2016 Outlook: The Economics of Change Warren Jestin SVP & - - PowerPoint PPT Presentation

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2016 Outlook: The Economics of Change Warren Jestin SVP & Chief Economist - Scotiabank Real Estate Forum - Toronto December 2, 2015 The U.S. Gears Up . . . Gradually Real GDP Growth 5 annual % change 4 U.K. Canada U.S. 3 2 1 0

SLIDE 1

2016 Outlook:

Warren Jestin

SVP & Chief Economist - Scotiabank

The Economics of Change

Real Estate Forum - Toronto

December 2, 2015

SLIDE 2

The U.S. Gears Up . . . Gradually

Source: Statistics Canada, BEA, Bloomberg, Scotiabank Economics.

1 2 3 4 5 2007 08 09 10 11 12 13 14 15f 16f annual % change

Real GDP Growth U.S. U.K. Euro zone Canada

Forecasts at November 2, 2015

Warren Jestin Page 1 Real Estate Forum - Toronto (Dec. 2, 2015)

SLIDE 3

Unemployment Rate

Source: Statistics Canada, BLS, Bloomberg, Scotiabank Economics.

2 4 6 8 10 12 14 2007 08 09 10 11 12 13 14 15f 16f

U.K. U.S. Canada

Improved U.S. Job Prospects Fuel Consumer Confidence . . .

Euro Zone

Forecasts at November 2, 2015

Warren Jestin Page 2 Real Estate Forum - Toronto (Dec. 2, 2015)

SLIDE 4

Source: Bloomberg, Scotiabank Economics.

. . . Supported by Income Gains . . .

100 105 110 115 120 125 130 135 2007 08 09 10 11 12 13 14

Euro zone U.S. Canada U.K. Growth In Personal Disposable Income

Index 2007=100

Warren Jestin Page 3 Real Estate Forum - Toronto (Dec. 2, 2015)

SLIDE 5

. . . & Years of Pent-up Demand

8 9 10 11 12 2007 08 09 10 11 12 13 14 years

Canada U.S.

Source: Wards Automotive, DesRosiers Automotive Consultants

Average Age Of Motor Vehicles

Warren Jestin Page 4 Real Estate Forum - Toronto (Dec. 2, 2015)

SLIDE 6

Source: Bloomberg, Scotiabank Economics.

Weak C$ Undercuts Purchasing Power But Boosts Competitiveness

70 80 90 100 110 120 130 2007 08 09 10 11 12 13 14

Euro zone U.S. Canada U.K. Personal Disposable Income Gains in US$

Index 2007=100 Incomes adjusted to US$

Warren Jestin Page 5 Real Estate Forum - Toronto (Dec. 2, 2015)

SLIDE 7

Emerging Nations Are Still Major Drivers of Global Growth . . .

Source: IMF WEO April 2015, Scotiabank Economics.

1 2 3 4 5 6 1990 2000 2007 2010 2014f 2019f Emerging and Developing Markets (share of total world GDP) Advanced Economies (share of total world GDP)

64% 36% 58% 42% 52% 48% 47% 53% 44% 56%

global growth & share of real GDP

41% 59%

World GDP Growth

Warren Jestin Page 6 Real Estate Forum - Toronto (Dec. 2, 2015)

SLIDE 8

Source: Bloomberg, Scotiabank Economics. *Urban households.

. . . Supported by Rapid Income Gains

100 120 140 160 180 200 220 240 260 280 2007 08 09 10 11 12 13 14

Euro zone U.S. Canada U.K. Growth In Personal Disposable Income

Index 2007=100

China*

Warren Jestin Page 7 Real Estate Forum - Toronto (Dec. 2, 2015)

SLIDE 9

But China Is Gearing Down . . .

4 8 12 16 2007 08 09 10 11 12 13 14 15f 16f y/y % change

Services Total Goods

Source: National Bureau of Statistics of China, Scotiabank Economics.

Forecasts at November 2, 2015

China GDP

Warren Jestin Page 8 Real Estate Forum - Toronto (Dec. 2, 2015)

SLIDE 10

. . . & Emerging Market Trends Are Uneven . . .

Source: Bloomberg, Scotiabank Economics.

