Global Forecast Update - Global Banking and Markets
Transcription
Global Forecast Update - Global Banking and Markets
Global Economics January 8, 2015 Global Forecast Update New Year, New Outlook, New Risks Global growth should average 3.3% in 2015, incrementally better than last year’s 3.2% advance. The lack of traction reflects largely offsetting developments. The cash flow boost to consumers and businesses associated with the over 50% slide in the price of crude oil since mid-2014, and the improving performances in a number of countries, most notably the U.S., should reinforce stronger economic momentum internationally. At the same time, production and capital spending cutbacks in many oilproducing countries around the world, the continuing slowdown in China, the restraint underway in a number of structurally weak nations and budgetary-challenged jurisdictions, as well as the increased volatility in financial markets, will drag on growth. Contents Overview.............................. 1-2 Forecasts International ...................... 3-4 Commodities........................ 4 North America...................... 5 Provincial ............................. 6 Financial Markets ............. 7-8 Despite the anticipated boost to global economic activity from substantially lower energy prices, including natural gas, stock markets have broadly corrected, government bond yields in many countries have plunged to historically low levels, and most currencies have weakened. The increased turbulence reflects increasing concerns over the health of the global economy — the negative impact of sharply lower crude prices on oilproducing companies and countries, the growing strains in the euro zone aggravated by the upcoming Greek elections, the numerous geopolitical challenges internationally, growing disinflationary pressures in certain regions, and the potential destabilizing effects on many economies stemming from the anticipated tightening in Fed monetary policy around mid-year. Expectations of wider interest rate differentials vis-à-vis the U.S. are already witnessing increasing ‘safe-haven’ capital flows into higher-yielding U.S. dollar assets, and a strengthening in the greenback to a multi-year high. We expect global real GDP growth to average a slightly better but still moderate 3.6% in 2016. Oil prices should move gradually higher, but remain supportive of somewhat stronger economic growth as energy-related production and capital spending begin to rebound. Nevertheless, a broad-based and synchronized upturn remains elusive, and susceptible to interruption from persistent geopolitical risks and chronically underperforming economies. For the time being, downside risks to the price of crude oil persist. More moderate demand for crude oil internationally has been overwhelmed by increasing supply from producing nations around the world, a development underpinned by the reluctance of Saudi Arabia to support prices through reduced OPEC output. Eventually, strengthening global growth aided by lower oil prices will trigger increased oil demand, while accelerated cutbacks in oil output and capital spending in most higher-cost oil producing nations will curb supply. These adjustments will increasingly play out over the next couple of years. Econometric models point to a progressive strengthening in global growth if the low level of crude oil prices is sustained. However, the ultimate boost to economic growth depends upon a number of variables such as the extent of the pass-through at gasoline pumps, and the degree to which production and capital spending are cut by oil-producing nations. Accordingly, the transition period may be longer and the net growth impact less positive until the uncertainty surrounding oil price developments is substantially reduced. In this environment, headline inflation pressures will continue to moderate in response to the slide in energy and