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October 12, 2021
Economic Update & Outlook
3October 12, 2021
Questions
• Please use the CHAT bar to submit your questions in writing during the live presentation.
• To register a question over the phone following the formal portion of our presentation:
o Enter 1 followed by 4 on your phone.
o If your question has already been asked, you can unregister your question by dialing 1 followed by 3.
Note, this webinar is being recorded, and the presentation will be made available on our virtual advice event landing page.
The long and winding road to recovery
Dawn DesjardinsVP & Deputy Chief Economist
(416) [email protected]
October 2021
US economy on recovery path amidst elevated uncertainty
-4
-3
-2
-1
0
1
2
3
4
5
6
7
2008 2010 2012 2014 2016 2018 2020 2022
Real GDP growth: U.S.
Annual Growth Rates
Real GDP2022f3.6
20192.3
2020-3.4
2021f5.6
Year to Year % change
Source: Bureau of Economic Analysis, RBC Economics
Canada challenged by Delta variant though unlikely to throw economy off course
-6
-4
-2
0
2
4
6
2008 2010 2012 2014 2016 2018 2020 2022
Real GDP growth: Canada
Annual Growth Rates
Real GDP2022f
4.320191.9
2020F-5.3
2021f5.1
Year to Year % change
Source: Statistics Canada, RBC Economics
High vaccination rate will limit pressure on health care and reduce need for restrictions
0
10
20
30
40
50
60
70
80
50
100
150
200
250
Hospitalized New cases Vaccinated
COVID Cases vs HospitalizationsLeft axis: New cases and hospitalizations per millionRight axis: Vaccination rate (at least one dose)
Source: Our World in Data, RBC Economics
Labour market recovery underway but uneven
-180
-96
-73
-36
-26
-30
22
76
108
94
183
-200 -100 0 100 200 300
Accommodation and Food Services
Other Services
Construction
Business, Building & Other Support Services
Transport and Warehousing
Trade
Forestry, Fishing, Mining, Oil & Gas
Finance, Insurance, Real Estate
Public Administration
Educational Services
Professional, Scientific & Technical
Canada employment vs pre-pandemic levelThousands, change from Feb 2020 to September 2021
Source: Statistics Canada, RBC Economics
Fiscal support offsets lost wages
85
90
95
100
105
110
115
120
2019Q
4
2020Q
1
2020Q
2
2020Q
3
2020Q
4
2021Q
1
2021Q
2
2021Q
3
2021Q
4
2022Q
1
2022Q
2
2022Q
3
2022Q
4
Primary income (mostlywages & salaries)
Disposable income (includesgov't transfers)
Indexed to 2019Q4=100
Canada Primary vs Disposable Household Income
Source: Statistics Canada, RBC Economics Research
Forecast
Lots of money on the sidelines
50 100 150 200 250 300
Total consumer spend on clothing &footwear in 2019
Total consumer spend on food,beverage and accomodation services
in 2019
Total tourism spending in 2019
Household excess savings,accumulated through Q2/21
Billions of Canadian $
Household savings stockpile in context
Source: Statistics Canada, RBC Economics
RBC data shows consumers spending on goods and now services
-30
-20
-10
10
20
30
40
Jan-21 Jan-21 Mar-21 Apr-21 May-21 May-21 Jun-21 Jul-21 Aug-21
Goods
Services
% change from 2019 (pre-shock) levels, 7-day rolling average
Canadians shifting some spending to services as economy reopens
Source: RBC Economics, RBC Data & Analytics
Housing sales surged; slowing lately
543517
460 490
550
637
505
0
100
200
300
400
500
600
700
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22
Source: Canadian Real Estate Association, RBC Economics
Thousands of units
Home resales: Canada
Forecast:
10-year average - 490K
Businesses are optimistic, planning to invest
-40
-30
-20
-10
0
10
20
30
40
50
2018-Q1 2018-Q3 2019-Q1 2019-Q3 2020-Q1 2020-Q3 2021-Q1
Canadian businesses plan to invest more in 2021
Source: Bank of Canada, RBC Economics
% balance of opinion of investment spending on machinery and equipment over the next 12 months
Labour shortages create challenges
3.7 3.84.1 4.2 4.2
4.54.8
5.05.2
5.86.0
0
1
2
3
4
5
6
7
MB NS NL SK AB NB ON Canada PE QC BC
Q4 2019 Jun-21
Job vacancy rate, in %
Businesses report elevated levels of unfilled positions
Source: Statistics Canada, RBC Economics
= 800,000 vacancies
Supply chain disruptions also limiting growth for now
0
20
40
60
80
100
120
Feb-20 Apr-20 Jun-20 Aug-20 Oct-20 Dec-20 Feb-21 Apr-21 Jun-21
Index = 100 in Feb/2020, SA
Chip shortages halting Canadian auto production recovery
Source: Automative News, RBC Economics
Shortages of inputs and labour lift business inflation expectations
0
20
40
60
80
100
Q1/19 Q2/19 Q3/19 Q4/19 Q1/20 Q2/20 Q3/20 Q4/20 Q1/21 Q2/21
2% to 3% above 3%
Percentage of firms' responses to inflation expectation over the next 2 years
More businesses expect inflation to exceed BoC target
