Canada’s economy navigating an uncertain global backdrop Desjardins Presentation.pdf · RBC...
Transcript of Canada’s economy navigating an uncertain global backdrop Desjardins Presentation.pdf · RBC...
RBC ECONOMIC I RESEARCH
Canada’s economy navigating an
uncertain global backdrop
Dawn Desjardins (Deputy Chief Economist) (416) 974-6919 [email protected]
March 2019
RBC ECONOMIC I RESEARCH
Global economy faces high level of uncertainty
2
50
100
150
200
250
300
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Canada Global
Indexed to long-run average = 100
Policy Uncertainty Elevated
Source: Policyuncertainty.com, RBC Economics Research
RBC ECONOMIC I RESEARCH
The pace of global growth is easing
3
-1
1
2
3
4
5
6
08 09 10 11 12 13 14 15 16 17 18 19 20
% change
World GDP growth
Source: International Monetary Fund, RBC Economic Research
Forecast
RBC ECONOMIC I RESEARCH
US economy headed for another year of solid growth
4
-2
-1
1
2
3
4
5
6
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
S
U.S. real GDP growthQuarter-over-quarter annualized % change
Forecast:
Annual Growth Rates
20182.9
2019f2.4
2020f1.9
Source: Bureau of Economic Analysis, RBC Economics Research
RBC ECONOMIC I RESEARCH
Canada’s economy facing challenges: lower oil prices and higher rates
5
-2
0
2
4
6
8
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: Statistics Canada, RBC Economic Research Forecasts
Canada's real GDP Quarter-over-quarter % change, annualized rate
Forecast:
Annual Growth Rates
20181.8
2019f1.5
2020f1.8
CCanada's potential growth rate
RBC ECONOMIC I RESEARCH
Drivers of economy shifting – less reliance on consumer
6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
Consumer spending Government spending Residential investment Nonresidentialinvestment
Net trade
2008-2018
2019f
2020f
percentage point contribution
Source: Statistics Canada, RBC Economics Research
Contributions to Canadian GDP growth
RBC ECONOMIC I RESEARCH
Federal government stimulus to continue in 2019
7
-56.4
-35.0
-28.0
-21.3
-8.1
-0.6 -2.9
-19.0 -19.0-14.9
-19.8-19.7
-14.8-12.1
-9.8
-70
-60
-50
-40
-30
-20
-10
0
10
20
30
1995–96
1996–97
1997–98
1998–99
1999–00
2000–01
2001–02
2002–03
2003–04
2004–05
2005–06
2006–07
2007–08
2008–09
2009–10
2010-1
1
2011-1
2
2012-1
3
2013-1
4
2014-1
5
2015-1
6
2016
-17
2017
-18
2018
-19
2019
-20
2020
-21
2021
-22
2022
-23
2023
-24
Federal budget projection
Federal government budgetary balance
Source: Department of Finance, RBC Economics Research Forecasts
Billions of dollars
RBC ECONOMIC I RESEARCH
Companies are hitting capacity limits and plan to invest
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65%
70%
75%
80%
85%
90%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Investment intentions (left axis)
Capacity utilization (right axis)
balance of opinion on investment intentions; industrial capacity utilization
Capacity utilization and investment intentions
Source: Bank of Canada, Statistics Canada, RBC Economics Research
RBC ECONOMIC I RESEARCH
Although the oil and gas sector will be sidelined by lower prices
9
20
40
60
80
100
120
140
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Western Canadian Select (WCS)
West Texas Intermediate (WTI)
$US/bbl
Oil prices: WTI and WCS
Source: Bloomberg, Wall Street Journal, RBC Equity Research
Forecast
Annual average
WTI
2018$65$38
2020f$64$43
2019f$56$37WCS
RBC ECONOMIC I RESEARCH
Range-bound C$ for now; conditions to improve in 2020
10
0.6
0.7
0.8
0.9
1.0
1.1
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20
Forecast
Source: Bank of Canada, RBC Economic Research
Parity
Canadian dollarUS$/C$
End of period
2019f
0.75US$/C$
2017
0.80
2018
0.732020f
0.77
RBC ECONOMIC I RESEARCH
Bank of Canada: waiting for economy to emerge from soft patch
