Economic Update and Outlook NAIOP Vancouver Chapter November 15, 2012 Helmut Pastrick Chief Economist Central 1 Credit Union
Outline: Global, U.S., and Canadian economic conditions Canada economic and interest rate forecasts Metro Vancouver economic conditions and trends Metro Vancouver economic and housing forecasts
Manufacturing slowdown eases in October, but activity still contracting 60 55 50 45 40 35 Global Manufacturing Purchasing Managers Index Balance of opinion (%) 30 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Source: JP Morgan, Markit. Note: Seasonally adjusted. Latest: Oct-12
Europe s economy in recession Euro Area Economic Growth Per cent change at annual rate in real GDP 1.5 1.0 0.5 0.0-0.5-1.0-1.5-2.0-2.5-3.0 Q1-07 Q1-08 Q1-09 Q1-10 Q1-11 Q1-12 Source: Eurostat. Latest: Q2-12
Europe s contraction continued in Q3-2012 2005=100 115 Euro Area Industrial Production, Manufacturing 110 105 100 95 90 85 80 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Source: ECB. Note: Seasonally and working day adjusted. Latest: Sep-12
China's economic growth slows to soft landing China Manufacturing Purchasing Managers Index Balance of opinion (%) 60 55 50 45 40 35 30 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Source: China NBS. Note: Seasonally adjusted. Latest: Oct-12
Low to moderate growth since 2010 Per cent change at annual rate in real GDP U.S. Economic Growth, Quarterly 6 4 2 0-2 -4-6 -8-10 Q1-07 Q1-08 Q1-09 Q1-10 Q1-11 Q1-12 Source: U.S. Bureau of Economic Analysis. Latest : Q3-12
Modest job growth, employment well below pre-recession level 140 138 136 U.S. Payroll Employment, Total and Monthly Change Persons - millions Change (R) Total (L) Persons - thousands 900 450 134 132 130 128 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Source: U.S. BLS. Note: Seasonally adjusted. Latest: Oct-12 0-450 -900
Key consumer spending sectors reviving 16 U.S. New Vehicle Sales Units - millions Units - millions 1.2 U.S. Housing Starts 14 1.0 12 0.8 10 0.6 8 0.4 Jan-08 Jan-10 Jan-12 Jan-08 Jan-10 Jan-12 Source: U.S. BEA. Note: Seasonally adjusted at annual rate. Latest: Sep-12
U.S. home sales no longer declining Units - millions 8 7 6 5 4 3 1996 2001 2006 2011 Source: NAR. Annually Monthly Units millions, saar 8 7 6 5 4 3 Jan-08 Jan-10 Jan-12 Latest: Sep-12
U.S. home prices at cycle bottom Dollars - thousands Annually 240 220 200 180 160 140 120 1996 2001 2006 2011 Source: NAR. Note: Median sale price. Dollars thousands Monthly 240 220 200 180 160 140 120 Jan-08 Jan-10 Jan-12 Latest: Sep-12
No recession likely in next three to six months 1992=100 135 U.S. Leading Economic Index, Weekly 130 125 120 115 Jan-11 Apr-11 Aug-11 Nov-11 Mar-12 Jun-12 Sep-12 Source: ECRI. Latest: Nov. 2, 2012.
Debt approaches ceiling limit in early 2013 Dollars - trillions 17 Debt ceiling = $16.394 trillion 16 U.S. Treasury Debt Outstanding 15 14 13 12 Jan-10 Jan-11 Jan-12 Jan-13 Source: U.S. Treasury, C1CU. Note: At month end. Latest: Oct-12
U.S. fiscal cliff impact - calendar 2013 Fiscal policy $ B % of GDP Bush-era tax cut (below $250k), EITC, CTC, AOTC 198 1.2 Payroll tax holiday 120 0.7 Alternative Minimum Tax patch 105 0.6 Spending cuts (sequestration) 100 0.6 Bush-era tax cut (above $250k), cap gains, etc. 79 0.5 Emergency unemployment insurance 36 0.2 Other - Affordable Care Act, Medicare, etc. 77 0.5 Total 715 4.3 Source: Moody s Analytics
No recession expected in 2013; moderate growth most likely 6 U.S. Economic Growth, Quarterly Per cent change at annual rate in real GDP 3 0-3 Actual High Median Low -6-9 -12 Q1-07 Q1-08 Q1-09 Q1-10 Q1-11 Q1-12 Q1-13 Source: U.S. BEA, WSJ Oct. 2012 Survey. Latest actual: Q3-12. Forecast: Q4-12 to Q4-13
Cyclical upturn in U.S. growth expected in 2014 U.S. Economic Growth, Actual and Forecast Per cent change in real GDP 6 Actual IMF Forecast Consensus 4 2 0-2 -4 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 Source: IMF July 2012, Consensus October 2012. Latest actual: 2011. Forecast: 2012-2017.