2 4 6 8 10 12 14 16 2007 08 09 10 11 12 13 14 15f 16f annual % change

Real GDP Growth Brazil China India

Forecasts at November 2, 2015

Warren Jestin Page 9 Real Estate Forum - Toronto (Dec. 2, 2015)

SLIDE 11

Source: CPB Netherlands Bureau of Economic Research.

World Trade Growth Is Low & Slow

5 10 15 20 2007 08 09 10 11 12 13 14 15 y/y % change

World Trade Volumes

. . . Undercutting World Trade . . .

Warren Jestin Page 10 Real Estate Forum - Toronto (Dec. 2, 2015)

SLIDE 12

Source: Bloomberg, Scotiabank Economics.

20 40 60 80 100 120 140 160 180 200 2007 08 09 10 11 12 13 14 15f 16f index, 2007Q1 = 100

WTI Oil Natural Gas Copper

. . . & Depressing Oil & Other Commodities

Commodity Prices

Forecasts at November 2, 2015

Warren Jestin Page 11 Real Estate Forum - Toronto (Dec. 2, 2015)

SLIDE 13

Source: Bloomberg, Scotiabank Economics.

70 80 90 100 110 120 130 140 150 160 2007 08 09 10 11 12 13 14 15f 16f exchange rate with US$ index, 2007Q1 = 100

Yen Euro

U.S. Dollar Underpinned By Domestic Strength & International Risks

Currencies vs. U.S. Dollar

Forecasts at November 2, 2015

Renminbi

Warren Jestin Page 12 Real Estate Forum - Toronto (Dec. 2, 2015)

SLIDE 14

Source: Bloomberg, Scotiabank Economics.

0.60 0.65 0.70 0.75 0.80 0.85 0.90 0.95 1.00 1.05 1.10 2007 08 09 10 11 12 13 14 15f 16f

vs. US$

Canadian Dollar Australian Dollar

The U.S. Dollar Also Flies High Against Commodity Currencies

A Sharp Slide from Parity

Forecasts at November 2, 2015

Warren Jestin Page 13 Real Estate Forum - Toronto (Dec. 2, 2015)

SLIDE 15

1 2 3 4 5 2007 08 09 10 11 12 13 14 15f 16f

U.K. Consumer Prices

Source: Statistics Canada, BLS, Bloomberg, Scotiabank Economics.

Inflation Interrupted … Again

U.S. Canada

y/y % change, end of period

Euro zone

Forecasts at November 2, 2015

Warren Jestin Page 14 Real Estate Forum - Toronto (Dec. 2, 2015)

SLIDE 16

1 2 3 4 5 6 2007 08 09 10 11 12 13 14 15f 16f

Source: Bank of Canada, U.S. Federal Reserve, ECB, Bank of England, Scotiabank Economics.

Central Bank Rates U.S.

per cent

Canada

Monetary Policy Is On Hold For Now . . .

Euro zone

Forecasts at November 2, 2015

U.K.

Warren Jestin Page 15 Real Estate Forum - Toronto (Dec. 2, 2015)

SLIDE 17

1 2 3 4 5 6 2007 08 09 10 11 12 13 14 15

10-Year Government Bond Yields

Source: Bloomberg, Scotiabank Economics.

. . . With Bond Yields Still Near Lifetime Lows

U.S. Canada

per cent

Germany U.K.

Warren Jestin Page 16 Real Estate Forum - Toronto (Dec. 2, 2015)

SLIDE 18

30 50 70 90 110 130 150 2007 08 09 10 11 12 13 14 15

Autos & Parts Canadian Exports Energy

Source: Statistics Canada, Scotiabank Economics.

Changing Global Fortunes Have Big Impact on Canadian Economy

$ bns, annualized, 3-month moving average

Warren Jestin Page 17 Real Estate Forum - Toronto (Dec. 2, 2015)

SLIDE 19

Economic & Market Outlook

Forecasts at November 2, 2015

Warren Jestin Page 18 Real Estate Forum - Toronto (Dec. 2, 2015)

SLIDE 20

Disclaimer

TM Trademark of The Bank of Nova Scotia. Used under license, where applicable.

This report has been prepared by Scotiabank Economics as a resource for the clients of

Scotiabank. Opinions, estimates and projections contained herein are our own as of the

date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or

completeness. Neither Scotiabank nor its affiliates accepts any liability whatsoever for any

loss arising from any use of this report or its contents.