The Economic Outlook Derek Burleton Vice President and Deputy Chief - - PDF document

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The Economic Outlook Derek Burleton Vice President and Deputy Chief - - PDF document

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The Economic Outlook Derek Burleton Vice President and Deputy Chief Economist April 2013 GLOBAL SLOWDOWN Global trade volume (y/y %change) Global PMI*, below 50 indicates contraction 25 75 20 70 15 65 10 60 5 55 0 50 -5 45 -10

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The Economic Outlook TD Economics, April 2013

The Economic Outlook

Derek Burleton Vice President and Deputy Chief Economist

April 2013

GLOBAL SLOWDOWN

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5 10 15 20 25 2000 2002 2004 2006 2008 2010 2012 25 30 35 40 45 50 55 60 65 70 75 Global PMI* (rhs) Global Trade Volume (lhs) Global PMI*, below 50 indicates contraction Global trade volume (y/y %change) *Purchasing managers index. As of April 2013. Source: TD Economics, Bloomberg, Haver Analytics. Grey area marks U.S. recession.

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The Economic Outlook TD Economics, April 2013

GLOBAL GROWTH OUTLOOK

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1 2 3 4 5 6 Canada U.S. Europe Developing Economies 2012 2013 2014 Real GDP Y/Y % Chg.

Source: TD Economics. Forecast by TD Economics as of March 2013.

EMERGING MARKETS STILL IN THE DRIVER’S SEAT

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2 4 6 8 10 2002 2004 2006 2008 2010 2012E 2014F Advanced Developing

Source: IMF, Forecast by TD Economics as of March 2013. Forecast

GDP Growth, YOY % Chg.

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The Economic Outlook TD Economics, April 2013

COMMODITIES TO BE SUPPORTED BY IMPROVING GLOBAL DEMAND**

3 6 9 12 15 2002 2004 2006 2008 2010 2012 2014 20 40 60 80 100 120 140 Natural Gas - Henry Hubb (lhs) Crude Oil - WTI (rhs) US$/mmbtu US$/Barrel Forecast Source: Haver Analytics, TD Economics. As of April 2013.

HEAVY OIL DIFFERENTIAL HAS IMPROVED

5 10 15 20 25 30 35 40 2008 2009 2010 2011 2012 WTI-WCS Spread, $ Note: Prices are expressed as monthly averages. Source: Bloomberg and TD Economics. Average Spread Since May 2008

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The Economic Outlook TD Economics, April 2013

FISCAL DRAG TO HOLD BACK US GROWTH

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2 4 6 8 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Without Fiscal Drag TD Forecast U.S. real GDP growth; year-over-year % chg. Source: BEA, Forecast by TD Economics. As of March 2013. Forecast

FEDERAL RESERVE HAS THE TAPS TURNED ON

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 2007 2008 2009 2010 2011 2012 2013 Mortgage backed securities Treasury securities Liquidity programs & other assets Agency securities Federal Reserve balance sheet, $U.S. (Trillions) Source: Federal Reserve Board; As of April 2013.

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The Economic Outlook TD Economics, April 2013

CONSUMER DELEVERAGING IS ABATING

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2 4 6 8 10 2007 2008 2009 2010 2011 2012 2013 Consumer credit Consumer credit net of defaults Consumer credit; year-over-year % change Includes auto loans, bankcard, retail credit Source: Equifax, Moody's Analytics, TD Economics. As of April 2013.

HOUSE PRICES FINALLY TURNING A CORNER

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5 10 15 20 2002 2004 2006 2008 2010 2012 S&P Case-Shiller HPI* CoreLogic HPI U.S. home prices; year-over-year % change Source: CoreLogic, S&P Case-Shiller, Haver Analytics. As of April 2013. *Twenty city composite.

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The Economic Outlook TD Economics, April 2013

CANADA’S LARGE MARKETS HAVE HELD UP RELATIVELY WELL

2.9 2.3 2.1 1.8 1.7 1.4 1.2 1.1 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 Edmonton Ottawa/Gatineau Québec Calgary Toronto Vancouver Winnipeg Montréal Annual growth rate of employment, 2007-2012, % Source: Statistics Canada.

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2 4 6

2004-2007 2008-2011 2012-2015 Business Investment and Exports Consumers, Governments and Residential Investment

Source: Statistics Canada, Haver Analytics Forecast by TD Economics as of December 2012 Average annual contribution to real GDP growth, % Forecast

CONSUMERS AND GOVERNMENTS CAN NO LONGER BE THE ENGINES OF GROWTH

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The Economic Outlook TD Economics, April 2013

NON-RESIDENTIAL SECTOR AT THE TOP OF THE GROWTH LEADERBOARD

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1 2 3 4 5

  • Res. Construction

Public Admin Financial Services Retail Trade

  • Accom. & Food Svs.

