Upload
ledang
View
221
Download
5
Embed Size (px)
Citation preview
B R I T I S H C O L U M B I A’ S E C O N O M I C P R O S P E C T S
I N A N U N C E R TA I N W O R L D
FEBRUARY 2, 2017
PRESENTED TO
P F M E X E C U T I V E S E A R C H C L I E N T S
V I C T O R I A , B C
JOCK FINLAYSON,
Executive Vice President and Chief Policy Officer
E X T E R N A L E C O N O M I C S E T T I N G
2
• The global economy remains on a slow-growth path...however, it may gain some added traction
over the course of 2017-18
• Most forecasters expect growth in the United States to pick up, but the arrival of a new and very
unorthodox President presents significant uncertainties
• Oil prices appear to be finding a new medium-term equilibrium (US$50-60/bbl)
• Economic indicators point to a firmer growth profile in the EU, despite continued problems in some
countries and sectors
• China’s economy should expand by 6.0-6.5% over the next two years, but there are downside risks
linked to rising debt levels and the prospect of conflict with the US over trade and security issues
• Canada looks to be poised for somewhat stronger growth in 2017-18, after two disappointing years
G L O B A L E C O N O M I C G R O W T H H O V E R I N G N E AR 3 % S I N C E 2 0 1 2
3
Source: IMF World Economic Outlook, October 2016 and Historical Database.
0
1
2
3
4
5
6
7
8
2010 2011 2012 2013 2014 2015 2016 2017
World Growth Outlook, real GDP % changeWorld
Advanced Economies
Emerging Economies
Average
Global
Growth
1995-
2007
W O R L D T R AD E * H AS L O S T M O M E N T U M( R A T I O O F W O R L D T R A D E G R O W T H T O W O R L D G D P G R O W T H )
4
* trade in goods and services measured at market exchange rates in US dollars. Source: OECD.
.
• 2015-16 slowdown partly reflects weaker demand in China
• Recent fall-off in trade growth also due to shifts in global value chains, protectionist policies,
re-shoring, and currency mis-alignments & manipulation
0.0
0.5
1.0
1.5
2.0
2.5
Avg 1975-1985 Avg 1986-2007 Avg 2011-2015 2015 2016 (f)
G L O B A L D E M O G R AP H I C S W E I G H O N P O T E N T I A L E C O N O M I C G R O W T H ( W O R K I N G A G E P O P U L A T I O N S , A N N U A L G R O W T H R A T E S , % )
5
Source: IMF, World Economic Outlook, October 2016.
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
"Old" advancedeconomies
"New" advancedeconomies
Emerging marketsex-China
China
1995-2004 2005-2015 2015-2021
T H E U S E C O N O M Y C O N T I N U E S T O S T R E N G T H E N
6
• Real GDP increased by just 1.6% last year, vs 2.6% in 2015
• But positive momentum was evident over the second half of the year
• Overall, the current multi-year US economic expansion cycle continues…
79 consecutive months of employment gains, with real wages now climbing
consumer spending is trending up
housing starts grinding higher, should reach ~1.2 million this year
Trump’s promised tax cuts and extra infrastructure/military spending should add to growth
by late 2017 and into 2018-19
• Recent forecasts suggest the US economy will grow by 2.2%-2.5% (after-inflation) in 2017
• Will the Trump/Republican agenda pave the way to faster growth over the medium term?
