Canada I n a Messy W orld By Avery Shenfeld, Chief Econom ist & - - PowerPoint PPT Presentation

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Canada I n a Messy W orld By Avery Shenfeld, Chief Econom ist & - - PowerPoint PPT Presentation

Sep 11, 2022 251 likes •520 views

Canada I n a Messy W orld By Avery Shenfeld, Chief Econom ist & Managing Director November 2011 Canadian Grow th Resum es After Disruptions in Autos and Energy Monthly GDP I ndex 108 107 106 105 104 104 103 102 101 100 99 98

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SLIDE 1

Canada I n a Messy W orld

By Avery Shenfeld, Chief Econom ist & Managing Director November 2011

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SLIDE 2

Canadian Grow th Resum es After Disruptions in Autos and Energy

107 108 Monthly GDP I ndex 104 105 106 102 103 104 99 100 101 98 Jun-09 Oct- 09 Feb-10 Jun-10 Oct-10 Feb-11 Jun-11 Canada US |

2

Canada US

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SLIDE 3

Slack Keeps Fed On Hold Through 2 0 1 3 ; Fed Extending Term to Anchor Long Rates

4 6 % decline in non-farm pay rolls from peak 2

  • 4
  • 2
  • 8
  • 6
  • 24
  • 18
  • 12
  • 6

6 12 2008-11 recession / recov ery

  • 24
  • 18
  • 12
  • 6

6 12 Months from Em ploy m ent Trough 1948 1953 1958 2007-

|

3

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SLIDE 4

Global Grow th Disappointm ents A Drag on Canada’s Exports, Com m odity Prices

5 .5

World GDP, % chg (at purchasing power parity )

4 5 5 .0 4 .0 4 .5 3 .5 3 .0 2 0 1 0 A 2 0 1 1 F 2 0 1 2 F

|

4

Actual/ CI BC Forecast I MF Forecast (June '11)

Source: IMF, CIBC * Assumes US extends payroll tax cut and extended jobless benefits

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SLIDE 5

Em erging Markets Now the Drivers For Com m odities Rallies

60% BI C (Brazil, I ndia, China) Share of Total Consum ption 40% 0% 20% 0% etroleum Refined Copper Coal Prim ary Nick el Pe 1990's Today Note: latest coal data as of 2009; petroleum data as of 2010; nick el and copper data as

  • f 2011 Q2, copper data ex cludes Brazil

|

5

Source: EIA, CRU, WBMS

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SLIDE 6

Com m odities Drive C$ Softer Global Grow th Keeps Loonie in Check

120 108 US$/bbl US¢/C$ 100 110 104 80 90 100 70 80 96

Arrows denote BoC rate hikes

60 Apr-10 Aug-10 Dec-10 Apr-11 Aug-11 92

Crude Oil (WTI) Canadian Dollar |

6

( )

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SLIDE 7

The Continental Divide

Em p lo y m e n t/ Po p u la tio n Ra tio Ou tp u t Ga p 63 64 65 % 2 4 % 59 60 61 62 63

  • 4
  • 2

56 57 58 59

  • 8
  • 6

55 01 03 05 07 09 11 Canada US

  • 10

01 03 05 07 09 11 Canada US

|

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Canada US Canada US

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SLIDE 8

Canada Sees 2 % Grow th in 2 0 1 2 But it W ill Take Low Rates to Get There

6.0% 5.0 GDP growth (s.a.a.r.) % For ecast 0 0% 2.0% 4.0% 3.0 4.0

  • 4.0%
  • 2.0%

0.0% 1.0 2.0 ?

  • 8.0%
  • 6.0%

Q1-07 Q1-08 Q1-09 Q1-10 Q1-11 Q1-12 0.0 1.0 Real GDP Growth (L) Ov ernight I nterest Rate (R)

|

8

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SLIDE 9

Bond Yields To Drift Higher; Rem ain Low By Historical Standards

6 Canada US 10-y r bond y ields (% ) F t 5 US For ecast 3 4 2 3 1 Dec00 Dec04 Dec08 Dec12

|

9

Dec00 Dec04 Dec08 Dec12

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SLIDE 10

Consum ers Reduced Debt Appetite Slow s Retail Sales: Low Rates Needed for Longer

1 0 % 1 6 % 2 0 % y/ y chg y/ y 2 % 6 % 4 % 8 % 1 2 %

  • 2 %

2 %

  • 4 %

0 % 4 %

  • 6 %

3 4 5 6 7 8 9 1 1 1

  • 1 2%
  • 8 %

J a n

  • 3

J a n

  • 4

J a n

  • 5

J a n

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J a n

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J a n

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J a n

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J a n

  • 1

J a n

  • 1

1

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Real Ret ail Consumpt ion ( L) Consumer Credit ( R)

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SLIDE 11

Debt Service Costs Unthreatening I f Overnight Rates Contained to 2 % or less

10 11

% of personal disposable income

9 10 7 8 6 7 5 Q4-89 Q4-91 Q4-93 Q4-95 Q4-97 Q4-99 Q4-01 Q4-03 Q4-05 Q4-07 Q4-09 Q4-11 Q4-13

|

11

Q Q Q Q Q Q Q Q Q Q Q Q Q

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SLIDE 12

Gasoline and Food I nflation Should Ease Giving Lift to Consum er Spending Pow er

210 135 1982-84= 100 2005= 100 170 190 125 130 110 130 150 115 120 70 90 110 105 110 50 05 06 07 08 09 10 11 100 World Com m odity Price I ndex : Food (L) Cdn CPI : Food (R)

|

12

World Com m odity Price I ndex : Food (L) Cdn CPI : Food (R)

Source: Bureau of Labour Statistics, Statistics Canada, CIBC

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SLIDE 13

Housing Starts Easing But Not Crashing

240 260 '000 units, SAAR 190 191 193 200 220 240 140 160 180 100 120 140 80 2 2 1 2 2 2 3 2 4 2 5 2 6 2 7 2 8 2 9 2 1 2 1 1 F 2 1 2 F

|

13

2 2 2 2 2 2 2 2 2 2 2 2 2

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SLIDE 14

Canadian Housing Market Still “Balanced”

Un it Sa le s a s a sh a r e o f Ne w Listin g s 0.9 Sellers' 0.7 0.8 Sellers' Mk t 0.5 0.6 Balanced Mark et 0 3 0.4 0.5 Balanced Mark et 0.2 0.3 00 01 02 03 04 05 06 07 08 09 10 11 Buy ers' Mk t

|

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Source: CREA, CIBC

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SLIDE 15

Mortgages Outstanding Still Grow ing Faster Than I ncom es

14 y / y % chg 10 12 14 y / y % chg 6 8 10 2 4 6 2 00 01 02 03 04 05 06 07 08 09 10 11

|

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Source: Bank of Canada, CIBC

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SLIDE 16

House Price I nflation Cooling… W e Hope

20 25 y / y % chg Unweighted 10 15 20 Weighted 5 10 15

  • 10
  • 5
  • 15

Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11

|

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Source: CREA, CIBC

J A O J A O J A O J A O J A O

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SLIDE 17

Mortgage Arrears Very Low

Ca na da

0 70 as a % of

By Province

0.85 as of August 2011 0.60 0.70 total portfolio 0 65 0.70 0.75 0.80 g 0.40 0.50 0.50 0.55 0.60 0.65 0.30 0 30 0.35 0.40 0.45 Canada 0.10 0.20 91 95 99 03 07 11 0.20 0.25 0.30 BC an/ Alta Ont Que Atl ask

|

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91 95 99 03 07 11 Ma A O Q Sa