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0
1
2
3
4
5
6
7
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
10 Year bond yield BoC overnight rate
Source: Bank of Canada, RBC Economic Research
%
Interest rates: Canada
Forecast
RBC ECONOMIC I RESEARCH 12
Canadian housing sagged due to higher rates and regulatory changes
250
300
350
400
450
500
550
600
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Thousands, SAAR
Existing home sales in Canada
Source: CREA, RBC Economics Research
RBC ECONOMIC I RESEARCH 13
Price gains moderated…
-15
-10
-5
5
10
15
20
25
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Year-over-year % change in the composite index
MLS Home Price Index - Canada
Source: CREA, RBC Economics Research
RBC ECONOMIC I RESEARCH 14
…especially in high-priced markets
-20
-10
0
10
20
30
40
2013 2014 2015 2016 2017 2018 2019
Vancouver
Toronto
Year-over-year % change
MLS Home Price Index
Source: CREA, TREB, REBGV, RBC Economic Research
July 25, 2016: BC government announces 15% foreign buyer tax in Metro Vancouver,
effective Aug. 2, 2016.
April 20, 2017: Ontario government announces housingaction plan that
includes a non-resident buyer tax of 15% effective immediately.
February 26, 2018: BC budget
announces rise in foreign buyer tax
to 20% and new non-resident speculator tax.
January 1, 2018: OSFI implements new B-20 guideline for mortgage
lending that calls for stress test for all uninsured mortgages.
RBC ECONOMIC I RESEARCH 15
Affordability pressures will remain intense
54
75
87
20
40
60
80
100
1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Vancouver
Toronto
Canada
Ownership costs as % of household income
RBC Housing Affordability Measures - aggregate
Source: RPS, Royal LePage, Statistics Canada, Bank of Canada, RBC Economic Research
RBC ECONOMIC I RESEARCH 16
Housing outlook: we expect a soft landing in Canada, not a collapse…
541 516
460 451472
0
100
200
300
400
500
600
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20
Source: Canadian Real Estate Association, RBC Economics Research
Thousands of units
Home resales: Canada
Forecast:
10-year average
RBC ECONOMIC I RESEARCH 17
…accompanied by stable prices
-0.3
1.5
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
06 07 08 09 10 11 12 13 14 15 16 17 18 19 20
Source: Brookfield, RPS, RBC Economic Research
Annual % change, composite
Home prices in Canada
Forecast:
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Rising payments will take a bigger bite out of household incomes
920
710
560590 580 660
1,010
730
810
1,260
1,130
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
Canada NL PE NS NB QC ON MB SK AB BC
If interest rates were 1 pp higher
2016 payments
* Including debt-free households.Source: Statistics Canada, RBC Economic Research
Average annual debt service payments per household*, in $
Effect of 1 pp rise in interest rates on debt service payments
RBC ECONOMIC I RESEARCH
Strong labour market will allow consumers to absorb higher costs
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5
6
7
8
9
13
14
15
16
17
18
19
20
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Millions, seasonally adjusted
Unemployment Rate (RHS)
%
Employment Level (LHS)
Source: Statistics Canada, RBC Economics Research
Labour market: Canada
RBC ECONOMIC I RESEARCH 20
2.5
2.3
1.7
1.7
1.6
1.5
1.5
1.3
1.2
0.6
0.5
2.5
0.4
1.6
1.4
1.6
1.7
1.8
2.6
2.2
0.8
0.8
-1 1 2 3 4
B.C.
N.& L.
ONT.
P.E.I
QUE.
MAN.
CANADA
ALTA.
SASK.
N.S.
N.B.
2019f 2020f
Sources: Statistics Canada, RBC Economics Research
Provincial real GDP growthAnnual % change, ranked by 2019 growth
Fastest growth coming from the coasts!
RBC ECONOMIC I RESEARCH 21
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