• US Federal Reserve hiked its policy rate in December… and more increases are coming
AM E R I C A’ S J O B M AR K E T H AS B E E N O N A T E AR
7
Latest: December 2016
Source: US Bureau of Economic Analysis. seasonally adjusted data
128
130
132
134
136
138
140
142
144
146
02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
US Non-Farm Payrolls, millions
US payrolls increased by 2.2
million jobs in 2016, down from
2.7 million in 2015
S O M E E C O N O M I C I M P L I C AT I O N S O F T H E T R U M P
( AN D R E P U B L I C A N ) V I C T O RY … F O R C AN A D A
8
Positive
• Faster US economic growth from stepped-up infrastructure and defense spending plus big tax
cuts should bolster the demand for Canadian exports…and boost our tourism sector
• More skilled immigrants may be attracted to Canada if the US is less welcoming
• Revival of the Keystone pipeline = improved access for Canadian oil; plus, under President
Trump, America may come to favour oil imports from ‘friendly’ nations
Negative
• Renegotiation of NAFTA – a number of downside risks for Canada
• Trend to global protectionism if the US slaps tariffs on China/Mexico – who then retaliate
• Canada is at risk from a potential US ‘border tax’ adjustment measure
• A decline in Canadian competitiveness under Trump’s tax plan (US federal corporate tax rate
drops from 35% to 15-20%, top personal tax rate goes from 39.6% to 33%)
• US rejection of Paris climate accord and carbon pricing will put Canada at an ever increasing
disadvantage in energy costs
C U M U L AT I V E C H AN G E I N M AN U FA C T U R I N G E M P L O Y M E N T S I N C E 2 0 0 0
( I N P E R C E N T )
9
Source: Conference Board of Canada.
-26%
-24%
-22%
-20%
-18%
-16%
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
US Canada
C AN A D A M O R E R E L I AN T O N B O T H B I L AT E R A L
AN D T O TA L T R AD E T H AN T H E U N I T E D S TAT E S
10
Source: TD Economics, January 2017.
0%
10%
20%
30%
40%
50%
60%
70%
United States Canada
Exports plus Imports as % of GDP, 2015
Total trade ex-bilateral Bilateral trade
I N C AN A D A , B C & O N TA R I O L E D I N J O B C R E AT I O N L AS T Y E AR ,
W I T H E M P L O Y M E N T D O W N I N M O S T O T H E R P R O V I N C E S
11
Source: Statistics Canada, Labour Force Survey.
-3
-2
-1
0
1
2
3
4
BC Alta Sask Man Ont Que NB NS PEI Nfld
Employment growth by province, 2016
C AN A D I A N I N T E R E S T R AT E S R E M AI N N E AR R E C O R D L O W S
12
Source: OECD Economic Surveys.
0
1
2
3
4
5
6
7Bank of Canada overnight policy rate
Effective household rate
Effective business rate
%
O U T L O O K F O R T H E C A N A D I A N D O L L A R
13
Latest: December 2016
Source: Bank of Canada, noon rate.
0.65
0.70
0.75
0.80
0.85
0.90
0.95
1.00
1.05
1.10
04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
US$ per Cdn$, monthly averages with quarterly forecasts
history
Scotiabank
RBC
CIBC
OECD PPP estimate
40-yr average
C AN A D I A N H O U S E H O L D D E B T T O D I S P O S A B L E I N C O M E
14
Source: OECD Economic Surveys.
80
90
100
110
120
130
140
150
160
170
1990 1995 2000 2005 2010 2015
%
H O U S E H O L D I N D E B T E D N E S S R AT I O , C AN A D A V S O T H E R O E C D
C O U N T R I E S , Q 4 2 0 1 5 1
15
1 Total household outstanding debt as a percentage of household gross disposable income.
Q4 2014 for Denmark and Q1 2015 for Japan.
Source: OECD Economic Surveys.
0
50
100
150
200
250
SVN CHL CZE ITA DEU GRC FRA BEL USA ESP FIN JPN PRT GBR CAN IRL SWE AUS NOR NLD DNK
%
C AN A D I A N H O U S E P R I C E S H I S T O R I C A L LY H I G H R E L AT I V E T O
I N C O M E S , Q 1 2 0 1 6 1
16
1 Deviation of the ratio of nominal house prices/nominal disposable income per capita over the long-term average. The long-term average
starts in Q1 1980 for most countries, with a few exceptions. The price-to-income ratio starts in Q1 1981 for Denmark, Q1 1986 for Korea and
New Zealand, Q1 1987 for the United Kingdom, Q1 1995 for Portugal and Q1 1997 for Greece. The latest observation is Q4 2015/Q 1 2016.