Source: Bank of Canada BOS survey, RBC Economics
0
20
40
60
80
100
Q1/19 Q2/19 Q3/19 Q4/19 Q1/20 Q2/20 Q3/20 Q4/20 Q1/21 Q2/21
2% to 3% above 3%
Percentage of firms' responses to inflation expectation over the next 2 years
More businesses expect inflation to exceed BoC target
Source: Bank of Canada BOS survey, RBC Economics
Inflation pressures will ease albeit remain above BOC’s 2% target
-2.0
0.0
2.0
4.0
Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 Q4-22
Other Food Energy MIC Headline CPI
Year over year growth in prices, non-seasonally adjusted
Energy prices to normalize; strong spending to put floor under inflation rate
Forecast
Source: Statistics Canada, RBC Economics
Rates will remain historically low
0%
1%
2%
3%
4%
5%
6%
7%
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
BoC overnight rate
10 Year Bond Yield
end of period
Interest rates: Canada
Source: BoC, RBC Economics
Forecast
Canada’s dollar to trade ≈80¢US
0.60
0.70
0.80
0.90
1.00
1.10
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22
Forecast
Parity
Canadian dollarUS$/C$
End of period
20210.80US$/C$
20190.77
20200.78
20220.79
Source: Bank of Canada, RBC Economics
Provinces moving at different speeds
-3.8-3.2 -3.0
-3.7
-5.3-4.8 -5.0 -5.3 -5.2
-8.2
-5.3
5.8
4.33.6
4.2
5.74.8 5.0 5.1
3.8
5.9
2.4
-10
-8
-6
-4
-2
0
2
4
6
8
B.C. N.S. P.E.I N.B. QUE. MAN. ONT. CA SASK. ALTA. N.& L.
2021
2020
2021 vs 2019
Source: Statistics Canada, RBC Economics
Real GDP, annual % change (2020 and 2021) and % change from 2019 to 2021
Half of provincial economies projected to recover fully in 2021
For more information please visit:rbc.com/economics
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express authorization of the copyright holder in writing. The statements and statistics contained herein have been prepared b y RBC Economics
Research based on information from sources considered to be reliable. We make no representation or warranty, express or implied, as to its accuracy
or completeness. This publication is for the information of investors and business persons and does not constitute an offer t o sell or a solicitation to
buy securities.
®Registered trademark of Royal Bank of Canada.
©Royal Bank of Canada.
22October 12, 2021
Questions
• Please use the CHAT bar to submit your questions in writing during the live presentation.
• To register a question over the phone following the formal portion of our presentation:
o Enter 1 followed by 4 on your phone.
o If your question has already been asked, you can unregister your question by dialing 1 followed by 3.
Note, this webinar is being recorded, and the presentation will be made available on our virtual advice event landing page.
23RBC Bank Mortgage SolutionsOctober 12, 2021
Equal Housing Lender. Member FDIC.
® / ™ Registered trademarks of Royal Bank of Canada. Used under l icense.
RBC Bank means RBC Bank (Georgia), N.A., a subsidiary of Royal Bank of Canada.
Mortgages are subject to approv al, including v erification of acceptable income, credit worthiness and property v aluations. Minimum and maximum property v alues and maximum loan-to-v alue ratios apply. Homeowner’s insurance is required for all loans and lines of credit, and flood insurance is required if the property is located in a Special Flood Hazard area. Escrows may be required. There are closing costs associated with these products.
2. 3, 5, 7, or 10-year term refers to the period of time the interest rate is set at the beginning of the loan period which is 30 years (360 months); after the initial fixed rate term, the interest rate will adjust annually. Example: 3-Year Adjustable Rate Mortgage (ARM) calculation assumes a $250,000 loan amount, 4.000% interest rate, 4.764% APR, with 20% down payment, amortized ov er 360 months = $1,193.54 monthly payment. Example: 5-Year ARM calculation assumes a $250,000 loan amount, 4.125% interest rate, 4.679% APR, with 20% down payment, amortized ov er 360 months = $1,211.62 monthly payment. Example: 7-Year ARM calculation assumes a $250,000 loan amount, 4.375% interest rate, 4.699% APR, with 20% down payment, amortized ov er 360 months = $1,248.21 monthly payment. Example: 10-Year ARM calculation assumes a $250,000 loan amount, 4.500% interest rate, 4.455% APR, with 20% down payment, amortized ov er 360 months = $1,266.71 monthly payment. Rates and payments are subject to increase after initial fixed period of loan. If the down payment is less than 20%, mortgage insurance may be needed on the loan. This could increase the monthly payment and the interest rate. Rates subject to increase after consummation.
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