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for the Canadian Economy Remarks to the T ourism Industry - - PowerPoint PPT Presentation

Oct 13, 2023 230 likes •499 views

Two-Track Adjustment: The Outlook for the Canadian Economy Remarks to the T ourism Industry Association of Nova Scotia and Cape Breton Partnership Sydney, Nova Scotia 02 June 2016 Lawrence Schembri Deputy Governor Bank of Canada Overview

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SLIDE 1

Two-Track Adjustment: The Outlook for the Canadian Economy

Remarks to the T

  • urism Industry Association of Nova Scotia and Cape Breton Partnership

Sydney, Nova Scotia 02 June 2016

Lawrence Schembri Deputy Governor Bank of Canada

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SLIDE 2

Overview

  • What are the economic outlooks?

– The major economies – Canada – Nova Scotia

  • What does the Bank of Canada do?
  • What are the implications for tourism?
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SLIDE 3

The Bank of Canada’s mandate and responsibilities

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SLIDE 4

Mandate and responsibilities

Monetary policy Funds management Financial system Currency

The Bank’s mandate: to promote Canada’s economic and financial well-being

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SLIDE 5

Economic and financial system outlook

5

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SLIDE 6

Commodity prices remain well below historical averages

75 100 125 150 175 100 200 300 400 2000 2002 2004 2006 2008 2010 2012 2014 2016

Real energy index (left scale) Historical average of real energy index (left scale) Real non-energy index (right scale) Historical average of real non-energy index (right scale)

Index: January 2000 = 100, monthly data

Last observation: March 2016 Sources: US Bureau of Economic Analysis and Bank of Canada Notes: The nominal Bank of Canada commodity price subindexes have been deflated using the US GDP deflator. The historical averages represent the average monthly index values from 1972 to 2015.

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SLIDE 7

Declines in capital expenditures by US oil producers and in US crude oil production are expected to help rebalance the global oil market

7.5 8.0 8.5 9.0 9.5 10.0 30 60 90 120 150 Millions of barrels per day US$ billions Capital expenditures of US oil producers (left scale) US crude oil production (right scale) 2014 2015 2016

Last data plotted: Capital expenditures, 2016;

  • il production, December 2016

Sources: International Energy Agency and Bank of Canada calculations Note: US oil capital expenditures are aggregated based on a review of annual reports from 53 US independent oil producers.

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SLIDE 8

Crude oil prices remain low

20 40 60 80 100 120 Jul Oct Jan Apr Jul Oct Jan Apr US$/barrel WCS crude oilᵃ WTI crude oilᵇ Brent crude oil

January Monetary Policy Report

2014 2015 2016 Daily data

Last observation: 8 April 2016 Sources: Haver Analytics and Bloomberg

  • a. WCS refers to Western Canada Select.
  • b. WTI refers to West Texas Intermediate.
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SLIDE 9

US employment gains and consumer confidence are around post-recession highs

  • 1,000
  • 800
  • 600
  • 400
  • 200

200 400 20 40 60 80 100 120 140 2007 2009 2011 2013 2015 Thousands Index Consumer confidence (left scale) Change in non-farm employment (right scale) 3-month moving average; index: 1985 = 100

Last observation: March 2016 Sources: US Conference Board and US Bureau of Labor Statistics

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SLIDE 10

Projection for global economic growth

10

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SLIDE 11

Export-related industries are picking up while industries most affected by commodity prices remain depressed

98 100 102 104 106 108 110 2013 2014 2015 2016 Index Selected export-related industries (17 per cent of GDP) Industries most affected by commodity prices (14 per cent of GDP) Rest of the economy (69 per cent of GDP)

+ 3.9 + 2.0

  • 3.7

Latest year-over-year percentage change

3-month moving average; index: January 2013 = 100, monthly data

Last observation: January 2016 Sources: Statistics Canada and Bank of Canada calculations Note: Selected export-related industries includes manufacturing, agriculture, forestry, fishing and hunting, and transportation. Industries most affected by commodity prices includes mining, oil and gas, engineering and non-residential construction, and related professional services.

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SLIDE 12

Various indicators illustrate divergence across Canada

  • 40
  • 30
  • 20
  • 10

10 20 30 40

  • 6
  • 4
  • 2

2 4 6 Employment (Survey of Employment, Payrolls and Hours, left scale) Retail sales (nominal, left scale) Housing resales (right scale) % National Energy-producing provinces Rest of Canada % Percentage change since November 2014, monthly data

Last observations: Employment and retail sales, January 2016; housing resales, February 2016 Sources: Statistics Canada and Bank of Canada calculations Note: The energy-producing provinces are Alberta, Saskatchewan, and Newfoundland and Labrador.