Primary

  • Prof. Services

Wholesale Trade Manufacturing Non-res Construction Source: Statistics Canada, TD Economics; Forecast as of December 2012. 2013-2014 average annual growth, %

HOUSEHOLD DEBT TO GROW MORE IN LINE WITH INCOME

20 40 60 80 100 120 140 160 180 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

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Household Debt-to-Income Ratio (lhs) Household Debt Growth (rhs)

Source: Statistics Canada. Forecast by TD Economics as of March 2013.

% Year-over-Year % Change Fcst*

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The Economic Outlook TD Economics, April 2013

INTEREST RATES TO REMAIN LOWER FOR LONGER

1 2 3 4 5 6 7 2000 2002 2004 2006 2008 2010 2012 2014 US Federal Funds Target Rate Bank of Canada Overnight Rate Source: Bank of Canada/Haver Analytics. Forecast by TD Economics as of March 2013. % Forecast

BOND YIELD CURVE TO GRADUALLY SHIFT UPWARDS

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 Overnight Rate 3-month 2-year 5-year 10-year 30-year Current End of 2013 End of 2014 Yield on Canadian bonds, %

Source: Bloomberg, TD Economics. As of March 2013.

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The Economic Outlook TD Economics, April 2013

CANADIAN EXPORTS TO PICK UP MODERATELY IN 2013-14

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5 10 15 2002 2004 2006 2008 2010 2012 2014 Resources Other Goods and Services Source: Statistics Canada/Haver Analytics. Forecast by TD Economics as of April 2013. Forecast Real exports, Y/Y% change

CANADIAN DOLLAR TO WEAKEN FURTHER

0.60 0.70 0.80 0.90 1.00 1.10 2002 2004 2006 2008 2010 2012 2014 US$/C$ Forecast Source : Bank of Canada; Forecast by TD Economics as of April 2013.

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The Economic Outlook TD Economics, April 2013

CANADIAN CORPORATE BALANCE SHEETS ARE HEALTHY …

0.4 0.5 0.6 0.7 0.8 0.9 1.0 1995 1998 2001 2004 2007 2010 0.0 0.2 0.4 0.6 0.8 1.0 1.2 Debt-to-Equity (lhs) Quick Ratio* (rhs) Source: Statistics Canada. Q4 2012. *Quick Ratio = Liquid assets / Current liabilities Debt-to-Equity Ratio Quick Ratio*

… WHICH AUGURS WELL FOR LONGER- TERM CAPITAL SPENDING PLANS

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5 10 15 2002 2004 2006 2008 2010 2012 2014 Business Investment GDP Growth Annual % Change

Source: Statistics Canada, Haver Analytics. Forecast by TD Economics as of March 2013.

Forecast

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The Economic Outlook TD Economics, April 2013

BUT ALBERTA BUSINESSES TO HOLD OUT ON CAPITAL OUTLAYS IN 2013

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2 4 6 8 10 12 14 Total Construction Machinery & Equipment Private Public 2012 Actual 2013 Expected Alberta Private and Public Capital Expenditure Intentions, Y/Y% Change Sectoral Breakdown

Source: Statistics Canada.

ALBERTA GOVERNMENT TARGETS RETURN TO SURPLUS IN 2014-15

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2 4 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13f* 13-14f

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5 10 Net Debt Government Budget Balance Forecast Alberta Government Budget Balance, % of GDP Alberta Net Debt, % of GDP Source: 2012 and 2013 Government Budgets and Fiscal Updates, TD Economics.

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The Economic Outlook TD Economics, April 2013

MODEST JOB CREATION AHEAD IN EDMONTON

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1 2 3 4 5 6 7 2010 2011 2012 2013F 2014F Canada Edmonton Employment growth, %

Source: Statistics Canada, Forecast by TD Economics.

Forecast

JOBLESS RATE TO HOLD FAIRLY STEADY

3 4 5 6 7 8 9 2010 2011 2012 2013F 2014F Canada Edmonton Unemployment Rate, %

Source: Statistics Canada, Forecast by TD Economics.

Forecast

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The Economic Outlook TD Economics, April 2013

ROOM FOR HOUSING MARKET TO GROW

5,000 10,000 15,000 20,000 25,000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 Edmonton Existing Home Sales, Units Edmonton Existing Home Prices, Level Source: CREA, Forecast by TD Economics as of April 2013. FCST

ACTIVE DEVELOPMENT CYCLE IN THE REGION

50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 500,000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: CMHC, Statistics Canada Edmonton Building Permits, 000's of C$

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The Economic Outlook TD Economics, April 2013

TD Economics www.td.com/economics

This report is provided by TD Economics for customers of TD Bank Group. It is for information purposes only and may not be appropriate for other purposes. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this report has been drawn from sources believed to be reliable, but is not guaranteed to be accurate or complete. The report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors, and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered.