outlook for canada’s economy
DESCRIPTION
Robert Hogue, RBCTRANSCRIPT
Who said the recovery would be easy?Outlook for Canada’s Economy
ECONOMICS I RESEARCH
Robert HogueSenior [email protected]
Transportation Strategy: Planning for 2011 in Uncertain TimesMississauga, September 14, 2010
2ECONOMICS I RESEARCH
After stellar start to year, growth slows down in second quarter
Canada’s recovery hits a bump
-8
-6
-4
-2
0
2
4
6
8
00 01 02 03 04 05 06 07 08 09 10
Annualized % change, quarter-over-quarter
Source : Statistics Canada, RBC Economics Research
Canada's real GDP
3ECONOMICS I RESEARCH
Net trade accounts for most of the Q2 growth moderation
Once again, uncertainty is coming from abroad
-4
-3
-2
-1
0
1
2
3
Consumer
spending
Government
spending
Residential
investment
Non-res.
investment
Net trade Inventories
2010 Q1 2010 Q2
Percentage points
Canadian real GDP growth composition
Source: Statistics Canada, RBC Economics Research
4ECONOMICS I RESEARCH
Greece’s troubles unsettled markets
European debt crisis shook confidence earlier this year…
-16
-14
-12
-10
-8
-6
-4
-2
0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
As % of GDP
Source : Eurostat, RBC Economics Research
Greece's budget deficit
5ECONOMICS I RESEARCH
Housing, labour data have disappointed south of the border
…then the U.S. economy hit a soft patch
-8
-6
-4
-2
0
2
4
6
8
10
00 01 02 03 04 05 06 07 08 09 10
Annualized % change, quarter-over-quarter
U.S. real GDP
Source: Bureau of Economic Analysis, RBC Economics Research
6ECONOMICS I RESEARCH
Meanwhile, imports are bouncing back quite strongly
Weak external conditions weigh on Canada’s exports
-5
0
5
10
15
20
25
00 01 02 03 04 05 06 07 08 09 10
Canada's Trade Balance
Source: Statistics Canada, RBC Economics Research
$ Billion
7ECONOMICS I RESEARCH
Activity sustained by very stimulative policy
At home, the domestic economy maintains a good pace
-10
-8
-6
-4
-2
0
2
4
6
8
02 03 04 05 06 07 08 09 10
Annualized % change, quarter-over-quarter
Source: Statistics Canada, RBC Economics Research
Canada's Final Domestic Demand
8ECONOMICS I RESEARCH
While rising, Canadian interest rates will still be very low
Going forward, policy will continue to provide support
0
1
2
3
4
5
6
7
00 01 02 03 04 05 06 07 08 09 10 11
%
Source: Bank of Canada, RBC Economics Research
Forecast
Bank of Canada overnight rate
9ECONOMICS I RESEARCH
Expectations well anchored at the 2% Bank of Canada target
Inflation is under control
-2
-1
0
1
2
3
4
5
6
7
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
Source: Statistics Canada, RBC Economics Research
% change, year-over-year
Forecast
Canadian inflation
Core
Headline
10ECONOMICS I RESEARCH
Infrastructure spending cresting this year
Strong fiscal stimulus
-50
-40
-30
-20
-10
0
10
20
30
40
02 03 04 05 06 07 08 09 10 11
Annualized % change, quarter-over-quarter
Fixed investment
Sources: Statistics Canada, RBC Economics Research
Government
Business
Forecast
11ECONOMICS I RESEARCH
Unemployment rate to trend lower
Job market will improve further…
5
6
7
8
9
10
00 01 02 03 04 05 06 07 08 09 10 11
Unemployment rate in Canada
Source: Statistics Canada, RBC Economics Research
%
Forecast
12ECONOMICS I RESEARCH
Although consumer spending growth will be moderate
…keeping Canadian consumers shopping
-4
-2
0
2
4
6
8
10
02 03 04 05 06 07 08 09 10 11
Annualized % change, quarter-over-quarter
Source: Statistics Canada, RBC Economics Research
Real consumer expenditures
Forecast
13ECONOMICS I RESEARCH
Multi-speed recovery is under way
Despite recent setbacks, global economy is growing…
-0.6-1
0
1
2
3
4
5
6
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
% change, year-over-year
World GDP growth
Source: International Monetary Fund, RBC Economics Research
Forecast
4.24.3
14ECONOMICS I RESEARCH
Supporting growth in Canada’s resource sector
…boosting demand for commodities
RBC Commodity Price Index
0
50
100
150
200
250
300
350
400
99 00 01 02 03 04 05 06 07 08 09 10
J anuary 1994 = 100
Source: RBC Economics Research
15ECONOMICS I RESEARCH
Oil prices to rise modestly
Crude oil prices WTI
0
20
40
60
80
100
120
140
99 00 01 02 03 04 05 06 07 08 09 10 11
79$85$
US$/ barrel
Source: Wall Street J ournal, Haver Analytics, RBC Economics Research
16ECONOMICS I RESEARCH
Still many challenges ahead but no double-dip in the cards
U.S. economy will pick up pace
-8
-6
-4
-2
0
2
4
6
8
10
00 01 02 03 04 05 06 07 08 09 10 11
Annualized % change, quarter-over-quarter
Forecast
U.S. real GDP
Source: Bureau of Economic Analysis, RBC Economics Research
Annual growth rates
2009 2010f 2011f
-2.6 2.7 3.0
17ECONOMICS I RESEARCH
Growth to hover between 3% and 4% this year and next
Canada’s recovery will be sustained
-8
-6
-4
-2
0
2
4
6
8
00 01 02 03 04 05 06 07 08 09 10 11
Annualized % change, quarter-over-quarter
Forecast
Source: Statistics Canada, RBC Economics Research
Annual growth rates
2009 2010f 2011f
-2.5 3.3 3.2
Canada's real GDP
18ECONOMICS I RESEARCH
Expected to test parity again by the middle of next year
Canadian dollar to gain some altitude
0.98
0.6
0.7
0.8
0.9
1.0
1.1
81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11
U.S dollar per Canadian dollar
Forecast
Canadian dollar
Source: Bank of Canada, RBC Economics Research
19ECONOMICS I RESEARCH
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