Moderate growth in most recent quarters 9 6 Canada Economic Growth, Quarterly Per cent change at annual rate in real GDP 3 0-3 GDP FDD -6-9 -12 Q1-07 Q1-08 Q1-09 Q1-10 Q1-11 Q1-12 Source: Statistics Canada. Latest: Q2-12
Canada s growth slowed in third quarter Industry GDP Canada, Monthly Billions of chained 2002 dollars Per cent change at annual rate 1,320 6 1,280 4 1,240 1,200 1,160 GDP (L) % change (R) 2 0-2 -4 1,120 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12-6 Source: Statistics Canada. Note: Seasonally adjusted at annual rate. Latest: Aug-12
No job growth in October 2012 Canada Employment, Total and Monthly Change Persons- millions Persons - thousands 17.7 100 17.4 50 17.1 0 16.8 16.5 Change (R) Employment (L) -50-100 16.2 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12-150 Source: Statistics Canada. Note: Seasonally adjusted. Latest: Oct-12
Recent growth trend to continue; central bank more optimistic in near term 9 6 3 0-3 Canada Economic Growth, Quarterly Per cent change at annual rate in real GDP Actual -6 BoC -9 Consensus C1 Economics -12 Q1-08 Q1-09 Q1-10 Q1-11 Q1-12 Q1-13 Q1-14 Source: Statistics Canada. Latest actual: Q2-12. Forecast: Q3-12 to Q4-14
Central bank sees output gap closing end of 2013 Canada s Output Gap, Actual and Forecast Per cent of potential GDP 3 2 Actual Forecast 1 0-1 -2-3 -4 Q1-07 Q1-08 Q1-09 Q1-10 Q1-11 Q1-12 Q1-13 Q1-14 Source: Bank of Canada Monetary Policy Report - October 2012. Latest actual Q3-12
Market expects no central bank rate change until Sept. 2014 Per cent 1.75 3-month Bankers Acceptance Futures 1.50 1.25 1.00 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Source: Montreal Exchange. Note: As of Nov. 14, 2012
Low interest rates ahead, first BoC rate increase early 2014 Per cent Interest Rate Forecasts, Quarterly 8 7 6 5 4 3 2 5y mortgage Prime 5y GIC Target 1 0 Q1-08 Q1-09 Q1-10 Q1-11 Q1-12 Q1-13 Q1-14 Source: Bank of Canada, C1CU. Note: Averages. Latest actual: Q3-12
Growth upturn expected in 2014 6 Per cent change in real GDP Canada Annual Economic Growth 4 2 0-2 -4 Actual IMF C1 Economics 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 Source: Statistics Canada, IMF July 2012. Latest actual: 2011. Forecast: 2012-2017.
Interest rates rise gradually in 2014, near normal levels in 2017 Per cent Canada Interest Rate Forecast 2012-2017 14 12 10 8 6 Long-term bond 3-mo. T-bill 4 2 0 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 Source: Bank of Canada, C1 Economics. Note: Annual average. Latest actual: 2011.
Population growth hovers around 1% Per cent change at annual rate 2.0 B.C. Population Growth, Quarterly 1.5 1.0 0.5 0.0 Q1-04 Q1-06 Q1-08 Q1-10 Q1-12 Source: Statistics Canada, C1CU. Latest: Q2-12
Thousands Net interprovincial remains negative Persons - thousands 16 B.C. Net Migration by Type, Quarterly 12 8 4 Net international Net interprovincial 0-4 Q1-04 Q1-06 Q1-08 Q1-10 Q1-12 Source: Statistics Canada, C1CU. Note: seasonally adjusted. Latest: Q2-12
Temporary decline in Metro population growth Per cent 3.0 Metro Vancouver Population Growth, Annually 2.5 2.0 1.5 1.0 0.5 0.0 96/97 98/99 00/01 02/03 04/05 06/07 08/09 10/11 Source: Statistics Canada, C1CU. Note: as of July 1. Latest: 2011
International dives on fewer NPRs 50 40 Metro Vancouver Population Growth Components Persons - thousands 30 20 10 0 Net International Net natural Net Interprovincial Net intraprovincial -10-20 96/97 98/99 00/01 02/03 04/05 06/07 08/09 10/11 Source: Statistics Canada, C1CU. Note: As of July 1. Latest are preliminary.