other key commodity prices such as iron ore and copper. Government fiscal performances are at risk alongside the plunge in nominal income growth, as are structurally weak countries — oil-producing nations such as Russia, Venezuela, and Nigeria, for example — where acute currency weakness has already begun to aggravate inflationary conditions. By contrast, in countries experiencing tightening labour markets, like the U.S., the U.K. as well as Canada, underlying price trends are likely to be contained, or trend modestly higher. Scotiabank Economics Scotia Plaza 40 King Street West, 63rd Floor Toronto, Ontario Canada M5H 1H1 Tel: 416.866.6253 Fax: 416.866.2829 Email: [email protected] 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. TM Trademark of The Bank of Nova Scotia. Used under license, where applicable. Global Forecast Update is available on scotiabank.com, Bloomberg at SCOT and Reuters at SM1C Global Economics January 8, 2015 Global Forecast Update The U.S. economy is expected to build upon its recent acceleration, with real GDP forecast to average 3.3% in 2015, the strongest annual performance since 2004. A self-reinforcing cycle of strengthening consumer spending, increased hiring, and expanded business investment is underway. Household spending power is being boosted by strengthening wage gains, and supported by the sizeable reduction in gasoline prices. There is a considerable backlog of durable goods orders, particularly in the large and broad transportation equipment sector, that should continue to underpin manufacturing activity. While near-term risk points to stronger U.S. growth, a number of factors such as the sub-par rebound in housing activity, cautious bank lending, and elevated personal debt levels among selected demographic groups, suggest a somewhat less vigorous rebound. While reduced oil imports helped to narrow the U.S. trade deficit in November, the continuing appreciation of the U.S. dollar and sluggish growth in many countries highlight the risk of an eventual deterioration in net exports (weaker export and stronger import trends) which would dampen growth prospects. Among the other advanced economies, the U.K. retains relatively solid forward momentum. Lower oil prices and rising wage trends will give some added boost to personal consumption, while construction activity should continue to be supported by low interest rates and capital inflows. A diversified economy will help keep Canada on a moderate, though weaker growth path. Gathering softness in the resource-producing regions resulting from reduced export volumes coupled with declining terms of trade will be largely offset by increasing activity in the manufacturing sectors in the central provinces that will benefit from the U.S. revival and a much lowervalued Canadian dollar. Domestic demand will be supported by continuing, albeit slower job growth, and low interest rates, though high household debt will remain a drag on spending. Most provinces will focus on balance sheet repair. Last year's spring VAT tax hike in Japan has undercut growth, with the new government planning to defer its next round. The euro zone is registering little if any growth, with weakness evident in the larger economies. Both France and Italy have been slow to implement pro-growth economic and fiscal reforms, while German trade has been affected by the slowdown in the Asia-Pacific region and Europe, and by the sanctions on Russia in response to the confrontation over Ukraine. While all regions should benefit to varying degrees from lower-priced oil, both the euro zone and Japan are likely to remain chronic underperformers in the absence of muchneeded reforms, increased fiscal stimulus, and even weaker exchange rates to bolster net exports. The upcoming Greek election underscores the political risk and uncertainty that persists in a region where unemployment remains high, though any potential negative