Source: OECD Economic Surveys.
-40
-20
0
20
40
60
KOR JPN PRT GRC DEU USA FIN CHE IRL ITA ESP DNK NLD FRA GBR NOR CAN BEL AUS NZL SWE
%
R E S I D E N T I A L I N V E S T M E N T H AS L O O M E D L AR G E I N C AN A D A
17
1 Excluding Canada.
Source: OECD Economic Surveys.
0
4
8
12
16
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
OECD Range Canada
Ireland United States
% of GDP
1
C AN A D A H AS L O S T C O M P E T I T I V E N E S S I N T H E U S M AR K E T
18
Source: Desjardins Economic Studies, Economic News, February 17, 2016.
0
5
10
15
20
25
1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2015
Country share of total US merchandise imports, per cent
Canada Mexico ChinaCanada
down
5.5
percentage
points
since
2000
E C O N O M I C F O R E C A S T F O R C AN A D A ( A N N U A L % C H A N G E U N L E S S N O T E D )
19
Source: BMO Economics, January 2017
2015 2016 2017 2018
Real GDP 0.9 1.3 2.0 1.8
Real business investment -11.5 -7.4 -0.1 2.7
Employment growth 0.9 0.7 1.0 0.7
Unemployment rate (%) 6.9 7.0 6.8 6.7
3 month T-bill rate, Q4 (%) 0.45 0.48 0.45 0.70
10-year Gov’t Bond yield, Q4 (%) 1.20 1.45 1.85 2.25
B C ’ S R E L AT I V E E C O N O M I C P O S I T I O N D E P E N D S I N PAR T O N
H O W O T H E R P R O V I N C E S P E R F O R M
20
Source: Statistics Canada, Provincial Economic Accounts
-4
-2
0
2
4
6
BC Alta Sask Man Ont Que NB NS PEI Nfld
Real GDP growth by province, %
2013 2015BC
ranks
5th in
2013
BC jumps to “1st spot” in
2015, as the previous growth
leaders fall into recession
B C ’ S J O B M AR K E T H AS S U R G E D S I N C E 2 0 1 4
21
Latest: December 2016
Source: Statistics Canada, LFS.
2190
2240
2290
2340
2390
2010 2011 2012 2013 2014 2015 2016
BC employment, SA, thousands
employment
trend
J O B G R O W T H C O N C E N T R AT E D I N T H E L O W E R M AI N L A N D
22
Source: Statistics Canada, LFS.
Unemployment rates are annual averages
90
95
100
105
110
115
120
10 11 12 13 14 15 16
Employment, indexed Jan 2010=100
Vancouver
Victoria
Kelowna
rest of BC
0
2
4
6
8
10
12
Van Island
LowerMain.
Thom.Ok
Koot-enay
Cariboo NC / Nechako
North-east
Unemployment rate by region, %
2015 2016
C H AN G E I N B C E M P L O Y M E N T, B Y B R O AD O C C U PAT I O N A L G R O U P AN D
E M P L O Y M E N T S TAT U S , 2 0 1 4 T O 2 0 1 6 ( %)
23
* Education, law, social, community and government
** Includes agriculture
Source: BC Stats.
-10% -5% 0% 5% 10% 15%
All occupations
Part time job status
Full time job status
Natural resource occupations**
Health occupations
Finance + administrative occupations
ELSCG* occupations
Management occupations
Trades, transport and equipment operators
Natural and applied sciences occupations
Arts, culture and recreation occupations
Sales and service occupations
Manufacturing and utlities occupations
S W I T C H I N U N E M P L O Y M E N T R AT E S
24
Latest: December 2016 Source: Statistics Canada LFS.
