Manitoba & Canadian Economic Forecast - Robert Hogue

More of the same in store for 2014?The economic outlook for Manitoba

RBC ECONOMICS I RESEARCH

Robert HogueSenior Economist, [email protected]

Manitoba Home Builders Association Housing ForumWinnipeg, November 6, 2013

2ECONOMICS I RESEARCH

Cash receipts are up 13% y/y

Many good news in Manitoba: agricultural is doing well,…

-40

-30

-20

-10

0

10

20

30

40

50

60

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Manitoba Canada

Source: Statistics Canada, RBC Economics Research

% change, year-over-year

Farm cash receipts: Manitoba vs. Canada


Manitoba’s major crops are set for record year; yields are excellent

…with bumper crops this year

2

4

6

8

10

12

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013p

Wheat, canola, soybeans, corn,barley, million tonnesCrop production: Manitoba



Many projects on the go; spending rising at a double-digit clip

Non-residential construction sector still very busy

-40

-30

-20

-10

0

10

20

30

40

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013



Non-residential building construction: Manitoba


New home construction still growing; renovation slowing a little

Residential investment leveling off but at an all-time high…

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013

Billion $, 4-quarter trailing sumResidential investment: Manitoba



Housing starts strengthened again in the third quarter

…and is likely to pick up in the latter part of this year

1

2

3

4

5

6

7

8

9

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Thousand units, quarterly averages, SAARManitoba housing starts

Source: CREA, RBC Economics Research


It is growing at nearly twice the pace of the goods-producing sector

The services sector continues to make headway,…

-8

-6

-4

-2

0

2

4

6

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013ytd

Services Goods


Payroll employment: Manitoba% change, year-over-year


Service industries focusing on both consumers and businesses

…driven by real estate, and accommodation and food

2 4 6 8 10

Total services

Finance and insurance

Health care and social assistance

Arts and entertainment

Professional and technical services

Accommodation and food services

Real estate and leasing

Payroll employment: Manitoba% change, year-to-date 2013



Merchandise exports are up 8.3% year to date; strong gains in the US

International exports are bouncing back,…

-25

-20

-15

-10

-5

0

5

10

15

20

25

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013ytd


Merchandise exports: Manitoba% change, year-over-year


Energy almost doubling; now accounting for 15% of Manitoba’s exports

…boosted by booming oil exports

-10 10 20 30 40 50 60 70 80 90 100

Machinery

Metallic products

Aircraft/ other transportation equipment

Farm products

Motor vehicles and parts

Total merchandise exports

Consumer products

Energy

Top commodity exports: Manitoba% change, year-to-date 2013



Wood, machinery, chemicals up; transportation equipment down

On a softer note, Manitoba’s factory sales moderated…

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Manitoba Canada



Manufacturing shipments: Manitoba


Retail sales track only 2.2% higher than last year; showed volatility

…and retail trade has yet to show sustained vigour,…

-10

-5

0

5

10

15

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Manitoba Canada



Retail sales: Manitoba vs. Canada


Employment has grown by less than 1% year-to-date

…partly because job creation slowed in the province

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013


Employment: Manitoba vs.CanadaSA, % change, year-over-year

Manitoba

Canada


At 5.5%, it is the third lowest in the country

Nonetheless, Manitoba’s unemployment rate remains low,…

0

1

2

3

4

5

6

7

8

9

10

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013


%, 3-month moving average

Unemployment rate: Manitoba vs. Canada

Canada

Manitoba


Net international and interprovincial migration near decades-high

…which attracts immigrants,…

-6,000

-4,000

-2,000

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013

Persons, trailing 4-quarter sumManitoba net migration



Running at close to 30-year high; no longer lags the Canadian average

…and which, in turn, boosts population growth

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013


% change

Population growth

Canada

Manitoba


One of Canada’s fastest growing provinces for the second year running

Overall, Manitoba economy is sustaining a decent pace…

2.62.52.7

-4

-2

0

2

4

6

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Manitoba

Canada

* 1997 - 2007 GDP is Mil. Chn. 2002; 2008 - current is Mil. Chn. 2007

** Canada GDP is Mil. Chn. 2007; 2012 GDP is actual


Real GDP: Manitoba% change, year-over-year

Forecast


Fairly steady growth forecasted; other provinces will pick things up

…and is expected to continue to do so next year

4.1

2.7

2.7

2.6

2.6

2.6

2.3

1.9

1.7

1.5

1.3

0 1 2 3 4 5

ALTA.

