featured session— economic update...economic update in search of better performance glen hodgson...
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FEATURED SESSION—Economic Update In Search of Better Performance
Glen HodgsonSenior FellowThe Conference Board of CanadaOttawa, Ontario
300-1
Global Outlook
• Lower oil prices not boosting global growth
• Significant regional variation– U.S.: private sector recovery under way– Japan: tepid recovery under Abenomics– EU: uneven growth, serious structural issues – Emerging markets have slipped
300-2
Global Outlook
• China aiming to grow by 6.5%• Indian performance improved but Modi
reform still needed• Brazil and Russia in recession through
2015-16
300-3
Uneven Growth in Global Economy
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Japan Euro zone NorthAmerica
Latin America Asia Pacific(excl Japan)
World
2015 2016 2017
Percent change, real GDP
300-4
Government Debt as a Share of GDP
0
20
40
60
80
100
120
140
160
180
200
Greece Japan Portugal Italy Spain UnitedKingdom
India* Canada China*
Percent, 2015 estimates, net debt; gross debt for India and China
300-5
China: Real GDP Growth and Inflation
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
03 04 05 06 07 08 09 10 11 12 13 14 15 16f 17f
Real GDP Growth Inflation
300-6
China’s Global Influence
0
5
10
15
20
25
30
35
40
45
50
55
60
Iron ore Aluminum Nickel Steel Copper Zinc Soybeans Oil
Share of global consumption, 2014
Source: World Bank
300-7
Potential Output—Total Economy
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Brazil China India RussianFederation
2001-2010 2011-20 2021-35
Measured in 2005 PPP USD, average annual compound growth, percent
300-8
Where Are Oil Prices Headed?
• Excess supply still remains an issue—Saudi Arabia fixated on regaining market share
• Oil prices rose to $50 bbl in spring due to declining production in U.S. Alberta, and difficulties in Nigeria and Venezuela
• Recent price weakening due to growing inventories
• Price recovery will be modest over the near term as US inventories remain elevated
300-9
Annual Change in Global Oil Demand
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
2006 07 08 09 2010 11 12 13 14 15 16
China World
Millions of barrels per day
Source: EIA
300-10
U.S. and Canadian Oil Production millions of barrels per day
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
2005 06 07 08 09 2010 11 12 13 14 2015 16f 17f
US Canada
Sources: The Conference Board of Canada; National Energy Board; US Energy Information Administration
300-11
U.S. Oil Production and Rig Counts (000s of barrels per day; number of rigs)
Sources: EIA, Baker Hughes.
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
8,4008,5008,6008,7008,8008,9009,0009,1009,2009,3009,4009,5009,6009,700
Oil production (left scale)Rigs in operation (right scale)
300-12
OPEC Oil ProductionMillions of barrels per day
Source: IEA.
30.0
30.5
31.0
31.5
32.0
32.5
33.0
300-13
Where Are Oil Prices Headed? WTI Crude Price, US$ per barrel
Sources: Bureau of Economic Analysis The Conference Board of Canada.
0
10
20
30
40
50
60
70
80
90
100
110
2002 03 04 05 06 07 08 09 10 11 12 13 14 15 16f 17f 18f 19f
300-14
U.S. Outlook • Better jobs and income are boosting spending on
housing, autos and other durable goods• Further Fed rate increases on hold for now• Strong greenback is hurting exports, earnings of
multinationals• Business investment should ratchet up over next
two years• Growth of up to 3% expected over 2016-17
300-15
U.S. Labour MarketChange in U.S. employment, 000s.
Source: Bureau of Economic Analysis.
-900-800-700-600-500-400-300-200-100
0100200300400500
300-16
U.S. Existing Home Sales and Prices
millions SAAR; $ 000s
Source: National Association of Realtors; The Conference Board of Canada.
200210220230240250260270280
2.53.03.54.04.55.05.56.06.57.07.58.0
Sales Average Price
300-17
U.S. Housing Starts 000s
Sources: Bureau of Economic Analysis; The Conference Board of Canada.
500
700
900
1,100
1,300
1,500
1,700
1,900
06 07 08 09 10 11 12 13 14 15 16f 17f
300-18
U.S. Real Consumer SpendingPercent change
Sources: BEA; The Conference Board of Canada.