0
2
4
6
8
10
12
14
16
76 79 82 85 88 91 94 97 00 03 06 09 12 15
Unemployment rates, %
Alberta
BC
N E T P O P U L AT I O N I N F L O W F R O M AL B E R TA P I C K S U P
25
Latest: Q3 2016
Source: Statistics Canada.
-4000
-3000
-2000
-1000
0
1000
2000
3000
4000
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
Net BC-Alberta migration, SA
3000
4000
5000
6000
7000
8000
9000
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
BC-Alberta migration, SA
BC to Alta Alta to BC
B C C O N S U M E R S H AV E B E E N B U S Y S P E N D I N G
26
Latest: October 2016
Source: Statistics Canada.
-10
-5
0
5
10
15
2010 2011 2012 2013 2014 2015 2016
Retail sales growth, y/y % change
BC
Alberta
H O U S I N G S TAR T S S T I L L AT E L E VAT E D L E V E L S
27
Latest: December 2016 data are 3 month moving averages
Source: Statistics Canada.
0
5
10
15
20
25
30
10 11 12 13 14 15 16
Metro Van housing starts, SAAR, 000s
singles
multiples
1
2
3
4
5
6
7
8
10 11 12 13 14 15 16
Rest of BC housing starts, SAAR, 000s
singles
multiples
S I G N S T H E M AR K E T I S C O O L I N G I N M E T R O VAN C O U V E R
Source: Greater Vancouver Real Estate Board.
300
600
900
1200
1500
1800
2100
Jan Mar May July Sept Nov
Detached housing sales, GVREB
2016
2015
200
500
800
1100
1400
1700
2000
2300
Jan Mar May July Sept Nov
Attached & Apartment sales, GVREB
Attached 2016
Attached 2015
Apart. 2016
Apart. 2015
28
H O U S I N G H A S P R O V I D E D A B I G E C O N O M I C L I F T F O R B C
29
* Includes residential construction, offices of real estate agents and related, and imputed rent.
Source: Source: Statistics Canada, CANSIM table 384-0038, data released November 10, 2015.
-4
-2
0
2
4
6
08 09 10 11 12 13 14 15
residential housing & related activity
all other industries
BC GDP growth – housing complex* and all other industries, %
E M P L O Y M E N T G R O W T H P I C K S U P I N V I C T O R I A
30
Source: Statistics Canada, LFS.
170
175
180
185
190
10 11 12 13 14 15 16
Victoria CMA employment, monthly 000s
120
130
140
150
160
170
180
190
200
2002 2004 2006 2008 2010 2012 2014 2016
Victoria CMA employment annual, 000s
H O U S I N G S TAR T S T R E N D I N G H I G H E R I N V I C T O R I A
31
Latest: December 2016 monthly data are 3 month moving averages
Source: Statistics Canada.
0
500
1000
1500
2000
2500
3000
3500
10 11 12 13 14 15 16
Metro Victoria housing starts, SAAR, 000s
singlesmultiples
0
500
1000
1500
2000
2500
2000 2002 2004 2006 2008 2010 2012 2014 2016
Metro Victoria housing starts, annual, 000s
singles
H O U S I N G M AR K E T S T R O N G E R I N T H E C AP I TA L R E G I O N
Source: Victoria Real Estate Board.
0
200
400
600
800
1000
Jan Mar May July Sept Nov
Detached housing sales, VREB
2016
2015
0
100
200
300
400
500
Jan Mar May July Sept Nov
Condo & townhome sales, VREB
2016 condos2015 condos2016 townhomes2015 townhomes
32
B C E X P O R T S T O AS I A R E B O U N D E D L AS T Y E AR
33
Latest: November 2016
Source: BC Stats.
