economic update - bryan yu - central 1 credit union
TRANSCRIPT
Economic Update and Forecast
Bryan Yu Central 1 Credit UnionApril 15, 2015
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About Central 1 Credit Union Central 1 is the primary liquidity manager, payments
processor and trade association for our member credit unions in B.C. and Ontario
Members which are also our owners represent a combined system of more than 130 independent credit unions, that have 3.3 million members and assets of more than $92 billion.
Credit Unions in B.C. employ more than 8,700 residents
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Agenda
• Oil, Oil, Oil!
• National Outlook – How low can rates go?
• B.C. – Where do we go from here?
• Regional wrap-up
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Headline news: Oil plunges on supply-side shocks
2007 2007-11-092008-09-122009-07-172010-05-212011-03-252012-01-272012-11-302013-10-042014-08-080.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
WTI USD/barrelSaudi Arabia: Retaining market share, prices reflect supply/demand
Source: U.S. Federal Reserve, Central 1 Credit Union Latest: 3/18//2015
$48
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Main sources of supply increases last year
Q1-14 Q2-14 Q3-14 Q4-14-0.4
0.0
0.4
0.8
1.2
1.6
Saudi Arabia Libya Iraq U.S.
Million barrels/day
Increase in petroleum production since Dec. 2013
Source: U.S. Dept. of Energy – EIA.
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Oversupply to last well into 2015
Q1-12
4/1/
...
7/1/
...
10/1
/...
Q1-13
4/1/
...
7/1/
...Q1-
Q1-14
4/1/
...
7/1/
...
10/1
/...
Q1-15
4/1/
...
7/1/
...
10/1
/...
Q1-16 Q1- Q1- Q1-
78
82
86
90
94
98
-2
-1
0
1
2
3
Balance (RHS) Production Consumption
Million barrels/day
World Oil Production and Consumption BalanceMillion barrels/day
Source: U.S. EIA, Short-term Energy Outlook, Feb. 2015.
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Source: Bank of Canada.
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Price plunge unexpected; higher prices after 2015
20
40
60
80
100
120
ActualConsensus Aug-14Consensus Dec-14Futures
US$ per barrel
Source: U.S. BEA, Consensus Forecasts, NYMEX. Forecast: 2015 - 2019.
WTI Oil Price: Actual and Forecasts
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Large downgrade to first half 2015 forecast
0
1
2
3
4
Ac-tual
Oct-14
Per cent change at annual rate in real GDP
Source: Statistics Canada, Bank of Canada. Latest actual: Q3-14. Forecast: Q4-14 to Q4-17.
Bank of Canada Economic Growth Forecast
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Canada’s outlook lowered, sharp cut to income growth
0
1
2
3
4
5
Source: Statistics Canada, Bank of Canada MPR. Latest: 2014 estimated, forecast 2015 to 2017.
1.5
2.0
2.5
3.0
3.5Actual Oct-14
Jan-15 Apr-15
Per Cent Per Cent
Real Gross Domestic Product Real Gross Domestic Income
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Headline inflation to approach zero
0.0
0.5
1.0
1.5
2.0
2.5
Ac-tual
14-Oct
15-Jan
Per cent change at annual rate
Source: Statistics Canada, Bank of Canada. Latest actual: Q4-14. Forecast Q1-15 to Q4-17.
Bank of Canada Total CPI Inflation Outlook
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Will the Bank of Canada cut again?
0.60
0.70
0.80
0.90
1.00
1.10
1.20
1.30
3-Mth BA Futures (Apr 10)
Target Overnight Rate
Per cent
3-Month Banker’s Acceptance, Actual and Futures
Source: Bank of Canada, Montreal Exchange, Central 1 Credit Union Latest Actual: Apr/2015
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Rate outlook cut, long bonds below 3% through 2017, short yield less than 1%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 20170.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
3-mo. T-bill LT GoC Bond
Per cent change
Interest Rate Outlook
Source: Statistics Canada, Bank of Canada Latest : 2014
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Global economy still in growth mode albeit at mild pace
30
35
40
45
50
55
60
Expansion/Contraction Demarcation
IndexJP Morgan Global Manufacturing PMI
Source: Bloomberg, Central 1 Credit Union
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China’s manufacturing slowdown
2013 2014 201546
48
50
52
54
56
58
Non-manufactur-ing
Index, 50=no change
Source: Bloomberg. Note: Seasonally adjusted. Latest: Feb. 2015
China PMIs
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U.S. growth disappoints in Q1, uptick expected
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
GDP Mean Forecast
Per cent change at annual rate
U.S. Economic Growth
Source: U.S. Bureau of Economic Analysis, WSJ Survey of Forecasters, Mar/15 Latest : Q4-14
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U.S. employment growth remains robust, to drive spending
123000
126000
129000
132000
135000
138000
141000
144000
-1000
-800
-600
-400
-200
0
200
400
600
Change (R) Total (L)
Persons (mil.)
