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Dollars & Cents

theANNUAL – 47


Dollars & Cents

Content provided by Benjamin Tal, Deputy Chief Economist, CIBC World Markets

1.2

Overview In 2017 the Canadian economy outperformed

Change in 2017 GDP Forecasts (%-pts, Latest vs. Start of the Year)

1.0 0.8

expectations. The extra growth is unlikely to continue in 2018 and 2019, even though world economic growth looks stronger.

0.6 0.4 0.2 0.0

Canada

EZ

Japan

U.K

China

Evolution of Consensus Forecasts For World Growth (% Yr/Yr)

2017

48 – theANNUAL

2018

U.S


The US expansion has been long, but not strong.

Cumulative Real GDP Per Capita Growth

US Economic Expansions (Months) 120 1961-69

100

1982-90

80

1991-01

60

1975-80

40

2009-Current

20

2001-07

0

1991-2001 2009Current

0

1961-1969 1982-1990 2001-2007 1975-1980

5

10

15

20

25

30

35

40

Employment The changing age composition of the population limits growth in GDP, although older people are working fewer hours.

Job growth 2009-2017

Share in Employment 0.25 0.20

0.80

Avg Hours Worked

0.75

34.9 – Avg age 25-54

0.15 0.7 0.10

32.2 – Avg age 55+ 0.65

0.05

Age 15-24

Age 25-55

Age 55+ 0.6

0.00 97

99

01

03

05

07

09

11

13

15

17

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Annual Average %

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Dollars & Cents

Content provided by Benjamin Tal, Deputy Chief Economist, CIBC World Markets

3.0 2.5

Exports

Tax Cut Revenue Impact as % US GDP

2.0

Despite the hype, the US tax cut is unlikely to drive major consumption growth among US consumers, or major increases in Canadian exports.

1.5 1.0 0.5 0.0 1981 1945 1948 2013 1964 2010 1921 2018

Business investment Business investment in the Canadian oil patch went up substantially in 2017. Indeed, that swing, worth 1%-point of GDP, was much of the 2017 growth story. Little growth can be expected there in 2018 and 2019. In the other 90% of the Canadian economy, capacity use is hitting peak levels, so there’s a need for additional space and equipment. However, many companies already have operations abroad, and siting a facility in the US to serve the American market makes sense with the protectionist attitude and measures of the Trump administration. Canada seems less attractive due to higher minimum wages and tougher environmental policies, coupled with the reduction in US tax rates. Ironically, all of the U.S. trade deficit with Canada comes from U.S. companies buying Canadian oil at a price which is discounted because of our lack of pipeline capacity.

Private Sector Capital Expenditures Intentions Survey (% Yr/Yr) 15 10 5 0 -5 -10 -15 -20

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18 E

16 17

15

14

13

12

09 10 11

08

07

-25

US Trade Deficit: 2016


Government stimulus In 2018, BC and Québec saw some room to

But recent quarters saw a notable pick-up in

ease up on budget surpluses, but Alberta is

government infrastructure activity. However,

still leaning towards reducing deficits.

while we still have a national infrastructure

Ontario’s direction will depend on the results

deficit to catch up with, the timing no longer

of the June 7 election. On the spending side,

suits from a Keynesian stimulus perspective,

government outlays essentially only matched

with many provinces at full employment.

the economy’s overall pace.

Consumer spending

The impact of one basis point as a percentage of borrowing costs

December 2017, but there are still signs that many firms are planning on accelerating hiring. Wages can be expected to rise 3% in 2018, with the proportion

1.2

so that the unemployment rate hit an all-time low in

1.5

In 2017, the labour market made remarkable gains,

stretched levels. 2017 also saw an acceleration in non-mortgage credit, leaving households with the hangover of those larger

0.6

0.9

of firms reporting to be facing labour shortages at

that rolls over into new rates. While rates are rising gently,

0.3

credit balances, and a higher interest charge on everything

0.0

their impact on consumption won’t be as gentle given outstanding debt burdens.

Summary 2017 (actual)

2018 (forecast)

2019 (forecast)

Exports

flat

flat

flat

Business Investment

UP

down

flat

Goverment Stimulus

UP

UP

flat

Consumer Spending

UP

flat

flat

Real GDP change

3.0%

2.0%

1.6%

Nominal GDP change

4.6%

4.4%

3.6%

Inflation (CPI)

1.6%

2.4%

2.0%

Content provided by CIBC World Markets

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Profile for Juan  Malvestitti

theANNUAL National 2018 - Dollars & Cents  

theANNUAL, theANNUAL National, Dollars & Cents, Benjamin Tal, Economic Forecast, RHB, RHB Magazine

theANNUAL National 2018 - Dollars & Cents  

theANNUAL, theANNUAL National, Dollars & Cents, Benjamin Tal, Economic Forecast, RHB, RHB Magazine

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