Hoping for the Best: BCs Economic Outlook Presented to: EDABC - - PowerPoint PPT Presentation

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Hoping for the Best: BCs Economic Outlook Presented to: EDABC - - PowerPoint PPT Presentation

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Hoping for the Best: BCs Economic Outlook Presented to: EDABC Richmond, BC May 15, 2012 Ken Peacock Chief Economist Business Council of BC 2 Two-Track Global Economy Real GDP Growth, % 9 6 3 0 World -3 Advanced economies

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SLIDE 1

Hoping for the Best: BC’s Economic Outlook

Presented to: EDABC

Richmond, BC May 15, 2012

Ken Peacock

Chief Economist Business Council of BC

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SLIDE 2

Two-Track Global Economy

Source: IMF.

  • 6
  • 3

3 6 9

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

World Advanced economies Emerging economies

Real GDP Growth, %

2

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SLIDE 3

Emerging Markets Driving the World Economy

Source: IMF.

3

28.0 35.0 3.7 4.2

  • 0.4
  • 3.3
  • 10
  • 5

5 10 15 20 25 30 35 40 Emerging markets Emerging Asia Canada US Euro area Japan

Change in level of real GDP, 2007 to Q3 2011

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SLIDE 4

Global Growth Set to Slow (Real GDP % Change)

2002-2007 average 2011 2012 2013 2014 United States 2.6 1.7 2.3 2.5 3.6 Euro area 2.0 1.5

  • 0.6

0.8 1.4 Japan 1.6

  • 0.7

1.9 1.6 1.6 China 11.2 9.2 8.1 8.0 8.0 Rest of the world 5.1 4.3 3.4 3.5 3.7 World 4.4 3.8 3.2 3.4 3.8 Canada 2.7 2.5 2.4 2.4 2.2

Source: Bank of Canada, Monetary Policy Report, April 24. 2012. 4

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SLIDE 5
  • 4
  • 2

2 4 6

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Canada US

Canada’s Growth Still Aligned with US

Source: IMF for history, TD Economics for 2012 & 2013 forecasts.

Real GDP Growth, %

5

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SLIDE 6

US Home Prices Stabilizing?

50 70 90 110 130 150 170 190 210 230 250 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

US Home Price Indices, Jan. 2000=100

S&P Case Shiller 10 City Composite CoreLogic National CoreLogic National excl Distressed sales

Source: Standard & Poor's and CoreLogic. Latest: February for S&P and March for CoreLogic 6

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SLIDE 7

US Housing Starts Gradually Rising

50 550 1050 1550 2050 2550 00 01 02 03 04 05 06 07 08 09 10 11 12

US Housing Starts, seasonally adjusted annual rate, 000s

Source: US Census Bureau. Latest: March 7

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SLIDE 8

When They Move Out…Starts Will Climb

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SLIDE 9

Loonie Shapes the Competitive Landscape

60 65 70 75 80 85 90 95 100 105 110

02 03 04 05 06 07 08 09 10 11 12 13

Canada - US Exchange Rate, monthly with quarterly forecasts, US cents/Cdn$ noon rate BMO Capital Markets TD Economics

Source: Bank of Canada, BMO Capital Markets for forecasts (May 2012). Latest actual: April 2012

forecast

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SLIDE 10

Canada: Interest Rates at Rock Bottom Levels

1 2 3 4 5 6 7

02 03 04 05 06 07 08 09 10 11 12

Interest Rates, %

3 month T-bill 10 yr Bond Yields

Source: Bank of Canada. Latest: April 2011 10

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SLIDE 11

BC Economy: Key Themes

Export sector has rebounded since 2009 – growing influence of Asia Domestic activity were soft in 2011, hindered by muted job growth, high household debt and HST-related issues Construction (non-residential) is expected to provide an economic lift going forward Northern BC on the rise Skill/talent shortages re-emerging as a key business concern

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SLIDE 12

Modest Employment Gains

Source: Statistics Canada. S.A. – seasonally adjusted

2000 2050 2100 2150 2200 2250 2300 2350 2004 2005 2006 2007 2008 2009 2010 2011 2012

BC Employment, thousands

Employment S.A. Trend

Latest: April 2012 12

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SLIDE 13

Job Growth Concentrated in Metro Vancouver

Source: Statistics Canada, seasonally adjusted data.

95 100 105 110 115 2006 2007 2008 2009 2010 2011 2012

Employment Metro Van and Rest of BC, Indexed Jan 2006=100

Metro Van Rest of BC

Latest: March 2012 13

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SLIDE 14

1 2 3 4 5 6 7 8 9 BC Alta Sask Man Ont Que

2009 2010 2011 2012 ytd

Unemployment Lower in the West

Source: Statistics Canada.

Provincial Unemployment Rates, %

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SLIDE 15

Growth in Consumer Spending Picking Up

BC Retail Sales Growth quarterly, y/y % change

  • 10
  • 8
  • 6
  • 4
  • 2

2 4 6 8 10 00 01 02 03 04 05 06 07 08 09 10 11 12

Source: Statistics Canada. Latest: Q1 2012, estimate based on Jan & Feb. 15

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SLIDE 16

Housing Sales Level Off in BC

Source: CREA.

3000 4000 5000 6000 7000 8000 9000 10000 2004 2005 2006 2007 2008 2009 2010 2011 2012

BC Housing Sales (MLS), seasonally adjusted, units

Latest: March 2012 16

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SLIDE 17

House Prices Moderating?

Source: CREA.

200 250 300 350 400 450 500 550 600 650 2004 2005 2006 2007 2008 2009 2010 2011 2012

  • Avg. House Price BC, $ thousands

Latest: March 2012 17

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SLIDE 18

Residential Construction Flat

500 1000 1500 2000 2500 3000 3500 4000 4500 03 04 05 06 07 08 09 10 11 12

BC Housing Starts seasonally adjusted, units

Source: CMHC, urban areas (population 10,000+). Latest: February 2012 18

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SLIDE 19

10 15 20 25 30 35 40 45 50 55

91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

BC Capital Investment, billions $

Capital Spending to Exceed $50 billion

Source: Statistics Canada, Public and Private Investment Intentions. 19

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SLIDE 20
  • 10
  • 8
  • 6
  • 4
  • 2

2 4 6 8 05 06 07 08 09 10 11 12

Change in BC Capital Investment, billions $ All other sectors Housing Mining, Oil & Gas & Mfg.

…thanks to More Investment in Resource Industries

Source: Statistics Canada, Public and Private Investment Intentions. 20

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SLIDE 21

China and Other Markets Have Driven BC Exports

700 900 1,100 1,300 1,500 1,700 1,900 2,100 06 07 08 09 10 11 12

BC International Merchandise Exports, S.A. millions $ US Rest of World

Source: BC Stats. Latest: March 2012 21

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SLIDE 22

5,000 10,000 15,000 20,000 25,000 00 01 02 03 04 05 06 07 08 09 10 11

BC Exports, millions $

BC Exports to Pacific Rim Now Equal to US

Source: BC Stats. 22

Pacific Rim US

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SLIDE 23

1,000 2,000 3,000 4,000 5,000 6,000 02 03 04 05 06 07 08 09 10 11

BC Lumber Exports, millions $

China US Japan

Asia Eclipsing Languishing US Market

Source: BC Stats. 23

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SLIDE 24

200 400 600 800 1,000 1,200 1,400 1,600 1,800 02 03 04 05 06 07 08 09 10 11

BC Pulp Exports, millions $

China US Japan

China is BC’s Largest Pulp Market

Source: BC Stats. 24

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SLIDE 25

Slower Growth in 2012

Forecast

2010 2011 2012f 2013f Real GDP 3.0 2.9 2.2 2.6 Employment 1.7 0.8 1.6 1.6 Retail sales 5.4 3.1 4.0 4.5 Housing starts (units) 26,500 25,500 25,000 25,000

Source: Business Council, Statistics Canada for history.