impact on the euro zone’s integrity may be limited by banking sector safeguards introduced in recent years. Growth in China continues to slow, though policymakers have implemented some measures recently — interest rate cuts and increased spending — to prevent an even greater deceleration in output. Real GDP this year is expected to be around 7%, with the pace of activity expected to moderate further in 2016. Even with continuing public sector investment, ongoing support from consumer spending, and the significant benefits accruing to lower-priced oil imports, the softening in real estate activity alongside the ongoing efforts to rein in lending highlight the risk of even slower growth and reduced demand for commodities. India is expected to post slightly stronger economic gains going forward, with more upside risks due to lower oil prices and the prospect of increased pro-growth economic reforms. Russia faces a much deeper downturn, with the decline in oil revenues, biting trade sanctions, and sharply higher interest rates needed to reverse capital flows and support the ruble forcing big adjustments to domestic spending and export earnings. Any additional sanctions imposed on Russia would risk an even greater recession, and could trigger reciprocal sanctions directed to Europe and the West which would dampen global prospects even further. Chronic economic problems will keep growth near recessionary levels in Brazil, though longer-term prospects should improve alongside reforms that the newly elected government is expected to introduce. Economic growth throughout much of Latin America will regain some momentum, balancing improving demand from the strengthening U.S. recovery against the relative softness in Asia-Pacific trade and persistent weakness in commodity prices and investments. The diverging economic performances around the world, coupled with the almost universal moderation in headline inflation, will reinforce differing policy responses. The U.S. Fed is expected to begin raising short-term interest rates in the second quarter, while the ECB will introduce a QE plan to purchase sovereign debt, and the Bank of Japan will expand upon its non-conventional bond buying program. The Bank of England and the Bank of Canada will likely remain on the policy sidelines for longer given their countries' more moderate growth trajectories, and short-term borrowing costs which already are above U.S. levels. The gradual upward trend in U.S. short-term rates will continue to favour a further strengthening in the U.S. dollar vis-à-vis most currencies, with capital inflows from developing and advanced economies increasingly attracted to safer and higher investment returns. Any further divergence in economic and policy performances would risk another bout of destabilizing capital outflows, especially from many structurally weak emerging market economies, and an even stronger U.S. dollar. Notwithstanding the anticipated strengthening in global economic activity, a stronger greenback will continue to pressure many US$-denominated commodity prices through much of the year until oversupply conditions are reduced. Commodity-related currencies such as the Canadian and Australian dollars are likely to remain at risk given the persistent weakness in many resource prices. 2 January 8, 2015 Global Economics Global Forecast Update International 2000-13 2015f 2016f (annual % change) Real GDP World (based on purchasing power parity) 2014f 3.9 3.2 3.3 3.6 Canada United States Mexico 2.2 1.9 2.4 2.4 2.4 2.1 2.2 3.3 3.3 2.1 3.1 3.7 United Kingdom Euro zone Germany France Italy Spain Greece Portugal Ireland Russia T urkey 1.8 1.2 1.2 1.3 0.2 1.6 0.2 0.3 2.7 4.9 4.4 2.6 0.8 1.4 0.4 -0.3 1.2 0.5 0.8 5.5 0.5 3.0 2.8 1.0 1.1 0.8 0.4 1.8 1.9 1.5 2.8 -5.0 3.5 2.3 1.3 1.7 1.3 0.9 2.0 2.5 1.8 3.0 0.5 4.0 China India Japan South Korea Indonesia Australia T hailand 9.1 7.0 0.9 4.1 5.5 3.0 4.1 