2016 Outlook: The Economics of Change Warren Jestin SVP & Chief Economist - Scotiabank Real Estate Forum - Toronto December 2, 2015
The U.S. Gears Up . . . Gradually Real GDP Growth 5 annual % change 4 U.K. Canada U.S. 3 2 1 0 -1 Euro zone -2 -3 -4 -5 2007 08 09 10 11 12 13 14 15f 16f Source: Statistics Canada, BEA, Bloomberg, Scotiabank Economics. Forecasts at November 2, 2015 Warren Jestin Page 1 Real Estate Forum - Toronto (Dec. 2, 2015)
Improved U.S. Job Prospects Fuel Consumer Confidence . . . Unemployment Rate 14 % Euro Zone 12 10 U.K. 8 Canada 6 4 U.S. 2 0 2007 08 09 10 11 12 13 14 15f 16f Source: Statistics Canada, BLS, Bloomberg, Scotiabank Economics. Forecasts at November 2, 2015 Warren Jestin Page 2 Real Estate Forum - Toronto (Dec. 2, 2015)
. . . Supported by Income Gains . . . Growth In Personal Disposable Income 135 Index 2007=100 130 Canada 125 U.K. 120 U.S. 115 110 Euro zone 105 100 2007 08 09 10 11 12 13 14 Source: Bloomberg, Scotiabank Economics. Warren Jestin Page 3 Real Estate Forum - Toronto (Dec. 2, 2015)
. . . & Years of Pent-up Demand Average Age Of Motor Vehicles 12 years U.S. 11 10 Canada 9 8 2007 08 09 10 11 12 13 14 Source: Wards Automotive, DesRosiers Automotive Consultants Warren Jestin Page 4 Real Estate Forum - Toronto (Dec. 2, 2015)
Weak C$ Undercuts Purchasing Power But Boosts Competitiveness Personal Disposable Income Gains in US$ 130 Index 2007=100 Incomes adjusted to US$ 120 Canada U.S. 110 100 Euro zone 90 U.K. 80 70 2007 08 09 10 11 12 13 14 Source: Bloomberg, Scotiabank Economics. Warren Jestin Page 5 Real Estate Forum - Toronto (Dec. 2, 2015)
Emerging Nations Are Still Major Drivers of Global Growth . . . World GDP Growth 6 global growth & share of real GDP 5 48% 4 53% 42% 3 36% 59% 56% 2 58% 52% 47% 64% 1 44% 41% 0 1990 2000 2007 2010 2014f 2019f Emerging and Developing Markets Advanced Economies (share of total world GDP) (share of total world GDP) Source: IMF WEO April 2015, Scotiabank Economics. Warren Jestin Page 6 Real Estate Forum - Toronto (Dec. 2, 2015)
. . . Supported by Rapid Income Gains Growth In Personal Disposable Income 280 Index 2007=100 260 China* 240 220 200 180 160 140 Canada U.K. U.S. 120 Euro zone 100 2007 08 09 10 11 12 13 14 Source: Bloomberg, Scotiabank Economics . *Urban households . Warren Jestin Page 7 Real Estate Forum - Toronto (Dec. 2, 2015)
But China Is Gearing Down . . . China GDP 16 y/y % change Goods 12 Services 8 Total 4 2007 08 09 10 11 12 13 14 15f 16f Source: National Bureau of Statistics of China, Scotiabank Economics. Forecasts at November 2, 2015 Warren Jestin Page 8 Real Estate Forum - Toronto (Dec. 2, 2015)
. . . & Emerging Market Trends Are Uneven . . . Real GDP Growth 16 annual % change 14 12 10 India 8 6 China 4 2 0 -2 Brazil -4 2007 08 09 10 11 12 13 14 15f 16f Source: Bloomberg, Scotiabank Economics. Forecasts at November 2, 2015 Warren Jestin Page 9 Real Estate Forum - Toronto (Dec. 2, 2015)
