDP Per Capita index: 24=1 18 Nominal GDP Per Capita index: 24=1 17 16 Saskatchewan 17 16 Newfoundland and Labrador 15 15 14 14 13 Manitoba 13 12 11 Alberta B.C. 12 11 New Brunswick Quebec 1 Ontario 4 5 6 7 8 9 1f 11f 12f 1 P.E.I. Nova Scotia 4 5 6 7 8 9 1f 11f 12f Source: Statistics, Scotia Economics.
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