Economic & Financial Market Outlook

Transcription

1 Economic & Financial Market Outlook BC Pension Forum March 1, 2013 Chris Lawless, Chief Economist

2 Overview Global forces Recent economic performance ~ US, Europe, Japan, China ~ Other emerging markets ~ Canada & BC Financial markets Outlook Risks 2

3 De-leveraging 140% U.S. household debt as a percent of after-tax income 130% 120% 110% 100% 90% Source: Federal Reserve 3

4 40% of the world way below potential 4 GDP: percent above/below potential 2 Outlook > US Eurozone Japan -8 Source: Oxford Economics 4

5 Europe - unemployment rates Annual averages, percent Spain Outlook > Eurozone Germany Source: Oxford Economics 5

6 Inflation 35 % change in consumer prices World Advanced Emerging Outlook > Source: International Monetary Fund 6

7 Eurozone labour cost adjustments Unit labour costs* (Index 2000 Q1 = 100; seas. adj.) Spain Italy France Portugal Germany 90 Data through 2012Q Source: Eurostat * Labour costs per unit of real economic output

8 U.S. job market improving Quits and layoffs as % of total separations (s.a.) Quits 55 Jan01 Dec07 avg Layoffs Jan01 Dec07 avg Source: Bureau of Labor Statistics

9 U.S. housing Housing market index (seasonally adjusted) 100 Building permits (000s; SAAR) 2, , , Jan-13 Monthly data to Feb 2013 Source: Federal Reserve Bank of St. Louis; National Association of Home Builders 9

10 U.S. household net worth recovers $70,000 $US Billions $65,000 $60,000 $55,000 $50,000 $45,000 $40, Source: Federal Reserve 10

11 U.S. energy independence? Oil Natural gas Source: U.S. Department of Energy 11

12 U.S. manufacturing renaissance? Average annual % change Pharmaceuticals Chemical Aerospace Autos & trucks Heavy machinery All industries Employment Shipments Source: Empirical Research Partners 12

13 Japanese Yen 74 Yen per U.S. dollar, daily (inverted) Source: Federal Reserve 13

14 China economic activity PMI level (50 = balanced) 58 Sales (year/year % change) Purchasing managers index (left) Real retail sales (right) Source: Bloomberg; bcimc estimates 14

15 2012 emerging market surprises 3 % difference between January 2012 real GDP growth forecasts and current estimates Source: Consensus Economics, Oxford Economics 15

16 Canada s external balance 6% Current account balance as a % of GDP 4% 2% 0% -2% -4% -6% Source: Statistics Canada 16

17 Canada s merchandise exports 130 Real merchandise exports (Index Jan 2005 = 100; 3mma seas. adj.) Metals and minerals Energy Other Autos and parts Forestry Source: Statistics Canada Monthly data to Dec

18 Commodity prices 1,000 Bank of Canada commodity price index, weekly, in US$ (Jan 1972 = 100)

19 Oil sands price disadvantage $140 Western Canada Select (heavy oil) vs. global light crude benchmarks, $US/barrel $120 $100 $80 $60 $40 $20 Western Cda Select WTI Brent $0 Source: Bloomberg 19

20 Canadian dollar $1.04 C$ per U.S. $, daily $1.02 $1.00 $0.98 $0.96 $0.94 $0.92 Source: Federal Reserve 20

21 Canada fiscal tightening 10 Year/year % change in nominal government spending + investment Source: Statistics Canada 21

22 22

23 Canada housing activity Sales to new listings of all homes (%; 3- month moving average, seas. adj.) >60 = seller s market <40 = buyer s market Greater Vancouver Calgary Toronto Victoria Data to January 2013 Source: Canadian Real Estate Association 23

24 Canada house prices Average home price* (Index Jan 2010 = 100) Greater Vancouver *Includes condos and townhomes Victoria Calgary Toronto Data to January 2013 Source: Canadian Real Estate Association 24

25 B.C. employment 5% Year/year percentage change; 3-month moving avg, 4% 3% 2% 1% 0% -1% -2% -3% -4% -5% Source: Statistics Canada 25

26 B.C. manufacturing & exports 40% 30% Year/year percentage change in $ value (3mon avg) Goods exports Mfg. sales 20% 10% 0% -10% -20% -30% -40% Source: Statistics Canada 26

27 B.C. capital expenditures $50 $45 $40 Private & public capital expenditures, billions +10% +9.1% +2.4% -16.9% +6.8% +0.9% $35 $30 $25 $ Intentions Source: Statistics Canada 27

28 Canadian interest rates 4.0 Yields on Government of Canada securities (%; weekly) year month Jan Apr Jul Oct Jan Apr Jul Oct Jan Source: Bloomberg 28

29 Eurozone will Italy cause more trouble? 16 What governments pay to borrow - 10-year bond yield (%) Portugal Italy Spain France Source: Bloomberg Data to Feb 22,

30 Economic outlook 10 8 Real GDP growth (annual % chg) Canada U.S. Japan Eurozone Source: bcimc 30

31 Economic outlook Real GDP growth (annual % chg) Mexico Turkey India Brazil India China Source: Oxford Economics (March 2013) 31

32 Stock markets Major market total return indexes (Dec 31, 2011 = 100; $C) Europe Emerging Markets U.S. S&P Canada/TSX Source: FactSet, MSCI Data to Feb 26,

33 Canadian stock vs. bond yields 20 % Government of Canada bond yield, 10yr TSX dividend yield Source: FactSet; Statistics Canada; TD Securities Data to Jan

34 Lower expectations Return 16% 14% 12% 10% 8% Mortgages Bonds Short-Term Capital Markets - Long Term Expectations 1990 and 2012 Real Estate Real Estate Global Equities Global Equities Private Placements Private Placements Emerging Markets Equity Emerging Markets Equity 6% Mortgages Actuarial discount rate: 6.5% 1990 & % 2% Short-Term Bonds 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 34 Risk (Standard Deviation of 2-Year Return)

35 Risks 2013: ~ Eurozone financial crisis resumes ~ U.S. fiscal showdown ~ Middle East/Africa conflicts ~ Canada: housing & consumer sector, business/energy investment, First Nations ~ Wild cards weather, etc. Longer-term: ~ Market-driven fiscal crisis in U.S. and Japan ~ Climate change ~ Are productivity & innovation in decline? 35

36 Questions, comments? 36