7.4 5.4 0.4 3.5 5.2 2.7 1.0 7.0 5.8 1.1 3.6 5.5 2.8 4.0 6.5 6.2 1.0 3.8 5.8 2.8 4.0 Brazil Colombia Peru Chile 3.4 4.2 5.6 4.4 0.2 4.8 2.6 1.7 0.5 4.1 5.0 2.7 1.5 4.4 5.7 3.9 2.0 2.4 4.7 2.2 1.3 4.2 1.6 1.9 4.2 2.1 2.3 4.0 United Kingdom Euro zone Germany France Italy Spain Greece Portugal Ireland Russia T urkey 2.3 2.0 1.7 1.8 2.3 2.7 2.7 2.4 2.1 11.4 16.6 0.5 -0.2 0.1 -0.1 -0.1 -1.1 -1.4 -0.2 0.0 11.4 8.2 1.4 0.3 0.7 0.4 0.3 0.2 -0.2 0.3 0.7 10.5 6.5 2.3 1.1 1.2 1.0 0.7 0.8 0.6 0.8 1.1 9.0 6.0 China India* Japan South Korea Indonesia Australia T hailand 2.4 10.2 -0.1 2.9 5.6 3.0 2.6 1.3 5.0 2.3 0.8 6.2 2.0 0.6 2.2 6.0 1.5 2.0 5.2 2.5 2.1 2.7 6.5 1.6 2.6 5.4 2.7 2.5 6.5 5.1 2.6 3.2 6.5 3.5 3.2 4.6 7.0 3.4 3.0 2.6 6.0 3.0 2.8 3.0 Brazil Colombia Peru Chile *WPI used prior to 2012. International We have revised our Chinese real GDP growth forecast downward to 7.0% and 6.5% in 2015 and 2016, respectively, reflecting a slowdown in the manufacturing and trade sectors that is only somewhat offset by a moderate pick-up in domestic services consumption. Reduced global oil prices will decrease most Asian economies’ net import bills, which will improve their current account balances. Inflation forecasts have also been revised downwards to reflect lower international oil prices. Thailand is one of the largest beneficiaries of lower oil prices in Asia due to the outsized value of petroleum imports relative to GDP. Accordingly, the boost to consumers and businesses will support the economy, with the country’s 2015 real GDP growth forecast revised up to 4.0% from 3.8%. The Brazilian economy, which has been flirting with recession over the past few months, will barely expand in the year ahead; we expect real GDP will grow by 0.5% in 2015 before gradually accelerating to 1.5% in 2016. In Colombia, we estimate that energy-related exports and investments will be negatively affected by the oil price collapse, and that the Federal government will foster economic activity through a more aggressive infrastructure development programme and a weaker domestic currency. Chile’s economy remains weak with four consecutive quarters of decelerating growth. We estimate the economy expanded 1.7% in 2014, and will accelerate to 2.7% in 2015, subject to downward risks. Russia has experienced severe market turmoil over the past month fuelled by plummeting oil prices, intensifying capital flight, and economic stress from Western sanctions. Recessionary forces are gathering steam, inflation is worryingly high, and banking sector stability is concerning. We now expect that the Russian economy will contract by 5% in 2015 as tight liquidity and elevated interest rates dampen domestic demand, and (y/y % change, year-end) Consum er Price s Canada United States Mexico Forecast Changes … continued on the next page 3 January 8, 2015 Global Economics Global Forecast Update International 2000-13 2014f 2015f 2016f (% of GDP) Curre nt Account Balance Canada United States Mexico -0.1 -4.0 -1.4 -2.1 -2.3 -2.0 -3.0 -2.3 -2.4 -2.5 -2.3 -2.4 United Kingdom Euro zone Germany France Italy Spain Greece Portugal Ireland Russia T urkey -2.5 0.1 4.1 -0.4 -1.2 -1.5 -7.5 -8.3 -1.3 7.6 -4.5 -4.0 2.4 7.0 -1.4 1.5 0.3 1.0 0.4 5.0 3.0 -5.5 -3.5 2.5 6.5 -1.2 1.5 0.6 1.2 0.6 5.5 2.5 -5.0 -3.0 2.2 6.0 -1.0 1.5 0.5 1.4 0.9 5.0 2.0 -5.5 China India Japan South Korea Indonesia Australia T hailand 4.3 -1.5 2.9 2.1 1.4 -4.5 2.7 2.4 -1.8 0.7 6.4 -2.9 -2.8 3.5 2.2 -2.3 1.1 6.9 -2.3 -2.8 2.9 2.1 -2.4 1.3 6.2 -1.9 -2.5 2.5 Brazil Colombia Peru Chile -1.3 -1.9 -1.4 0.4 -3.9 -4.2 -4.6 -1.6 -4.0 -4.9 -4.9 -1.8 -3.7 -4.4 -3.7 -1.9 Commodities Forecast Changes … continued from previous page International lower energy prices reduce its main export revenue. In 2016, the expected improvement in oil prices and an expected easing of sanctions should support a modest economic rebound. Inflation figures continue to pose risks in Europe; we have lowered our inflation forecasts across the region and expect the European Central Bank will launch a sovereign bond-buying program at its January 22nd meeting. Commodities WTI oil prices have dropped to US$48/bbl in early 2015 (Brent to US$51), against the backdrop of weak global demand growth and more-than-ample supply. Prices are currently below production costs across North America and are unsustainable at these levels. A supply-side adjustment internationally will set the stage for a moderate recovery in prices by mid-2015. Oil-targetted drilling activity in Western Canada and in the U.S. shales (the North Dakota Bakken and the Permian & Eagle Ford Basins) is dropping sharply and will fall further in coming months. While U.S. oil production could increase in 2015, the gain will be less than half the extraordinary 1.28 mb/d advance from early 2014 to early 2015. Saudi Arabia and other major Gulf Co-operation Council members decided not to cut output to shore up prices at the November 27, 2014 meeting, but instead to allow prices to drop to levels that would curb development of the U.S. shales. Saudi Arabia has been losing market share in the U.S. Gulf and may fear an eventual market share loss in Asia. While capital spending in Western Canada’s ‘oil patch’ will likely drop by 20% in 2015, production and exports are likely to increase, given new project development and the recent commissioning of the Flanagan Pipeline and Seaway expansion to Texas. Canadian oil will back out more overseas crude into the United States. (annual average) WT I Oil (US$/bbl) Brent Oil (US$/bbl) Nymex Natural Gas (US$/mmbtu) 63 65 5.32 93 99 4.26 60 63 3.75 70 73 3.75 Copper (US$/lb) Zinc (US$/lb) Nickel (US$/lb) Gold, London PM Fix (US$/oz) 2.30 0.79 7.58 792 3.11 0.98 7.65 1,266 2.90 1.20 9.00 1,150 2.85 1.60 11.50 1,150 745 587 280 1,025 604 349 1,005 610 370 1,020 615 400 Pulp (US$/tonne) Newsprint (US$/tonne) Lumber (US$/mfbm) World GDP Growth & WTI 120 y/y % change $ per barrel, annual avg. Commodity Price Trends 6 900 Index:2002Q1=100 800 WTI Oil 100 5 80 4 Nickel 700 WTI Oil 600 Copper 500 60 3 40 2 Natural Gas 400 300 200 20 1 World GDP Growth 0 0 00 02 04 06 08 10 12 14f 16f Source: Scotiabank Economics, IMF. 100 Gold 0 02 04 06 08 10 12 14 Source: Bloomberg, Scotiabank Economics. 4 January 8, 2015 Global Economics Global Forecast Update North America 2000-13 2015f 2016f (annual % change) Canada Real GDP Consumer Spending Residential Investment Business Investment Government Exports Imports 2014f 2.2 3.0 3.8 3.7 2.7 0.8 3.3 2.4 2.8 2.5 -0.4 -0.1 5.5 1.7 2.2 2.6 2.1 0.7 0.2 5.0 3.6 2.1 2.3 -0.4 2.7 0.3 5.0 3.7 4.7 2.4 2.0 1.8 5.1 1.5 238 7.1 4.3 1.9 2.0 1.8 10.5 0.8 139 6.9 2.1 0.0 1.3 1.9 3.0 1.1 199 6.7 3.8 1.7 2.0 1.9 6.5 0.9 156 6.8 Current Account Balance (C$ bn.) Merchandise T rade Balance (C$ bn.) Federal Budget Balance (C$ bn.) per cent of GDP -6.5 33.9 -4.5 -0.3 -42.2 5.5 -2.0 -0.1 -60.3 -14.7 1.0 0.0 -52.5 -6.3 2.5 0.1 Housing Starts (thousands) Motor Vehicle Sales (thousands) Motor Vehicle Production (thousands) Industrial Production 200 1,606 2,421 0.5 190 1,851 2,350 3.7 185 1,855 2,390 4.1 180 1,855 2,450 3.5 Real GDP Consumer Spending Residential Investment Business Investment Government Exports Imports 1.9 2.3 -1.8 2.0 1.2 4.0 3.4 2.4 2.5 1.6 6.2 0.0 3.3 3.7 3.3 3.4 6.0 4.7 0.9 5.6 5.2 3.1 3.3 8.4 5.2 0.5 5.8 5.9 Nominal GDP GDP Deflator Consumer Price Index Core CPI Pre-Tax Corporate Profits Employment millions of jobs Unemployment Rate (%) 4.0 2.1 2.4 2.0 6.9 0.4 0.51 6.4 4.0 1.5 1.7 1.8 0.3 1.8 2.50 6.2 4.5 1.2 1.3 2.0 9.5 2.0 2.73 5.5 4.9 1.7 2.2 2.2 7.0 1.6 2.26 5.2 Current Account Balance (US$ bn.) Merchandise T rade Balance (US$ bn.) Federal Budget Balance (US$ bn.) per cent of GDP -537 -655 -539 -4.0 -401 -737 -483 -2.8 -419 -764 -460 -2.5 -444 -814 -490 -2.6 Housing Starts (millions) Motor Vehicle Sales (millions) Motor Vehicle Production (millions) Industrial Production 1.31 15.2 10.5 0.9 1.00 16.4 11.6 4.2 1.20 17.0 12.0 4.2 1.35 17.3 12.2 3.5 2.4 4.7 -13.3 -6.5 2.1 4.2 -26.6 -3.2 3.3 4.2 -31.8 -7.9 3.7 4.0 -34.9 -10.7 Nominal GDP GDP Deflator Consumer Price Index Core CPI Pre-Tax Corporate Profits Employment thousands of jobs Unemployment Rate (%) Forecast Changes Canada & United States We have again edged down our forecast for Canadian GDP growth for 2015, from 2.3% to 2.2%, in light of the continuing slump in crude oil prices. Notwithstanding lower prices at the pump, sluggish employment and wage gains, a more subdued housing market and high household debt burdens are expected to restrain consumer spending. The outlook for industrial activity is mixed, with sharply lower oil prices tempering energy sector investment, while strengthening U.S. growth and a weaker Canadian dollar boost manufacturing prospects. Our forecast for U.S. growth this year and next is unchanged, at 3.3% and 3.1%, respectively. Consumer confidence and spending are benefitting from the sharp drop in gasoline prices to a five-year low and the steady improvement in labour market conditions. While low oil prices and U.S. dollar strength are expected to dampen investment and export gains, U.S. producers will continue to benefit from solid domestic sales and a well diversified export base. For Canada’s federal government, our near-term outlook for softer oil prices and lower inflation steepens the challenge of balanced books by fiscal 2015-16.For U.S. federal and state revenues, robust output growth represents a significant offset to the nearterm revenue constraint of slower inflation. United States Mexico We reaffirm our view that Banco de Mexico will begin to increase interest rates once the U.S. Federal Reserve makes the first move. Heightened volatility in energy markets has prompted adjustments in our currency market view. Mexico Real GDP Consumer Price Index (year-end) Current Account Balance (US$ bn.) Merchandise T rade Balance (US$ bn.) 5 January 8, 2015 Global Economics Global Forecast Update Provincial Provincial 2000-13 2000-13 2014f 2014f 2015f 2015f 2016f 2016f 2000-13 2000-13 2014f 2014f 2015f 2015f 2016f 2016f Budget Balances, Balances, FYFY March 31 31 Budget March ($millions) ($ millions) Real GDPGDP Real (annual % change) (annual % change) Canada Canada 2.2 2.4 2.2 2.1 -3,102 Newfoundland & Labrador Newfoundland & Labrador Prince Edward Prince Edward IslandIsland Nova Scotia Nova Scotia New Brunswick New Brunswick 3.1 1.9 1.5 1.3 0.3 1.3 1.5 0.9 0.2 1.6 1.9 1.2 0.1 1.6 2.0 1.3 167 -40 23 -97 Quebec Quebec Ontario Ontario 1.8 1.9 1.8 2.3 1.9 2.6 1.8 2.3 -836 -4,477 Manitoba Manitoba Saskatchewan Saskatchewan Alberta Alberta British Columbia British Columbia 2.4 2.4 3.3 2.6 2.2 1.2 3.9 2.1 2.4 1.7 2.3 2.5 2.3 1.8 2.2 2.7 -5,150 * -2,000 -389 * -52 -679 * -499 * -6 ** 440 n.a. *** 198 n.a. n.a. n.a. n.a. -2,824 * -2,350 -10,453 * -12,507 n.a. n.a. * * * * Provinces Over the two-year forecast period, our revised outlook for softer oil prices and a weaker Canadian dollar vis-à-vis the U.S. dollar is expected to support real GDP growth in Manitoba, Central Canada and the Maritimes. Reflecting a slower-than-anticipated start on LNG investment, British Columbia’s growth is trimmed through 2016, leaving Ontario leading provincial growth in 2015 by a narrow margin. Increasing oil price uncertainty continues to temper our nearterm growth outlook for Alberta, Saskatchewan and Newfoundland and Labrador, though the three provinces entering 2016 should begin to benefit from the gradual recovery anticipated in both Brent and WTI oil prices. Alberta’s housing starts over the next two years are edged lower, following last year’s buoyant activity. Moderating inflation is anticipated across Canada given lower oil and natural gas prices. For the three major oil-producing provinces, the surge in recent years in labour compensation