Source: CBA, CIBC

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SLIDE 18

Num ber of Stretched Households on the Rise – But Not to Troubling Levels Yet

6 0 6.5 8.0 % % 4 5 5.0 5.5 6.0 7.0 7.5 3 0 3.5 4.0 4.5 6.0 6.5 2.0 2.5 3.0 03 04 05 06 07 08 09 10 11 5.0 5.5 03 04 05 06 07 08 09 10 11 Effectiv e Mortgage I nterest Rates (L) Share of Households with > 40% serv ice ratios (R)

|

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Source: The Financial Monitor, CIBC

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SLIDE 19

Optim ism On I nvestm ent Spending A Plus for I ndustrial Properties

40 Equipment Spending Plans, Balance of Opinion (% -pts) 10 20 30

  • 10

10

  • 40
  • 30
  • 20
  • 40

98:Q3 99:Q2 00:Q1 00:Q4 01:Q3 02:Q2 03:Q1 03:Q4 04:Q3 05:Q2 06:Q1 06:Q4 07:Q3 08:Q2 09:Q1 09:Q4 10:Q3 11:Q2

|

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Source: Bank of Canada Business Outlook Survey

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SLIDE 20

Private Construction A Needed Offset to Governm ent I nfrastructure Pullback

140 160 bns 2002C$ For ecast 100 120 140 80 100 40 60 20 3: 1 3: 4 4: 3 5: 2 6: 1 6: 4 7: 3 8: 2 9: 1 9: 4 0: 3 1: 2 : 1F : 4F : 3F Gov 't Capital Spending Business I nv estm ent: Non-Res Str uctur es Business I nv estm ent: Machinery

|

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03 03 04 05 06 06 07 08 09 09 10 11 12: 12: 13:

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SLIDE 21

Fiscal Credentials: Canada’s Earlier Hard W ork Paid Dividends

200 250

Gross Net

General Government Debt, % (2011) 150

128 101 79 75 72 55

50 100

35

JPN ITA FRA UK US GER CAN

100 125 150 175 General Government Net Debt, % of GDP

Fcst

25 50 75 100

|

21

1990 95 00 05 10 15

CAN US UK FRA GER JPN ITA

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SLIDE 22

W est is Best in 2 0 1 2

4.0

Real GDP Growth, Y/Y % Chg

3.0 3.5 2011 2012 2.0 2.5 1.0 1.5 0.0 0.5 |

22

BC Alta Sask Man Ont Qué NB NS PEI N&L

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SLIDE 23

TSX Forw ard PE Low by Historical Standards, Matching US

17 14 15 16 12 13 14 9 10 11 Valuation gap closed 8 Jan-07 May -10 TSX Com posite S&P 500

|

23

TSX Com posite S&P 500

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SLIDE 24

Analysts Cutting 2 0 1 2 Earnings Expectations

9 7 8 9 Ratio of Downgrades to Upgrades 4 5 6 2 3 4 Normal = 1.5: 1 1 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11

|

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Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11

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SLIDE 25

Quality Dividend Stocks Should Outperform

1 05

Total Return, April 5=1 00 +

95 1 00

  • 1%

90 95

  • 11%

85

*S&P/TSX Canadian Dividend Aristocrats

80 5-Apr 3-May 31

  • May

28-Jun 26-Jul 23-Aug 20-Sep 1 8-Oct

High Quality Dividend Stocks* TSX Composite

|

25

g y p

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SLIDE 26

Canadian REI Ts Helped by Low Bond Yields; Vacancies Peaked at Low Levels

16% 18% Vacancy Rate US Office Vacancy Rate ( REI S) 12% 14% 16% US I ndustrial Vacancy Rate (Colliers) 8% 10% 12% Cdn Office US I ndustrial Vacancy Rate (Colliers) 4% 6% Cdn I ndustrial 0% 2% Q4/ 01 Q2/ 03 Q4/ 04 Q2/ 06 Q4/ 07 Q2/ 09 Q4/ 10 |

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