. . . Undercutting World Trade . . . World Trade Growth Is Low & Slow 20 y/y % change 15 World Trade 10 Volumes 5 0 -5 -10 -15 -20 2007 08 09 10 11 12 13 14 15 Source: CPB Netherlands Bureau of Economic Research. Warren Jestin Page 10 Real Estate Forum - Toronto (Dec. 2, 2015)
. . . & Depressing Oil & Other Commodities Commodity Prices 200 index, 2007Q1 = 100 180 160 140 120 100 Copper 80 WTI Oil 60 Natural Gas 40 20 0 2007 08 09 10 11 12 13 14 15f 16f Source: Bloomberg, Scotiabank Economics. Forecasts at November 2, 2015 Warren Jestin Page 11 Real Estate Forum - Toronto (Dec. 2, 2015)
U.S. Dollar Underpinned By Domestic Strength & International Risks Currencies vs. U.S. Dollar 160 exchange rate with US$ Yen index, 2007Q1 = 100 150 140 Renminbi 130 120 110 100 90 Euro 80 70 2007 08 09 10 11 12 13 14 15f 16f Source: Bloomberg, Scotiabank Economics. Forecasts at November 2, 2015 Warren Jestin Page 12 Real Estate Forum - Toronto (Dec. 2, 2015)
The U.S. Dollar Also Flies High Against Commodity Currencies A Sharp Slide from Parity 1.10 vs. US$ 1.05 1.00 0.95 0.90 0.85 0.80 Canadian Dollar 0.75 Australian 0.70 Dollar 0.65 0.60 2007 08 09 10 11 12 13 14 15f 16f Source: Bloomberg, Scotiabank Economics. Forecasts at November 2, 2015 Warren Jestin Page 13 Real Estate Forum - Toronto (Dec. 2, 2015)
Inflation Interrupted … Again Consumer Prices 5 y/y % change, end of period U.K. 4 U.S. 3 2 1 Canada 0 Euro zone -1 2007 08 09 10 11 12 13 14 15f 16f Source: Statistics Canada, BLS, Bloomberg, Scotiabank Economics. Forecasts at November 2, 2015 Warren Jestin Page 14 Real Estate Forum - Toronto (Dec. 2, 2015)
Monetary Policy Is On Hold For Now . . . Central Bank Rates 6 per cent U.K. 5 4 3 2 Euro zone U.S. Canada 1 0 2007 08 09 10 11 12 13 14 15f 16f Source: Bank of Canada, U.S. Federal Reserve, ECB, Bank of England, Scotiabank Economics. Forecasts at November 2, 2015 Warren Jestin Page 15 Real Estate Forum - Toronto (Dec. 2, 2015)
. . . With Bond Yields Still Near Lifetime Lows 10-Year Government Bond Yields 6 per cent 5 4 3 U.S. 2 U.K. Canada 1 Germany 0 2007 08 09 10 11 12 13 14 15 Source: Bloomberg, Scotiabank Economics. Warren Jestin Page 16 Real Estate Forum - Toronto (Dec. 2, 2015)
Changing Global Fortunes Have Big Impact on Canadian Economy Canadian Exports $ bns, annualized, 150 3-month moving average 130 Energy 110 90 70 Autos & Parts 50 30 2007 08 09 10 11 12 13 14 15 Source: Statistics Canada, Scotiabank Economics. Warren Jestin Page 17 Real Estate Forum - Toronto (Dec. 2, 2015)
Economic & Market Outlook Forecasts at November 2, 2015 Warren Jestin Page 18 Real Estate Forum - Toronto (Dec. 2, 2015)
Disclaimer TM Trademark of The Bank of Nova Scotia. Used under license, where applicable. This report has been prepared by Scotiabank Economics as a resource for the clients of Scotiabank. 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 nor its affiliates accepts any liability whatsoever for any loss arising from any use of this report or its contents.
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