is expected to cool, alongside lower core inflation persisting through 2016. Canadian vehicle sales in 2014 climbed to a stronger-thanexpected 1.85 million units, with gains in every region. We expect purchases to climb to new heights in 2015, with the increases centred in the industrial heartland. The budget challenges for Alberta, Saskatchewan and Newfoundland and Labrador during the second half of fiscal 2014-15 (FY15), given the erosion of their royalty and corporate income tax revenues with the steep oil price correction, underscores the difficult decisions anticipated in the budget planning for FY16. Conversely, recent economic developments should assist the Provinces not involved in petroleum production with their budget targets. 1,000 -916 -45 -221 -377 -522 589 2,499 353 Forecast Changes -402 71 2,706 444 n.a. n.a. n.a. n.a. * Final.* Final. FY14 prov. estimates: FY14&&FY15 FY15 prov. estimates: Provinces.Provinces. ** FY04-FY13. ** FY04-FY13. Operational Balances: FY14 & FY15. *** Operational***Balances: FY14 & FY15. Employment Employment (annual % change) (annual % change) Unemployment Rate Rate Unemployment (annual average, (annual average, %) %) Canada Canada 1.5 0.8 1.1 0.9 7.1 6.9 6.7 6.8 Newfoundland & Labrador Newfoundland & Labrador Prince Edward IslandIsland Prince Edward Nova Scotia Nova Scotia New Brunswick New Brunswick 1.0 1.5 0.8 0.5 -2.0 0.2 -1.4 0.3 0.5 0.6 0.8 0.5 0.1 0.5 0.6 0.5 14.5 11.3 8.8 9.5 12.0 10.8 8.9 9.8 11.8 10.8 8.8 9.7 12.0 10.7 8.7 9.7 Quebec Quebec Ontario Ontario 1.4 1.4 0.0 0.8 0.8 1.1 0.7 1.0 8.1 7.2 7.8 7.3 7.6 7.1 7.5 7.0 Manitoba Manitoba Saskatchewan Saskatchewan Alberta Alberta British Columbia British Columbia 1.1 1.2 2.6 1.4 0.0 1.9 2.9 0.9 0.7 0.8 2.0 1.1 0.7 0.8 1.5 1.2 5.0 4.9 4.8 6.7 5.4 3.7 4.6 6.1 5.2 3.8 4.5 6.1 5.1 4.0 4.6 6.1 Housing StartsStarts Housing (annual, thousands (annual, thousands of units)of units) Motor Vehicle SalesSales Motor Vehicle (annual, thousands of units) (annual, thousands of units) Canada Canada 200 190 185 180 1,606 1,851 1,855 1,855 Atlantic Atlantic 12 8 9 9 117 136 136 135 Quebec Quebec Ontario Ontario 45 72 39 59 38 59 37 59 407 607 418 719 420 726 421 728 Manitoba Manitoba Saskatchewan Saskatchewan Alberta Alberta British Columbia British Columbia 5 5 34 27 6 9 41 28 6 8 39 26 6 7 36 26 45 44 211 175 56 57 271 194 56 56 266 195 56 55 264 196 6 January 8, 2015 Global Economics Global Forecast Update Quarterly Forecasts 2014 2015 2016 Canada Q3 Q4f Q1f Q2f Q3f Q4f Q1f Q2f Q3f Q4f Real GDP (q/q, ann. % change) Real GDP (y/y, % change) Consumer Prices (y/y, % change) Core CPI (y/y % change) 2.8 2.6 2.1 2.0 2.4 2.5 2.2 2.2 1.8 2.6 1.5 2.1 1.7 2.2 1.1 1.9 1.9 1.9 1.2 1.8 2.1 1.9 1.6 1.8 2.1 2.0 1.8 1.8 2.1 2.1 1.9 1.9 2.2 2.1 2.1 2.0 2.2 2.1 2.1 2.0 5.0 2.7 1.8 1.8 3.0 2.6 1.3 1.8 2.8 3.8 1.1 1.9 2.8 3.4 1.0 1.9 3.1 2.9 1.2 2.0 3.2 3.0 1.9 2.1 3.2 3.1 2.1 2.1 3.1 3.2 2.1 2.1 2.9 3.1 2.3 2.2 2.9 3.0 2.3 2.3 United States Real GDP (q/q, ann. % change) Real GDP (y/y, % change) Consumer Prices (y/y, % change) Core CPI (y/y % change) Financial Markets Central Bank Rates (%, end of period) Am ericas Bank of Canada U.S. Federal Reserve Bank of Mexico Central Bank of Brazil Bank of the Republic of Colombia Central Reserve Bank of Peru Central Bank of Chile 1.00 0.25 3.00 1.00 0.25 3.00 1.00 0.25 3.00 1.00 0.50 3.25 1.00 0.75 3.75 1.00 1.25 4.00 1.00 1.50 4.50 1.25 1.75 4.75 1.50 2.25 5.25 1.75 2.50 5.75 11.00 4.50 3.50 3.25 11.75 4.50 3.50 3.00 12.25 4.50 3.50 3.00 12.50 4.50 3.50 3.00 12.75 4.75 3.50 3.00 12.75 5.00 3.50 3.00 12.75 5.25 3.50 3.25 12.50 5.50 3.50 3.50 12.25 5.50 3.50 3.75 12.00 5.50 3.50 4.00 0.05 0.50 0.00 0.05 0.50 -0.25 0.05 0.50 -0.25 0.05 0.50 -0.25 0.05 0.50 -0.25 0.05 0.75 -0.25 0.05 0.75 -0.25 0.05 1.00 -0.25 0.05 1.00 -0.25 0.05 1.25 -0.25 2.50 6.00 8.00 2.25 7.50 2.00 2.50 5.60 8.00 2.00 7.75 2.00 2.50 5.35 7.75 2.00 7.75 2.00 2.50 5.35 7.75 2.00 