BC Economic Forecast, % change unless noted

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SLIDE 26

A Decent Overall Economic Performance for BC

0.0 0.5 1.0 1.5 2.0 2.5 3.0

NS Ont NB Que PEI Can Nfld Sask BC Man Alta

Real GDP Growth 2005-2011, annual average %

Source: Statistics Canada. 26

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SLIDE 27

BC’s Economic Position in Canada: Three Metrics

Real GDP per person, 2010 Real Disposable Income per person, 2010 Labour Productivity: real output per hour worked, business sector, 2010 BC $36,899

(5th among provinces)

BC $26,166

(4th among provinces)

BC $34.15

(6th among provinces)

Alberta $49,249 Alberta $33,438 Alberta $46.96 Ontario $39,902 Ontario $27,004 Nfld $45.00 Sask $39,769 Sask $26,193 Sask $42.77 Nfld $37,214 Canada $26,571 Ontario $38.20 Canada $38,826 Quebec $36.52 Canada $38.22

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SLIDE 28

Economic Upswing in “Northern BC”

Mining (coal, metals) – BC Jobs Plan targets 8 new mines by 2020 Construction – many significant projects Wood products (but from a low base) Transportation/logistics – PG and Prince Rupert Gateway development and expansion Energy (Northwest Transmission Line, IPPs, LNG terminal in Kitimat, other shale gas and LNG plays, pipeline development, bio- energy opportunities, Site C) Rio Tinto Alcan smelter modernization But…regional skill shortages expected (already emerging)

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SLIDE 29
  • 40
  • 30
  • 20
  • 10

10 20 30 40

Vancouver Island Mainland / Southwest Thompson-Okanagan Kootenay Cariboo North Coast Nechako Northeast

Per Cent Change, Population 25-49

1990-2000 2000-2010

Source: BC Stats.

Decline in Core Working Age Population in Many Areas

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SLIDE 30

200 400 600 800 1,000 1,200 1,400 1,600 15-24 25-34 35-44 45-54 55-64 65+

2011 2021 2031

65+ Will Account for 23% of the Population (compared to 15% Today)

Source: Statistics Canada. * medium growth M1 scenario

BC Population* by Age Cohorts, thousands

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SLIDE 31

Net Interprovincial Migration Turns Negative

Source: BC Stats, BCBC for seasonal adjustment.

  • 10000
  • 5000

5000 10000 15000 20000 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11

BC Net Migration, quarterly seasonally adjusted, persons

Interprovincial International

Latest: Q4 2011 31

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SLIDE 32

10 20 30 40 50 60

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11

Immigration, thousands Man Sask Alta BC

Almost as Many Immigrants Settle in Alberta as BC

Source: Statistics Canada. 32

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SLIDE 33
  • 30
  • 20
  • 10

10 20 30 40 50

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11

Net Interprovincial Migration, thousands Alta BC

Alberta Attracting People

Source: Statistics Canada 33

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SLIDE 34

Marginal Effective Tax Rates on Business Investment

BC Pre-HST 26.4% BC with HST 15.7% Ontario with HST 16.2% Alberta 16.3% Quebec 14.8% US 34.3% OECD avg 22% The Marginal Effective Tax Rate (METR) is a comprehensive measure of the impact of business taxes

  • n investments. It captures all

taxes which impact the net return on capital employed – e.g., corporate income tax, capital taxes, sales taxes, and capital cost allowances. The METR excludes R&D tax credits and property taxes.

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SLIDE 35

Keeping BC Competitive in a Post-HST World

Maintain low corporate tax rates Streamline / simplify PST administration – to reduce compliance costs As fiscal circumstances permit, expand PST exemptions for business inputs (focus on inputs that drive investment and productivity) Examine scope to deploy new tax incentives aimed at boosting productivity-enhancing investments Assess all policies and regulations through a competitiveness lens Overhaul the regime governing municipal property taxation to improve equity between residential/business property owners

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SLIDE 36

Summary

Rise of emerging economies (Asia) reshaping BC economy Resource sectors providing a lift (incl. investment) Domestic economic activity mixed Downside risks still exist, but have diminished BC’s competitive position a concern, especially with return to PST Challenges: demographics, and productivity / innovation

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