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SLIDE 13

Investment outside oil and gas industries is projected to pick up

  • 15
  • 10
  • 5

5 10

  • 15
  • 10
  • 5

5 10 2013 2014 2015 2016 2017 2018 Percentage points % Oil and gas industries (right scale) Other industries (right scale) Total investment growth (left scale) Contribution to total business investment growth, annual data

Sources: Statistics Canada and Bank of Canada estimates, calculations and projections

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SLIDE 14

Non-commodity exports are projected to become the main contributor to total export growth

1 2 3 4 5 1 2 3 4 5 Average 2013–15 2016Q4 2017Q4 2018Q4 Percentage points % Commodity exports (contribution to total export growth, right scale) Non-commodity exports (contribution to total export growth, right scale) Total exports (year-over-year percentage change, left scale) Q4/Q4 percentage change

Sources: Statistics Canada and Bank of Canada calculations and projections

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SLIDE 15

Contributions to real GDP growth

Percentage points

15

2015 2016 2017 2018 Consumption 1.1 1.0 1.2 1.0 Housing 0.3 0.2 0.1 0.0 Government 0.4 0.5 0.6 0.0 Business fixed investment

  • 1.2
  • 0.8

0.4 0.5 Exports 1.0 1.1 0.9 1.2 Imports

  • 0.1

0.2

  • 1.2
  • 0.8

GDP 1.2 1.7 2.3 2.0

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SLIDE 16

Total CPI inflation is expected to remain below 2 per cent through 2016

  • 2.5
  • 2.0
  • 1.5
  • 1.0
  • 0.5

0.0 0.5 1.0 1.5

  • 0.5

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 2014 2015 2016 2017 2018 Percentage points % Commodity prices excluding pass-throughᵃ (right scale) Output gap (right scale) Exchange rate pass-through (right scale) Other factors (right scale) Total inflation (year-over-year percentage change, left scale) Contribution to the deviation of inflation from 2 per cent

Sources: Statistics Canada and Bank of Canada estimates, calculations and projections

  • a. Also includes the effect on inflation of the divergence from the typical relationship between gasoline and crude oil prices and the introduction of the cap-and-trade plan in Ontario
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SLIDE 17

Risks to the outlook for inflation

  • Upside risks
  • 1. Stronger real GDP growth in the United States
  • 2. Stronger momentum for Canadian exports
  • Downside risks
  • 1. More cautious behaviour by Canadian consumers
  • 2. More pronounced adjustment of Canadian economy to low

commodity prices

  • 3. Slower growth in emerging-market economies
  • Implications for monetary policy

17

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SLIDE 18

Nova Scotia economic outlook

18

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SLIDE 19
  • 4
  • 3
  • 2
  • 1

1 2 3 4 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Canada Nova Scotia

Source: Statistics Canada and Private Sector Forecasts (Conference Board of Canada, Bank of Nova Scotia, TD, CIBC, BMO, RBC, and Desjardins)

%

Growth in Nova Scotia will be supported by project investments and exports

Real GDP Growth

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SLIDE 20

Nova Scotia exports could top $1.9 billion in 2016

1 2 1 2 3 4 5 6 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016e Fishery products Rubber products Lumber and forestry products Machinery and equipment All others Natural gas and other energy (right scale) $ Billions in non-energy exports

Last observation: March 2016 Source: Industry Canada Trade Data Online

$ Billions in energy exports

*2016e is an estimate based on 2016Q1 data

Exports by Product

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SLIDE 21

T

  • urism

21

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SLIDE 22

Although lower than its peak, Canada’s tourism sector continues to play an important role

3.3 3.5 3.7 3.9 4.1 4.3 4.5 1.3 1.5 1.7 1.9 2.1 2.3 2.5 % % Tourism share of gross domestic product at basic prices (left scale) Tourism share of total employment (right scale) Tourism share of GDP and total employment

Last observation: 2015Q4 Source: Statistics Canada and Bank of Canada calculations

2015: GDP: $7.8 billion (2007 CAD) Employment: 637,000 jobs

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SLIDE 23

Currency movements affect foreign travel into and out of Canada

0.60 0.65 0.70 0.75 0.80 0.85 0.90 0.95 1.00 1.05 1.10

  • 3.5
  • 2.5
  • 1.5
  • 0.5

0.5 1.5 2.5 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Exchange rate Millions of travellers Canadian dollar vis-à-vis the U.S. dollar (right scale) Non-resident travellers to Canada (left scale) Canadians travelling abroad (left scale) Changes in the number of travellers since 1990 Indexed at 1990, quarterly data

Last observation: 2016Q1 Sources: Statistics Canada and Bank of Canada calculations

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SLIDE 24

The U.S. economy and other major events also have a material impact on tourism

  • 10.0%
  • 8.0%
  • 6.0%
  • 4.0%
  • 2.0%

0.0% 2.0% 4.0% 6.0% 0.60 0.65 0.70 0.75 0.80 0.85 0.90 0.95 1.00 1.05 1.10 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 Exchange Rate Difference in tourism GDP and national GDP annual growth rates (right scale) Canadian dollar vis-à-vis the U.S. dollar (left scale) Difference in tourism GDP and national GDP annual growth rates

SARS Outbreak 9/11

Last observation: 2015

% U.S. Recession Period

Sources: Statistics Canada, NBER and Bank of Canada calculations

6.0 4.0 2.0 0.0

  • 2.0
  • 4.0
  • 6.0
  • 8.0
  • 10.0
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SLIDE 25

Recent strength in tourism expenditure growth is being increasingly driven by foreign demand

  • 0.5

0.0 0.5 1.0 1.5 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 2015Q3 % Domestic contribution Foreign contribution Total tourism expenditure growth Foreign and domestic contributions to quarterly tourism expenditure growth

Last observation: 2015Q4 Sources: Statistics Canada and Bank of Canada calculations

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SLIDE 26

Key Messages

  • Global and Canadian economies will gradually

gain momentum

  • Economic adjustment in Canada will be facilitated

by depreciation of CDN dollar and stronger U.S.

  • Demand for tourism services will increase