2015 CUSBA CROSS-BORDER FORECAST Canadas Great Balancing Act - - PowerPoint PPT Presentation

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2015 CUSBA CROSS-BORDER FORECAST Canadas Great Balancing Act - - PowerPoint PPT Presentation

Nov 28, 2023 266 likes •507 views

2015 CUSBA CROSS-BORDER FORECAST Canadas Great Balancing Act February 5, 2015 Detroit Branch Federal Reserve Bank of Chicago Peter Hall Vice-President and Chief Economist TARGETS DILEMMA: CANADAS TAPPED -OUT CONSUMERS Debt to

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2015 CUSBA CROSS-BORDER FORECAST

Canada’s Great Balancing Act

February 5, 2015 Detroit Branch Federal Reserve Bank of Chicago Peter Hall Vice-President and Chief Economist

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TARGET’S DILEMMA: CANADA’S TAPPED-OUT CONSUMERS

Sources: Statistics Canada, Haver Analytics

Debt to 4-quarter moving average of disposable income

90 100 110 120 130 140 150 160 170 95 98 01 04 07 10 13

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CONSUMERS VULNERABLE TO RATE HIKES

Sources: Statistics Canada, Haver Analytics

Current total interest payments, $M, actual and shock

20,000 40,000 60,000 80,000 100,000 120,000 95 97 99 01 03 05 07 09 11 13

Shock Actual

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HOUSING: ALSO FEEBLE

Sources: EIA-CME, Haver Analytics

Housing starts, SAAR and requirements

50 100 150 200 250 300 350 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

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PUBLIC FINANCES: FEDS ARE OK…

Sources: RBC Financial

Budget balance as a share of GDP

  • 10
  • 8
  • 6
  • 4
  • 2

2 4 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13

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…BUT THE PROVINCES?

Sources: RBC Financial

Budget balance as a share of GDP

  • 2
  • 2
  • 1
  • 1

1 1 BC AB SK MB ON QC NB NS PEI NF

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REASONS THE US RECOVERY IS REAL

Lagging indicators Leading indicators End of QE No added austerity Sentiment Pent-up demand

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CANADA: ARE EXPORTS IN TROUBLE?

Sources: Statistics Canada, Haver Analytics

Exports, chained 2007, $million

28,000 30,000 32,000 34,000 36,000 38,000 40,000 42,000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

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US INDUSTRY: CAPACITY CRUNCH

US capacity utilization, all industry, per cent of capacity

Sources: Federal Reserve Board, Haver Analytics 60 65 70 75 80 85 2001 2005 2009 2013

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CAD bn % Share of Total Exports Export Outlook (% growth) 2013 2013 2013 2014(f) 2015(f) Agri-Food 50.2 9.5 5.6 10 Energy 123.9 23.4 6.5 19 Forestry 29.8 5.6 12.4 13 10 Chemical and Plastics 37.0 7.0 7.4 12 Fertilizers 7.7 1.5

  • 4.9
  • 10

Metals, Ores and Other Industrial Products 61.9 11.7

  • 0.1

2 Industrial Machinery and Equip. 28.0 5.3

  • 2.4

8 16 Aircraft and Parts 11.3 2.1 4.6 12 10 Advanced Technology 13.8 2.6

  • 0.6

3 4 Motor Vehicles and Parts 62.5 11.8

  • 0.9

9 3 Consumer Goods 8.0 1.5 11.0

  • 3

5 Special Transactions* 3.6 0.7 10.2 20 9 Total Goods Sector 443.5 83.7 3.7 11 6 Total Service Sector 86.5 16.3 2.9 4 4 Total Exports 530.0 100.0 3.6 10 6 Memorandum Total Volumes 100.0 1.9 4 5 Total Goods Nominal (excl. Energy) 319.6 60.3 2.6 8 7 Total Goods Nominal (excl. Autos and Energy) 257.1 48.5 3.5 7 8

EXPORT FORECAST OVERVIEW*

Source: Statistics Canada, EDC economics, 2013 is actual data while 2013 and 2014 are forecast Special transactions* mainly low-valued transactions, value of repairs is equipment and goods returned to country of origin.

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OIL PRICES – GOOD NEWS, BAD NEWS

Sources: EIA-CME, Haver Analytics

West Texas Intermediate crude, Cushing, USD/bbl

20 40 60 80 100 120 140 160 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

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EXCESS LIQUIDITY: DISTORTIONS?