-2.0-1.5-1.0-0.50.00.51.01.52.02.53.03.54.0
03 04 05 06 07 08 09 10 11 12 13 14 15 16f 17f
300-19
U.S. Real Consumer Business Investment
Percent change, investment in structures and machinery and equipment
Sources: BEA; The Conference Board of Canada.
-18.0
-15.0
-12.0
-9.0
-6.0
-3.0
0.0
3.0
6.0
9.0
03 04 05 06 07 08 09 10 11 12 13 14 15 16f 17f
300-20
U.S. Federal DeficitNIPA basis, billions of current $
Sources: BEA; The Conference Board of Canada.
-1,400
-1,200
-1,000
-800
-600
-400
-200
0
200
400
300-21
U.S. Net Debt as a Share of GDP
Percent
Source: IMF
30354045505560657075808590
300-22
U.S. Real GDP GrowthPercent change
Sources: Bureau of Economic Analysis The Conference Board of Canada.
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
03 04 05 06 07 08 09 10 11 12 13 14 15 16f 17f
300-23
Weak Canadian Performance: The “New Normal”
• Depressed resource prices taking another notch out of growth—real GDP forecast to grow 1.4%in 2016, following 1.2% growth last year
• Low flying loonie coupled with strong U.S. consumer should support some export sectors, including tourism
300-24
Weak Canadian Performance: The “New Normal” (continued)
• Business investment remains lacklustre • Rock bottom oil prices taking a toll on
energy sector• Despite soft job gains, labour markets to
slowly tighten
300-25
Raw Material Price Index
Sources: Statistics Canada; The Conference Board of Canada.
-25.0
-20.0
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
03 04 05 06 07 08 09 10 11 12 13 14 15 16f 17f
Percent change
300-26
Short-Term Interest RatesCanadian Bank Rate and U.S. Federal Funds Rate
Sources: The Conference Board of Canada; Statistics Canada.
0
1
2
3
4
5
6
7
99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16f 17f
Canada United States
300-27
The Loonie and the Oil Price (WTI $US, $US/$C)
Sources: The Conference Board of Canada; U.S. EIA; Statistics Canada.
2030405060708090100110120
0.600.650.700.750.800.850.900.951.001.051.10
Dollar (left) Oil Price (right)
300-28
Export Volumes Percent change
Sources: Statistics Canada; The Conference Board of Canada.
-14.0-12.0-10.0-8.0-6.0-4.0-2.00.02.04.06.0
300-29
Real Business Investment Non-residential structures and machinery, percent change
Sources: Statistics Canada; The Conference Board of Canada.
-20.0
-16.0
-12.0
-8.0
-4.0
0.0
4.0
8.0
12.0
03 04 05 06 07 08 09 10 11 12 13 14 15 16f 17f
300-30
Real Business Investment Resources vs. Non-Resource Sector
Non-residential structures and machinery, percent change
Sources: Statistics Canada; The Conference Board of Canada.
-40
-30
-20
-10
0
10
20
30
40
03 04 05 06 07 08 09 10 11 12 13 14 15 16f 17f
Non-Resource Resource
300-31
Relative Unit Labour Cost IndexCanadian/U.S. Industrial Composite, 2007=100
Sources: Statistics Canada; The Conference Board of Canada.
60
70
80
90
100
110
120
300-32
Employment GrowthPercent change
Sources: Statistics Canada; The Conference Board of Canada.
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
03 04 05 06 07 08 09 10 11 12 13 14 15 16f 17f
about 110,000 jobs
272,000 jobs lost
300-33
Growth in Industrial Composite Average Weekly Wage vs. CPI
Percent change
Sources: Statistics Canada; The Conference Board of Canada.
0.00.51.01.52.02.53.03.54.04.5
0.00.51.01.52.02.53.03.54.04.5
03 04 05 06 07 08 09 10 11 12 13 14 15 16f 17f
Average Weekly Wages CPI
300-34
Real Consumer Spending Percent change
Sources: Statistics Canada; The Conference Board of Canada.
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
03 04 05 06 07 08 09 10 11 12 13 14 15 16f 17f
300-35
Canada Housing Starts vs. Demographic Requirements
000s
Sources: Canada Mortgage and Housing Corporation; The Conference Board of Canada.
