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New World Realities Warren Jestin SVP & Chief Economist Presentation to: Edmonton Real Estate Forum Edmonton, May 3, 2011 The Global Economy Is Reviving Real GDP annual % change 2004-07 12 2010e 2011f 10 2012f 8 6 4 2 0

SLIDE 1

New World Realities

Warren Jestin SVP & Chief Economist

Presentation to:

Edmonton Real Estate Forum

Edmonton, May 3, 2011

SLIDE 2

The Global Economy Is Reviving…

2 4 6 8 10 12 China India Brazil Mexico Japan U.S. Canada Euro zone 2010e 2011f 2012f

annual % change

Source: Scotia Economics, Bloomberg, BEA, Statistics Canada, Eurostat.

Real GDP

2004-07

SLIDE 3

2 4 6 04 05 06 07 08 09 10 11

y/y % change

U.S. Employment Growth

Source: Statistics Canada, BEA, Scotia Economics, Eurostat.

Canada

70 80 90 100 110 120 130 140 150 04 05 06 07 08 09 10 11

Construction & Resources Lead in Alberta Manufacturing

employment, Index: 2004Q1=100

Services Construction

… But the Recovery is Uneven Across Regions and Sectors…

Alberta Natural Resources

SLIDE 4

2 4 6 8 10 12 14 16 04 05 06 07 08 09 10

… U.S. Financial Strains Remain Intense…

U.S. Foreclosures Near Record Highs

Source: Bloomberg.

Subprime Foreclosures Prime Foreclosures

% of total loans 1.6 2.0 2.4 2.8 3.2 3.6 FY04 05 06 07 08 09 10

Federal Spending Far Exceeds Revenues

US$ trillions

Source: U.S. Treasury.

Total Revenue Total Expenditures

SLIDE 5

2 4 6 8 10 12 14 U.S. U.K. Japan Canada Germany

Fiscal Deficits

Source: IMF, Scotia Economics.

General Gov’t, 2010, % of GDP

20 40 60 80 100 120 140 Japan U.K. U.S. GermanyCanada

Net Debt

Emerging Economies

General Gov’t, 2010, % of GDP

… & Fiscal Repair Will Temper Growth Beyond Mid-Decade

Emerging Economies

SLIDE 6

Emerging Markets are Driving Global Growth

Motor Vehicle Sales*

4 8 12 16 20 04 05 06 07 08 09 10 11f millions of units

North America EU & Japan Brazil, Russia, India & China

forecast

*Includes light trucks in North America. Source: Scotia Economics, Ward’s Automotive Reports.

Commodities Prices

50 100 150 200 250 300 350 400 04 05 06 07 08 09 10 11

Gold WTI Oil

prices, index:2004Q1=100 Source: Scotia Economics, Bloomberg.

NYMEX Natural Gas Wheat

SLIDE 7

25 50 75 100 125 150 175 04 05 06 07 08 09 10 11

Canada’s Consumer Price Index

index: January 2004=100, 12 month moving average

Inflation Risks Are Rising

*CPI ex-8 most volatile components & impact of indirect tax changes. Source: Scotia Economics, Statistics Canada.

Food Gasoline Canada’s Inflation Dichotomy

1 2 3 4 04 05 06 07 08 09 10 11 y/y % change

Core* Motor Vehicles Personal Computers Headline Total

SLIDE 8

1 2 3 4 5 6 04 05 06 07 08 09 10 11 12 Source: Bank of Canada, U.S. Federal Reserve, Scotia Economics.

Central Bank Rates U.S.

forecast %

Canada

100 125 150 175 04 05 06 07 08 09 10 11

Canada’s Consumer Spending Surge

index: Jan 2004=100 3-month moving average

Low Interest Rates Support Retail Sales and Home Prices

MLS House Prices Full-time Employment Retail Sales

Source: Canadian Real Estate Association, Statistics Canada.

SLIDE 9

Stronger Job Creation & Confidence Underpin Housing Market

Source: The Conference Board, Scotia Economics. 25 50 75 100 125 150 04 05 06 07 08 09 10 11

Canada U.S.

Consumer Confidence

index: 2004 Q1 = 100

25 50 75 100 125 150 04 05 06 07 08 09 10 11 12

Housing Starts

forecast

Source: Global Insight, Scotia Economics.

Canada U.S. Alberta

index: 2004=100

SLIDE 10

14 16 18 20 22 24 26 28 30 32 94 96 98 00 02 04 06 08 10

Despite Rising Debt, Canadian Finances Are in Better Shape

Canada U.S.

… But We Use Less Debt to Buy Assets

household* debt o/s as % of assets

* Includes households and unincorporated business. Source: U.S. Federal Reserve, Statistics Canada, Scotia Economics. 80 90 100 110 120 130 140 150 160 170 94 96 98 00 02 04 06 08 10

Canada U.S.

The Gap has Closed on Debt to Income…

household* credit liabilities o/s as % of PDY

SLIDE 11

80 100 120 140 04 05 06 07 08 09 10 11 12 4 8 12 16 04 05 06 07 08 09 10 11

Non-res Construction Also More Resilient in Canada…

forecast

Canada U.S. Non-Residential Construction

index: 2004=100 %

Canada U.S. Office Vacancy Rates

Source: Statistics Canada, CBRE, Cushman & Wakefield Scotia Economics.

Edmonton Calgary

SLIDE 12

Source: Scotia Economics, Statistics Canada, Bloomberg. 25 50 75 100 125 04 05 06 07 08 09 10 11 12 0.60 0.65 0.70 0.75 0.80 0.85 0.90 0.95 1.00 1.05 1.10

CADUSD

Parity

Canadian Dollar (RHS)

forecast

The Loonie Continues to Fly High… WTI Oil (LHS)

WTI Oil US$/bbl

5 10 15 20 25 04 05 06 07 08 09 10

Commodities …Despite Weaker Trade Balances

C$ billions, 4-quarter moving average

Merchandise Trade ex. Commodities

$100/bbl

Tourism Balance

… & Loonie Strength, U.S. Weakness Hit Our Exports

SLIDE 13

Source: Statistics Canada, Scotia Economics. 100 110 120 130 140 150 160 170 180 04 05 06 07 08 09 10f 11f 12f

Nominal GDP Per Capita

index: 2004=100

100 110 120 130 140 150 160 170 180 04 05 06 07 08 09 10f 11f 12f

Nominal GDP Per Capita

index: 2004=100

Ontario B.C. Alberta Quebec Saskatchewan P.E.I. New Brunswick Nova Scotia Newfoundland and Labrador

forecast forecast

Manitoba

Growth & Income Prospects Best in Resource Regions

SLIDE 14

Disclaimer

This report has been prepared by Scotia Economics as a resource for the clients of Scotiabank and Scotia Capital. 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 Group nor its affiliates accepts any liability whatsoever for any loss arising from any use of this report or its contents.