global outlook: double dip or single slog?
DESCRIPTION
Douglas Porter, Deputy Chief Economist & Managing Director, BMO Capital Markets presented a view of the global economy at the recent annual meeting of the Canadian Chamber of Commerce. Here is a copy of his presentation on September 26, 2010.TRANSCRIPT
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GLOBAL OUTLOOK: DOUBLE DIP OR SINGLE SLOG?
September 26, 2010
Douglas Porter, CFA Deputy Chief Economist & Managing Director, BMO Capital Markets
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Financial Markets See-saw
Commodities
08 09 10
30
60
90
120
150
0.75
1.50
2.25
3.00
3.75
4.50Stocks
08 09 10
600
800
1000
1200
1400
1600
6000
8000
10000
12000
14000
16000
(as of September 24, 2010)
Canadian Dollar(US¢)
08 09 10
75
80
85
90
95
100
105
Concerns: US Slowing, Europe Debt, China Tightening
Oil(US$/bbl:
lhs)
Copper(US$/lb:
rhs)TSX(rhs)
S&P 500(lhs)
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Expansion Will Be Moderate
Recovery Gears Down
Real GDP
04 05 06 07 08 09 10 11
-8
-4
0
4
8
(q/q % chng : ar)
Canada
US
forecast
08 09 10 11CanadaUS
0.50.0
-2.5-2.6
3.02.7
2.52.2
Recession Gauges:Length Depth
-4.1%-3.3%
USCanada
18 mnths3 qtrs
Page 1-2
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US Recession Much Worse
Employment
75 80 85 90 95 00 05 10
-6
-4
-2
0
2
4
6
(y/y % chng)
Job Losses in Perspective
CanadaUS
Cumulative Chng in Recession
US recession
Canada
US
0.2%2.4%
Record-4.7%
-2.4%
% Level-2.4%-6.1%
-417,000-8.4 mln
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Jobless Rates Will Fall Gradually
SpainIrelandGreecePortugalFranceBelgiumFinlandSwedenGermanyJapanAustraliaUK
20.313.611.010.810.08.98.38.26.95.25.14.5
04 05 06 07 08 09 10 114
5
6
7
8
9
10
11
Unemployment Rate (percent)
Canada
US
forecast
33-year Low
9.6%
5.9%
4.4%
Lagging Indicator8.1%
US Job Creation Slow
Page 3-4
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Canadian Housing Chills, US Freezes
Existing Home Prices(y/y % chng : 3-mnth ma)
03 05 07 09-20
-10
0
10
20
Housing Starts(2005 = 100 : 2-mnth ma)
03 05 07 0920
40
60
80
100
120
Home Sales: US = Existing + New Canada = Existing
Home Sales(mlns : ar)
03 05 07 094
5
6
7
8
9
0.2
0.3
0.4
0.5
0.6Canada
(rhs) CanadaCanada
USUS
US(lhs)
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Tepid Consumer Recovery
Personal Savings Rate(% of disposable income : 4-qtr ma)
06 07 08 09 10 111
2
3
4
5
6
7
Real Consumer Spending
(y/y % chng)
06 07 08 09 10 11-3
0
3
6
US
Canada
08 09 10 11CanadaUS
2.9-0.3
0.4-1.2
3.41.5
3.12.2
forecast
US
Canada
Page 5-6
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05 06 07 08 09 10
9
12
15
18
21
0.9
1.2
1.5
1.8
2.1
Canada: Aug = estimate
US(lhs)
Canada(rhs)
Vehicle Sales (mlns : ar)
Changing Gears
(3-mnth ma)05 06 07 08 09 10
5
10
15
20
China
US
Crossover
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Global GDP: The Great Divide
Real GDP
ChinaIndia
BrazilKorea
CanadaUS
JapanEurozone
UK
0 2 4 6 8 10 12
10.38.88.8
7.23.4
3.02.4
1.91.7
08 09 10 11WorldEurozone
3.00.3
-0.6-4.0
4.21.6
3.71.5
(y/y % chng)2010:Q2
Page 7-8
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Must Broaden Markets
Europe & Emerging Markets
75 80 85 90 95 00 05 10
4
6
8
10
12
14
16
Canadian Exports (% of total)
Canadian Exports: Where Now?
United States
75 80 85 90 95 00 05 10
60
65
70
75
80
85
Europe
Emerging Markets
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Loonie & Commodities: The Ties that Bind
95 97 99 01 03 05 07 09200
400
600
800
1000
60
70
80
90
100
110
120
Canada (as of September 24, 2010)
BoC Commodity Price Index
(lhs)
C$(US¢ : rhs)
Page 9-10
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Dots represent countries in the OECD, except Norway, which has huge assets
OECD Fiscal Landscape
Deficit vs Debt
-60 -30 0 30 60 90 120-3
0
3
6
9
12
15
Net Debt
2010 (% of nominal GDP)
Deficit
Surplus
Australia
New Zealand
Japan
US
Canada
Greece
UKIreland
Italy
SpainPortugal
TROUBLE
Germany
France
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Canadian Dollar Outlook: Still Looking Up?
Canadian Dollar
03 04 05 06 07 08 09 10 11
60
70
80
90
100
110
Downside Risk: Sovereign Debt Spillover
(US¢ : as of September 24, 2010)
Parity
forecast
Positives:
Rate Hikes
Global Diversification
Sounder Finances[Current]97.58¢
Page 11-12
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HST Made Little Impact
Inflation Below 2%
United States
07 08 09 10 11
-3
0
3
6
Consumer Price Index (y/y % chng)
Core
Total
Canada
07 08 09 10 11
-3
0
3
6
Core
forecast
1.1%1.7%
[Total]1.6%[Core]
0.9% ...and Falling
Total
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CurrentSpread26 bps
10-year Bonds
07 08 09 10 11
0
1
2
3
4
5
6
Bond Yields Will Rise... EventuallyBoC Tightens
Monetary Policy Tightens in Canada First
Fixed Mortgage Rate
07 08 09 10 11
4.0
4.5
5.0
5.5
6.0
6.5
7.0Overnight Rate
05 07 09 11
0
1
2
3
4
5
6
(% : as of September 24, 2010)
US forecast
Canada
0% - 0.25%USCanada 1.00%
3.50%
2.55%
’10)(Year-end
US
Canada 2.80%
US(30-yr)
Canada(5-yr)
Canada 2.87%US 2.61%
[Current]
3.50%
’11)(Year-end
Page 13-14
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S&P 500: Correction Japan: Bear
Equity Markets
GermanyDJIATSXUK
S&P 500Brazil
AustraliaSpainJapanChina
Greece
-35 -30 -25 -20 -15 -10 -5 0 5 10
5.74.1
3.93.4
3.0-0.6
-4.7-10.2-10.2
-20.1-31.1
Global Equities: New Challenges(y-t-d % chng : as of September 24, 2010)
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Equals Single Slog
Constraints on Growth
Fiscal Restraint
Tight Credit
Jobless US
Cooling Emerging Market Growth
Strong C$
Page 15-16