Source: EDC Economics

Cash already in the system Cash hoarding Cash injection

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ADD A LITTLE GROWTH, AND…

Source: EDC Economics

Financial transmission mechanism

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THE OIL PRICE PLUNGE: 2008, NOW

Sources: EIA-CME, Haver Analytics

West Texas Intermediate crude, Cushing, USD/bbl, peak-to-trough

20 40 60 80 100 120 140 160 1 2 3 4 5 6 7

USD Months Now Then

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DRIVERS OF THE CANADIAN DOLLAR

US dollar movements* The ‘halo’ effect Canadian dollar

Source: EDC Economics

Oil & gas prices Non-energy commodity prices Interest rate spreads

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IMPACT OF OIL PRICES ON THE CANADIAN ECONOMY

Oil Price Impact by Economic Sector, % of GDP

Category Oil Price, WTI Crude, $US Oil price scenario: $75 $60 $40 $25 O&G direct

  • 1.6%
  • 2.6%
  • 3.8%
  • 4.8%

Indirect investment

  • 0.2%
  • 0.3%
  • 0.4%
  • 0.5%

Manufacturing (cost) 0.6% 1.0% 1.5% 1.8% Manufacturing (effect of $) 0.7% 1.2% 1.8% 2.2% Consumer 0.4% 0.6% 0.9% 1.2% Fiscal

  • 0.1%
  • 0.2%
  • 0.3%
  • 0.4%

Net impact, % of GDP

  • 0.16%
  • 0.26%
  • 0.39%
  • 0.48%
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TAKEAWAYS

› Domestic demand is weak

› Consumers: tapped out › Housing: overbuilt › Austerity still in the works

› Trade takes over › Investment focus shifts

› From internal to external

› Monetary policy: no rush to tighten › Dollar to remain weak

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VISIT US ONLINE

› edc.ca/economics

› Country analysis and information › Global Export Forecast › Weekly Commentary › Trade Confidence Index › Research reports on international trade

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RISKS

› Housing market collapse › Debt crunch › US infected by global weakness › Permanently weaker oil prices › Neo-myopic Canadian exporter › Population constraints › Investment reticence in Canada

› Private › Public

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0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2

Real GDP, Russia, billions of chained 2008 rubles, % yoy

RUSSIA: VULNERABLE TO SANCTIONS

Sources: State Committee of the Russian Federation, Haver Analytics

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*Dated – pending oil price adjustments

Market Share (2013) 2012 2013 2014 (f) 2015 (f)

US 16.5 2.3 2.2 2.2 3.6 Canada 1.5 1.7 2.0 2.2 2.8 Mexico 2.0 4.0 1.1 2.3 3.8 Euro Area 13.1

  • 0.7
  • 0.4

0.9 1.4 Japan 4.6 1.5 1.5 1.4 1.2 Industrialized 43.6 1.2 1.4 1.9 2.6 Emerging Asia 28.7 6.7 6.6 6.4 7.1

› China

15.8 7.7 7.7 7.5 8.0

› India

6.6 4.7 5.0 5.2 6.0 LatAm/Caribbean 8.7 2.9 2.7 1.4 2.5

› Brazil

3.0 1.0 2.5 0.5 2.0 Emerging Europe 8.2 5.5 3.4 0.7 1.5

› Russia

3.4 3.4 1.3 0.6 0.9 Africa/Mideast 6.9 4.9 3.1 3.1 4.4 Emerging 56.4 5.1 4.7 4.2 5.0 Total World 100.0 3.4 3.3 3.2 4.0

GLOBAL GROWTH FORECAST*

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CAD bn % Share of Total Exports Export Outlook (% growth) 2013 2013 2013 2014(f) 2015(f) Agri-Food 50.2 9.5 5.6 10 5 Energy 123.9 23.4 6.5 19 4 Forestry 29.8 5.6 12.4 13 10 Chemical and Plastics 37.0 7.0 7.4 12 5 Fertilizers 7.7 1.5

  • 4.9
  • 10

14 Metals, Ores and Other Industrial Products 61.9 11.7

  • 0.1

2 7 Industrial Machinery and Equip. 28.0 5.3

  • 2.4

8 16 Aircraft and Parts 11.3 2.1 4.6 12 10 Advanced Technology 13.8 2.6

  • 0.6

3 4 Motor Vehicles and Parts 62.5 11.8

  • 0.9

9 3 Consumer Goods 8.0 1.5 11.0

  • 3

5 Special Transactions* 3.6 0.7 10.2 20 9 Total Goods Sector 443.5 83.7 3.7 11 6 Total Service Sector 86.5 16.3 2.9 4 4 Total Exports 530.0 100.0 3.6 10 6 Memorandum Total Volumes 100.0 1.9 4 5 Total Goods Nominal (excl. Energy) 319.6 60.3 2.6 8 7 Total Goods Nominal (excl. Autos and Energy) 257.1 48.5 3.5 7 8

EXPORT FORECAST OVERVIEW*

Source: Statistics Canada, EDC economics, 2013 is actual data while 2013 and 2014 are forecast Special transactions* mainly low-valued transactions, value of repairs is equipment and goods returned to country of origin.