7.75 2.00 2.75 5.35 7.50 2.00 7.75 2.00 3.00 5.35 7.50 2.00 7.75 2.00 3.25 5.35 7.50 2.25 8.00 2.25 3.50 5.35 7.50 2.50 8.00 2.50 3.75 5.35 7.50 2.75 8.00 2.75 3.75 5.35 7.50 3.00 8.00 3.00 0.92 1.12 1.63 2.15 2.67 0.92 1.01 1.34 1.79 2.34 1.00 1.00 1.35 1.70 2.30 1.00 1.10 1.60 1.90 2.55 1.00 1.20 1.80 2.10 2.65 1.00 1.30 2.00 2.30 2.75 1.05 1.45 2.10 2.45 2.90 1.30 1.65 2.30 2.55 3.00 1.55 2.00 2.50 2.70 3.15 1.85 2.25 2.60 2.85 3.30 0.02 0.57 1.76 2.49 3.20 0.04 0.66 1.65 2.17 2.75 0.25 0.80 1.60 2.10 2.65 0.60 1.10 1.80 2.30 2.90 1.10 1.50 2.10 2.50 3.00 1.60 1.90 2.40 2.75 3.20 1.85 2.15 2.60 2.85 3.30 2.10 2.30 2.75 2.95 3.45 2.40 2.55 3.00 3.10 3.50 2.60 2.75 3.10 3.25 3.75 0.90 0.56 -0.13 -0.34 -0.53 0.88 0.35 -0.31 -0.38 -0.41 0.75 0.20 -0.25 -0.40 -0.35 0.40 0.00 -0.20 -0.40 -0.35 -0.10 -0.30 -0.30 -0.40 -0.35 -0.60 -0.60 -0.40 -0.45 -0.45 -0.80 -0.70 -0.50 -0.40 -0.40 -0.80 -0.65 -0.45 -0.40 -0.45 -0.85 -0.55 -0.50 -0.40 -0.35 -0.75 -0.50 -0.50 -0.40 -0.45 Europe European Central Bank Bank of England Swiss National Bank Asia/Oceania Reserve Bank of Australia People's Bank of China Reserve Bank of India Bank of Korea Bank Indonesia Bank of Thailand Canada 3-month T-bill 2-year Canada 5-year Canada 10-year Canada 30-year Canada United States 3-month T-bill 2-year Treasury 5-year Treasury 10-year Treasury 30-year Treasury Canada-U.S. Spreads 3-month T-bill 2-year 5-year 10-year 30-year 7 January 8, 2015 Global Economics Global Forecast Update Financial Markets 2014 Exchange Rates 2015 Q3 Q4 Q1f Q2f 2016 Q3f Q4f Q1f Q2f Q3f Q4f (end of period) Am ericas Canadian Dollar (USDCAD) Canadian Dollar (CADUSD) Mexican Peso (USDMXN) 1.12 0.89 13.43 1.16 0.86 14.75 1.20 0.83 15.00 1.22 0.82 14.50 1.21 0.83 13.88 1.20 0.83 14.09 1.20 0.83 14.23 1.19 0.84 14.09 1.19 0.84 14.17 1.18 0.85 14.40 Brazilian Real (USDBRL) Colombian Peso (USDCOP) Peruvian Nuevo Sol (USDPEN) Chilean Peso (USDCLP) 2.45 2025 2.89 598 2.66 2377 2.98 606 2.75 2500 3.05 625 2.80 2475 3.10 620 2.82 2500 3.15 615 2.85 2525 3.10 620 2.85 2550 3.07 620 2.90 2525 3.05 618 2.95 2500 3.03 615 3.00 2450 3.00 615 1.41 1.82 98 0.98 11.99 1.41 1.81 103 0.95 12.69 1.40 1.80 102 0.95 12.50 1.40 1.83 102 0.96 11.89 1.38 1.83 103 0.94 11.47 1.36 1.81 105 0.94 11.74 1.36 1.81 107 0.92 11.86 1.34 1.80 108 0.93 11.84 1.33 1.80 109 0.93 11.91 1.32 1.78 111 0.92 12.21 1.26 1.62 0.96 7.21 6.43 39.6 2.28 1.21 1.56 0.99 7.81 7.45 60.7 2.34 1.17 1.50 1.03 8.07 7.65 62.0 2.33 1.15 1.50 1.05 8.10 7.65 63.5 2.35 1.14 1.51 1.06 8.10 7.70 64.5 2.37 1.13 1.51 1.08 8.15 7.70 65.0 2.40 1.13 1.51 1.09 8.15 7.70 65.0 2.42 1.13 1.51 1.09 8.20 7.75 62.0 2.43 1.12 1.51 1.10 8.20 7.75 60.0 2.44 1.12 1.51 1.10 8.20 7.75 58.0 2.45 110 0.87 6.14 61.8 1055 12188 32.4 120 0.82 6.21 63.0 1091 12388 32.9 122 0.79 6.15 63.5 1133 12591 33.2 124 0.79 6.09 64.0 1145 12794 33.5 125 0.78 6.04 64.5 1158 12997 33.7 126 0.78 5.98 65.0 1170 13200 34.0 128 0.77 5.96 64.8 1165 13150 33.9 129 0.78 5.94 64.5 1160 13100 33.8 130 0.78 5.92 64.3 1155 13050 33.6 131 0.78 5.90 64.0 1150 13000 33.5 Canadian Dollar Cross Rates Euro (EURCAD) U.K. Pound (GBPCAD) Japanese Yen (CADJPY) Australian Dollar (AUDCAD) Mexican Peso (CADMXN) Europe Euro (EURUSD) U.K. Pound (GBPUSD) Swiss Franc (USDCHF) Swedish Krona (USDSEK) Norwegian Krone (USDNOK) Russian Ruble (USDRUB) Turkish Lira (USDTRY) Asia/Oceania Japanese Yen (USDJPY) Australian Dollar (AUDUSD) Chinese Yuan (USDCNY) Indian Rupee (USDINR) South Korean Won (USDKRW) Indonesian Rupiah (USDIDR) Thai Baht (USDTHB) Central Bank Rates Global Inflation 7 10 % 6 10-Year Yields 7 y/y % change % 6 8 U.S. U.K. 5 6 4 Forecast 3 2 4 2 3 Canada -2 1 0 04 06 08 10 12 14 16 Source: Bloomberg, Scotiabank Economics. Forecast U.S. 5 4 0 Euro zone Forecast China Canada Canada U.S. 2 Euro zone 1 0 -4 07 08 09 10 11 12 13 14 15 16 Source: Bloomberg, Scotiabank Economics. 04 06 08 10 12 14 16 Source: Bloomberg, Scotiabank Economics. 8