No job growth since May 2012 Metro Vancouver Employment, Total and Monthly Change Persons- millions Persons - thousands 1.32 50 1.28 Change (R) 40 Employment (L) 30 1.24 20 10 1.20 0 1.16-10 -20 1.12 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12-30 Source: Statistics Canada. Note: Seasonally adjusted. Latest: Oct-12
Metro employment rises in most years Metro Vancouver Employment, Total and Yearly Change Persons - millions Per cent 1.40 4.0 1.30 1.20 1.10 1.00 0.90 0.80 % Change (R) Employment (L) 1996 1998 2000 2002 2004 2006 2008 2010 2012 3.0 2.0 1.0 0.0-1.0 Source: Statistics Canada. Latest: Year-to-date Oct-12
Sluggish growth since 2008 Persons - thousands 340 320 300 280 260 240 220 Metro Vancouver Office Employment Proxy 200 1996 1998 2000 2002 2004 2006 2008 2010 2012 Source: Statistics Canada, C1CU. Latest: 2012 to Oct.
Down last two years 210 Metro Vancouver Retail and Wholesale Trade Employment Persons - thousands 190 170 150 130 1996 1998 2000 2002 2004 2006 2008 2010 2012 Source: Statistics Canada, C1CU. Latest: 2012 to Oct.
Little growth since 2010 rebound Number of businesses 24,000 22,000 20,000 18,000 16,000 14,000 12,000 Metro Vancouver Business Incorporations 10,000 1996 1998 2000 2002 2004 2006 2008 2010 2012 Source: B.C. Ministry of Finance. Latest: 12 months ending Sep.
Metro Vancouver retail sales up about 4% this year, X-Auto 3% Dollar - billions 30 28 26 24 22 Total Retail Sales 20 19 18 17 16 15 Sales X-Autos and related Dollars - billions 20 2004 2006 2008 2010 2012 14 2004 2006 2008 2010 2012 Source: Statistics Canada. Latest: 12 months ending Aug-12
Private non-residential building construction turning up in Metro Vancouver Dollar - millions Commercial 700 650 600 550 500 450 400 Q1-08 Q1-10 Q1-12 Dollars - millions Industrial 70 Current $ 2007 $ 60 50 40 30 20 10 Q1-08 Q1-10 Q1-12 Source: Statistics Canada. Note: Seasonally adjusted. Latest: Q3-12
Metro Vancouver commercial investment up sharply Commercial Building Permits Dollars - millions 300 Actual Trend 250 200 150 100 50 0 Jan-10 Jan-11 Jan-12 Source: Statistics Canada, C1CU. Industrial Building Permits Dollars - millions 35 30 25 20 15 10 5 0 Jan-10 Jan-11 Jan-12 Latest: Sep-12
No decline in housing sales past two months Units - thousands 6 MLS Residential Sales, Lower Mainland 5 4 3 2 1 0 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Source: CREA, C1CU. Note: Seasonally adjusted. Latest: Oct-12
Supply at high level and rising Units - thousands MLS Residential Active Listings, Lower Mainland 31 29 27 25 23 21 19 17 15 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Source: CREA, C1CU. Note: Seasonally adjusted. Latest: Oct-12
Market is oversupplied, downward pressure on prices in near term Per cent 35 Sales-to-active Listings Ratio, Lower Mainland 30 25 20 15 10 5 0 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Source: CREA, C1CU. Note: Seasonally adjusted. Latest: Oct-12
Prices sliding lower, average price misleading Home Price Index and Average Sale Price, Lower Mainland Jan. 2005=100 Dollars - thousands 160 750 700 150 650 140 600 550 130 HPI (L) Ave. Price (R) 500 450 120 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 400 Source: CREA, C1CU. Note: Seasonally adjusted. Latest: Oct-12
Housing starts beginning to turn down Units - thousands 3.0 Housing Starts, Metro Vancouver 2.5 2.0 1.5 1.0 Seas. Adj. Trend 0.5 0.0 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Source: CMHC, C1CU. Latest: Oct-12
Metro Vancouver Economic Outlook Indicator 2011 2012f 2013f 2014f Employment, % change 2.6 2.1 1.5 2.3 Unemployment rate, % 7.3 6.9 6.7 6.3 Population, % change 1.3 1.8 1.7 1.5 CPI, % change 2.3 1.6 1.5 2.0 Retail sales, % change 3.0 3.7 4.5 5.0 Commercial permits, % chg. 13.4 40.0 10.0 25.0 Industrial permits, % change 49.9 40.0 15.0 10.0 Source: Statistics Canada, C1CU, forecast.
Metro Vancouver Housing Outlook Indicator 2011 2012f 2013f 2014f Housing sales, units 47,663 39,400 41,300 46,200 % change 5.6-17.3 4.8 11.8 HPI, % change 4.1 1.9-2.4 3.0 Average sale price, $ 694,094 651,000 650,000 680,000 % change 14.5-6.2-0.2 4.6 Housing starts, units 17,867 19,300 16,900 18,400 % change 17.4 8.0-12.4 8.9 Rental vacancy rate*, % 1.4 1.1 0.8 1.0 Source: CREA, CMHC, C1CU forecast.
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