The Economic Outlook: A Multi-speed Recovery in a Turbulent World

1. The Economic Outlook:A Multi-speed Recovery in a Turbulent World Burlington Economic Development April 28, 2011 Glen Hodgson Senior Vice-President and Chief Economist hodgson@conferenceboard.ca

2. The global economy has recovered, but with sharp differences among regions Japan’s natural disaster and aftermath has severely impacted short-term growth Slow recovery in W. Europe, with continuing public debt and energy price risks Medium speed in North America – real growth in Canada, too much artificial growth in the U.S. High speed growth in emerging markets Global Outlook

3. Plenty of risks to go around: Global imbalances remain Earthquakes and aftermath in Japan, New Zealand Public sector debt in EU, Japan, U.S. Political turmoil in N. Africa, Middle East Higher oil and food prices Inflation in emerging markets A Risky World

4. Uneven Growth in Global Economy(per cent change, real GDP) Source: Consensus Economics.

5. Government Debt as a share of GDP(per cent, 2010) Source: IMF

6. www.conferenceboard.ca U.S. Outlook • U.S. growth set to expand by around 3.0 per cent over the near term • Better prospects in labour markets as well as rising consumer and business confidence • But housing sector still a mess • Extension of Bush tax cuts and lower payroll and business taxes will result in trillion dollar-plus deficits and massive public debt over the medium term. • Oil price impact: every $10 increase in a barrel of oil chops 0.2 percentage points from U.S. GDP growth

7. U.S. Vehicle Sales(millions, annualized) Source: Moody’s Economy.com

8. U.S. Commercial Bank Lending Finally Turning the Corner (commercial and industrial, $ billions) Source: FRB

9. U.S. Labour Market(Change in U.S. Employment, 000s) Source: Bureau of Economic Analysis.

10. U.S. Consumer Confidence (1985=100) Source: The Conference Board Inc.

11. U.S. Real Consumer Spending(per cent change) Sources: BEA; CBoC.

12. U.S. Existing Home Sales and Prices(millions SAAR; $thousands) Source: National Assn. of Realtors.

13. US Housing Starts(millions, SAAR) Source: Moody’s Economy.com

14. U.S. Federal Deficit (NIPA basis, $billions) Sources: CBO; CBoC.

15. U.S. Debt as % of GDP(net debt) Source: IMF

16. U.S. Real GDP(per cent change) Sources: BEA; CBoC.

17. Fiscal and household restraint will hold overall GDP growth to 2.4 per cent this year. U.S. economy seems finally to have found its footing—a relatively solid expansion is expected this year and next. Inflation expectations remain muted despite high gasoline and food prices—still rate hikes are on the way. Economic outlook is positive enough to allow the federal government to return to fiscal balance but provinces will continue to struggle. Numerous external risks can still derail the near-term growth path. Canadian Outlook

18. The Loonie and the Oil PriceWTI $US, $US/$C Sources: The Conference Board of Canada; U.S. EIA; Statistics Canada.

19. Interest Rates (90-Day T-Bill) Quarterly 1999–14 Canada U.S. Sources: The Conference Board of Canada; BEA; Statistics Canada.

20. Employment Growth Canada, 2001–12 269,000 jobs lost 231,000 jobs gained Sources: The Conference Board of Canada; Statistics Canada.

21. Unemployment Rate vs. Natural Rate (percent), 1981-2015 Unemployment Rate Natural rate Sources: The Conference Board of Canada; Statistics Canada.

22. Growth in Industrial Composite Average Weekly Wage versus CPI(per cent change) Sources: The Conference Board of Canada; Statistics Canada

23. Index of Consumer Confidence, CanadaJan 2004–Feb 2011 (2002 =100) Source: The Conference Board of Canada. 1990-95 Average = 67.2 1982 Recession Averge = 51

24. Real Consumer Spending Growth Canada 2001–12 Sources: The Conference Board of Canada; Statistics Canada.

25. Housing Starts vs. Demographic Requirements Canada 1997—15 (000s) Household formation Sources: The Conference Board of Canada; Canada Mortgage and Housing Corporation.

26. Pre–Tax Corporate Profits(per cent share of net domestic income) Historical Peak of 18.2 per cent Sources: The Conference Board of Canada; Statistics Canada.

27. Real Business Investment Growth (Canada 2002–12) Sources: The Conference Board of Canada; Statistics Canada.

28. Non-Residential, Capital Investment($ billions of $2002, 2003–15) Sources: The Conference Board of Canada; Statistics Canada.

29. Real Government Spending on Goods and Services Canada (per cent change, 2001–12) Sources: The Conference Board of Canada; Statistics Canada.

30. Federal and Regional BalancesNational Accounts Basis ($ billions) Sources: Statistics Canada; The Conference Board of Canada.

31. Federal and Provincial Gov’t Debt(as a Share of GDP 2010-11) Sources: The Conference Board of Canada; Statistics Canada; various government budgets.

32. Real GDP Growth Rate Canada 2002–12 Sources: The Conference Board of Canada; Statistics Canada.

33. A turbulent global economic environment Canada’s growth will moderate in 2011 as consumer and government spending eases The strong dollar is here to stay; Canadian firms will need to stay focused on remaining competitive The U.S. economy is recovering but better job gains are needed The path back to balanced budgets will be painful for America Conclusion

34. Visit us at www.conferenceboard.ca