900
1100
1300
1500
1700
1900
2100
10 11 12 13 14 15 16
Th
ou
san
ds
BC int. merchandise exports, millions $
US
rest of world
0 5 10 15
China
Japan
South Korea
US
India
total
Export growth (Jan-Nov) by country, annual % chng
L U M B E R P R O D U C T I O N H A S G R A D U A L LY R I S E N
Source: Statistics Canada.
1000
1500
2000
2500
3000
3500
4000
03 04 05 06 07 08 09 10 11 12 13 14 15 16
BC Softwood Lumber Production, 000s cubic metres
34
B C ’ S M AI N T R A D E D I N D U S T R I E S – VAL U E O F E X P O R T S 2 0 1 5
35
Source: BC Stats * merchandise exports
Forestry Others (cont’d)
Wood products $8.5 billion Natural gas $1.4 billion
Pulp and paper $4.4 billion Agrifood products $2.7 billion
Total forestry $12.9 billion Fabricated metals $1.1 billion
Forestry as % of total exports* 36% Fish products $1.1 billion
Others Chemical products $1.1 billion
Metallic minerals $4.4 billion Plastics $426 million
Machinery and equipment $4.8 billion Apparel etc. $124 million
Coal $3.1 billion Total BC goods exports: $35.8 billion
BC also has service industry clusters that engage in international trade, of which the most important
are tourism (~$4 billion of exports), transportation, communications (incl. software), education,
engineering, and technical/scientific/environmental services
T H E B U S I N E S S C O U N C I L’ S B C E C O N O M I C F O R E C A S T( A N N U A L % C H A N G E U N L E S S O T H E R W I S E I N D I C A T E D )
36
f – forecast
Source: Statistics Canada and BC Stats; Business Council for forecasts.
2015 2016e 2017f 2018f
Real GDP 3.2 2.9 2.2 2.2
Employment 1.2 3.1 1.3 1.4
Unemployment rate (%) 6.1 6.0 5.8 5.7
Housing starts (000 units) 31.4 41.0 36.5 35.0
Retail sales 6.0 6.0 4.5 4.5
BC CPI 1.1 1.7 2.0 1.8
O V E R A L L B C C AP I TA L S P E N D I N G I S S I M I L AR T O N AT I O N A L P I C T U R E
37
Source: CANSIM Table 032-0002 Public and private investment
*includes structures and machinery and equipment
10
11
12
13
14
15
16
17
18
19
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
Private capital expenditures* as a share of GDP, %
Canada BC
… B U T W E D O L E S S W E L L W H E N H O U S I N G I S E X C L U D E D
38
Source: CANSIM Table 032-0002 Public and private investment
7
8
9
10
11
12
13
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
Private capital expenditures excluding housing as a share of GDP, %
Canada BC
… AN D B C I S P E R F O R M I N G V E RY P O O R LY O N M & E I N V E S T M E N T
39
Source: CANSIM Table 032-0002 Public and private investment
3
4
5
6
7
8
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
Private capital expenditures machinery & equipment, as share of GDP, %
Canada BC
S I M P LY P U T … O U R F I R M S J U S T D O N ’ T I N V E S T E N O U G H 40
Source: C.D. Howe Institute.
0
20
40
60
80
100
% of US % of OECD average
Tangible investment per worker as a share of US and OECD average 2014, %
Canada BC
B C ’ S B U S I N E S S TAX R E G I M E F O R N E W I N V E S T M E N T I S N O T
C O M P E T I T I V E
41
Source: “The 2014 Global Tax Competitiveness Report,” D. Chen and J. Mintz, School of
Public Policy, University of Calgary, SPP Research Papers, Volume 8, Issue 4, February
2015.