SASK.

CANADA

MAN.

ONT.

B.C.

N.S.

QUE.

P.E.I.

N.B.

N.& L.

Sources: Statistics Canada, RBC Economics Research

Provincial real GDP growth in 2014Annual % change


Gains in auto and construction sectors; confidence will rebuild; politics

Manitoba exporters will benefit from stronger US growth,…

-10

-8

-6

-4

-2

0

2

4

6

8

10

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Forecast:

Source: Bureau of Economic Analysis, RBC Economics Research

U.S. real GDPQuarter-over-quarter annualized % change

Annual Growth Rates

20122.8

20111.8

2014f2.6Real GDP

2013f1.6


The Canadian dollar will stay close to parity; still very volatile

…a slightly weaker loonie…

0.60

0.70

0.80

0.90

1.00

1.10

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Forecast

Source: Bank of Canada, RBC Economics Research Forecasts

Parity

Canadian dollar forecastUS$/ C$

End of period rates

2013f0.95

20121.00US$/C$

2014f0.98


Expansion of emerging economies to sustain demand for commodities

…and a brighter global growth outlook next year

3.2 2.9

3.6

-2

-1

1

2

3

4

5

6

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Year-over-year % changeWorld GDP growth

Source: International Monetary Fund, RBC Economics ResearchSource: International Monetary Fund, RBC Economics Research

IMF Forecast


Net trade gains will offset stable housing and the effect of fiscal restraint

Improving export picture also will help the rest of Canada

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

Consumerspending

Governmentspending

Residentialinvestment

Non-res.investment

Net trade Inventories

2012 2013f 2014f


Percentage points Canadian real GDP growth composition


However, some economic slack will persist until 2015

Canadian real GDP growth to move above its potential rate

-10

-8

-6

-4

-2

0

2

4

6

8

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014


Canada's real GDP growth Quarter-over-quarter % change, annualized rate

Forecast:

Annual Growth Rates

20121.7

2014f2.6

2013f1.7Real GDP


We expect the Bank of Canada to keep its rate unchanged in 2014

Interest rates will remain low

0

1

2

3

4

5

6

7

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Source: Bank of Canada, RBC Economics Research Forecasts

%

Interest rates: Canada

10 Year Bond Yield

BoC Overnight Rate

Forecast


Engineering spending likely to crest; ICI building has room to grow

Non-residential investment to be a catalyst in Manitoba still

-15

-10

-5

0

5

10

15

20

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Source: Statistics Canada, Haver Analytics, RBC Economics Research

Canada

Manitoba

% change, year-over-yearNon-residential capital expenditure: Manitoba and Canada

Forecast


Employment growth to accelerate slightly to 1.3% in 2014

Conditions will be conducive to further job creation,…

0.9%

1.3%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Year-over-year, % change Employment growth: Manitoba


Forecast


Relatively good job prospects will be positive for confidence, immigration

…and some easing in the unemployment rate,…

1

2

3

4

5

6

7

8

9

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014


Manitoba

Canada

%, SAUnemployment rate: Manitoba vs. Canada

Forecast

Annual Rate

2012

7.2

5.3

2011

7.4

5.4Canada

Manitoba

2014f

6.8

5.1

2013f

7.1

5.4


Growth in retail sales forecasted to pick up modestly

…which will support stronger consumer spending…

2.6

4.4

-2

0

2

4

6

8

10

12

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014


Retail sales: Manitoba % change, year-over-year

Forecast


Home resale activity to remained quite stable at historically high levels

…and demand for housing

14.0 13.9 14.3

2

4

6

8

10

12

14

16

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Thousand unitsManitoba home resales

Source: CREA, RBC Economics Research


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Manitoba & Canadian Economic Forecast - Robert Hogue

Economy & Finance

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