120
140
160
180
200
220
240
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
f
2017
f
2018
f
Housing Starts Household Formation
300-36
Canada’s Housing Market “Trifurcation”
Index: January 2015=100Source: The Conference Board of Canada, C.R.E.A.
90
95
100
105
110
115
120
125
130
Resource Other Tor_Van
300-37
Federal and Provincial Government Balances
As a share of GDP, 2015-16
Sources: The Conference Board of Canada; Statistics Canada; various government budgets.
-8.0
-7.0
-6.0
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
1.0
300-38
Net Public Debt by Province % of nominal GDP, 2015-16
Sources: The Conference Board of Canada, Statistics Canada.
-10%
0%
10%
20%
30%
40%
50%
60%
NL PE NS NB QC ON MB SK AB BC
300-39
The Conference Board of Canada Composite Leading Index (CLI)
300-40
Canada’s Real GDP Growth Percent change
Sources: Statistics Canada; The Conference Board of Canada.
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
03 04 05 06 07 08 09 10 11 12 13 14 15 16f 17f 18f
300-41
The Resource Decade—Real GDP by Province
Average annual compound growth, percent
Sources: Statistics Canada; The Conference Board of Canada.
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
NL PEI NS NB Que Ont Man Sask Alta BC
2004-14
300-42
Population Growth by Province Average annual compound growth, percent
Sources: Statistics Canada; The Conference Board of Canada.
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
NL PEI NS NB Que Ont Man Sask Alta BC
2003-12
300-43
Net Interprovincial Migration 000s
Sources: Statistics Canada; The Conference Board of Canada.
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
NFLD&L PEI NS NB Que Ont Praries BC
Previous decade 2004-2014
300-44
Real per Capita GDP Growth by Province
Average annual compound growth, percent
Sources: Statistics Canada; The Conference Board of Canada.
0.0
0.5
1.0
1.5
2.0
NL PEI NS NB Que Ont Man Sask Alta BC
2004-14
300-45
Provincial Economic Outlook Highlights 2016-2017
• BC will strongly outpace all other provinces this year• Ontario, Manitoba, Nova Scotia and Quebec should
manage growth above 2%• Slump in commodity prices will weigh on economic
prospects of resource-dependent provinces • Alberta and Newfoundland and Labrador face recession
again in 2016 • Lower loonie and more solid growth in U.S. demand will
benefit Ontario and other manufacturing provinces
300-46
2016 Real GDP by Province Percent change, basic prices, $2007
Sources: The Conference Board of Canada; Statistics Canada
-2.5 -2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0
BC
ONT
MB
NS
PEI
QC
SASK
NB
NL
AB
Canada :1.4%
300-47
2017 Real GDP by Province Percent change, basic prices, $2007.
Sources: The Conference Board of Canada; Statistics Canada
0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0
BC
AB
ONT
MAN
NL
QC
PEI
NS
SK
NB
Canada: 2.2%
300-48
The Resource Crash—Real GDP by Province
Average annual compound growth, percent
Sources: Statistics Canada; The Conference Board of Canada.
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
NL PEI NS NB Que Ont Man Sask Alta BC
2015-18
300-49
49th Annual Canadian Employee Benefits Conference November 20-23, 2016San Diego, California
Session #300 FEATURED SESSION—Economic UpdateIn Search of Better Performance
• Slower Canadian growth potential; 2% isthe “new normal”
• End of the commodity super-cycle• Expanded trade can help boost growth, if
investment recovers to build capacity• Big differences among regions—shift in
economic gravity back toward centralCanada
• Fiscal situation a challenge for manyprovinces
300-50
2017 Educational ProgramsPensions/Retirement Security
Joint Meetings
Canadian Public Sector Pensions and Benefits ConferenceMay 16-17, 2017Ottawa, Ontariowww.ifebp.org/canadape
Canadian Legal and Legislative UpdateMay 18-19, 2017Ottawa, Ontariowww.ifebp.org/canupdate
50th Annual Canadian Employee Benefits ConferenceSeptember 10-13, 2017Halifax, Nova Scotiawww.ifebp.org/canannual
Canadian Investment InstituteNovember 19-22, 2017Southampton, Bermudawww.ifebp.org/canadainvest
Related ReadingVisit the on-site Bookstore or see www.ifebp.org/bookstore for more books.
Canadian Pensions and Retirement Income PlanningItem #8991www.ifebp.org/books.asp?8991
916
300-51