Marginal Effective Tax Rates,
Average of all Industry Sectors Combined, %
2014 2011
Canada 18.8% 18.8%
BC 27.5% 19.0%
Alberta 17.0% 18.2%
Ontario 18.2% 19.3%
Quebec 15.2% 17.5%
USA 35.3% 35.3%
Japan 29.3% 31.5%
Australia 25.9% 25.9%
UK 23.7% 27.2%
Germany 24.4% 24.0%
France 36.0% 35.1%
Sweden 16.1% 19.5%
BC now has the
6th highest average
METR among the
ten provinces and
34 OECD
countries
combined, as well
as the 2nd highest
average METR
in Canada
B C AL S O H AS T H E H I G H E S T ‘ C AR B O N P R I C E ’ I N N O R T H
AM E R I C A ( C A N A D A / U S / M E X I C O C A R B O N P R I C E S , 2 0 1 6 )
42
Notes:
1. RGGI is made up of 9 states: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont. RGGI
market applies to electricity only.
2. Alberta Specified Gas Emitters Regulation only applies to facilities who emit more than 100,000 tonnes per year. Payment is only for incremental
emissions.
3. California protects 47 sectors and 94 related industrial activities.
4. Quebec protects the following industries: Aluminium, lime, cement, chemical and petrochemical industry, metallurgy, mining and pelletizing, pulp and
paper, petroleum refining, glass containers, electrodes, gypsum products, some agri-food establishments.
Carbon price = $0
CA
D$
6.8
0
CA
D$
15
.00
CA
D$
16
.43
CA
D$
16
.43 CA
D$
30
.00
CA
D$
3.8
8 (
up
per
)
BC as of 2016 was:
100 x rest of Canada (ex AB)
8 x Mexico
4.5 x RGGI (north east states)
2 x Quebec/California
2 x Alberta
A L O O K B AC K : B C ’ S L E AD I N G G R O W T H I N D U S T R I E S C O M E
F R O M A D I V E R S E M I X O F S E C T O R S
43
Source: Statistics Canada.
5.1
5.2
5.3
5.3
5.5
5.9
6.4
6.7
6.8
7.5
7.7
8.9
15.7
0 10
Other wood mfg…
Aquaculture
Miscellaneous mfg.
Oil & gas extraction
Veneer, plywood and…
Design, R&D, technical…
Equip. repair, houshold…
Other misc. mfg
Gambling industries
Pharmaceutical & med. mfg
Cmpt systems design serv.
Waste man. / remediation
Software publishers
BC top growth industries 1997-14average annual % change
2.7
2.8
2.8
2.8
3.3
3.5
3.6
3.7
3.8
4.2
4.5
4.6
0 10
Warehousing & storage
Couriers & messengers
Pipeline transport. of natural gas
Other furniture-related prod. mfg.
Truck transportation
Motion picture prod. & dist.
Municipal public admin.
Tech, & trades schools,…
Residential construction
Investigation & security serv.
Rail transportation
Cmpt & related equip. mfg
BC top growth industries 1997-14average annual % change
R E S O U R C E S S T I L L I M P O R TA N T
44
Source: Statistics Canada
* includes forestry, mining, oil and gas and related support activities and processing.
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
1997-2015 excl 2009
BC real GDP growth, avg. 1997-2015 % change
resource sector* rest of economy
0
2
4
6
8
10
12
14
97 99 01 03 05 07 09 11 13 15
Resources* share of BC real GDP, %
resource sector
mining
R E C AP
45
• The current choppy, risk-prone global economic environment is expected to persist through 2017
– and perhaps beyond
• A fairly muted economic outlook for Canada, with hopes largely riding on the US. Firmer oil prices
are helping
• Heightened global uncertainty with Trump as President, national elections coming in Europe, fall-out
from BREXIT, and the risk of China-US trade and geopolitical conflict
• The current economic expansion in BC will continue, but at a slower pace…after three years of
above-average growth. This reflects a drop in housing market activity (mainly in the lower mainland),
difficulties in the forest industry, and a modest fall-off in the growth of consumer spending
• BC’s increasingly diversified economy is a source of strength and resilience
• Over the medium term, BC needs to address a number of structural weaknesses – sub-par business
investment, waning competitiveness in most traded industry sectors, and lagging productivity