U.S. Payroll Employment
Persons (000s)
Source: FRED Latest: Mar/15
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U.S. housing starts rebalancing after decade of overbuilding
1991 3372534213 1995 3518635674 1999 3664737135 2003 3810838596 2007 3956940057 2011 4103041518 20150
500
1,000
1,500
2,000
2,500
Avg HH formation Housing Starts
(000s)
Source: Federal Reserve St. Louis, Central 1 Credit Union Latest : Q4-14
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Divergence in monetary policy implied by futures markets – US to rise earlier and faster
Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-170.00
0.50
1.00
1.50
2.00
3m Bas (Canada)30d Fed funds (US)
Per centShort-term Interest Rate Futures: Canada and U.S.
Source: Montreal Exchange, CME Group, Central 1 Credit Union. Date: Mar 16/15
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Low oil, rate divergence hammers Canadian dollar
1/1/2010 12/3/201011/4/201110/5/2012 9/6/2013 8/8/20140.70
0.75
0.80
0.85
0.90
0.95
1.00
1.05
1.10
CAD at more than five-year low
CDN in USDDaily Exchange Rate
2011 2012 2013 2014 2015 2016 2017 2018 20190.70
0.75
0.80
0.85
0.90
0.95
1.00
1.05
1.10
Exchange Rate OutlookCDN in USD
Source: Statistics Canada, Central 1 Credit Union. Daily Latest actual: Apr/15
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External Economic Outlook Indicator 2013 2014 2015f 2016f 2017f
U.S. real GDP, % chg. 1.9 2.4 2.9 3.1 3.0
Japan GDP, % chg. 1.5 -0.1 1.1 1.7 1.3
China GDP, % chg. 7.7 7.4 6.9 6.8 6.7
EU GDP, % -0.4 1.3 1.7 1.9 1.8
Canada real GDP, % chg. 2.0 2.5 1.8 2.0 2.5
WTI Crude- $/bbl 98 93 52 58 63
CAD – cents/dollar 97.1 90.6 78.4 75.5 74.9
Canada 3-month T-bill 0.97 0.95 0.65 0.50 0.75
Canada GOC Long Yield 2.72 2.77 2.05 2.25 2.70
Source: U.S. BEA, Statistics Canada, Consensus Forecasts, Central 1 Credit Union Mar/15 outlook.
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Weaker oil will not derail B.C. economic growth
-6
-4
-2
0
2
4
6
8
10
NominalReal
Per cent change in GDPB.C. Economic Growth, Actual and Forecast
Source: Statistics Canada, C1CU. Latest actual: 2011. Forecast: 2014 - 2017.
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Impacts on growth
• Income impact of Alberta oil shock• Weaker demand and income for interprovincial workers
• B.C. made up more than 25 per cent of Alberta interprovincial workforce (2008)1
• Could constrain oil-sand demand growth for B.C. natural gas
Source: 1Based on Statistics Canada data from, Laporte, Lu and Schellenberg. Interprovincial Employees in Alberta. 2013
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Impacts on growth
• Lower oil prices lift domestic demand through consumer spending channels, lower input costs for businesses
• U.S. economic lift and lower Canadian dollar drives demand for B.C. exports
• Housing demand sustained by record-low mortgage rates
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Mild improvements in B.C. labour market
2,140.00
2,160.00
2,180.00
2,200.00
2,220.00
2,240.00
2,260.00
2,280.00
2,300.00
Seas. Adj. 3-mo ma
Persons - millionsB.C. Employment
AWE
Hours Worked
Part-time
Full-time
Total EMP
0 1 2 3
2014 Performance
Source: Statistics Canada, Central 1 Credit Union. Latest actual: Mar/15
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Population growth edges higher in 2014
-20000
-10000
0
10000
20000
30000
40000
50000
60000International Interprovincial
SOURCE Statistics Canada Central 1 Credit Union)
0.50
0.75
1.00
1.25
1.50Per Cent Persons (000s)
Population Growth Net Migration Flows
Source: Statistics Canada, Central 1 Credit Union Latest actual: 2014
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Domestic economy continues to show strength
-15
-10
-5
0
5
10
15
Per CentY/Y Retail Sales Growth
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
MLS® SalesUnits
Source: Statistics Canada, Central 1 Credit Union Latest actual: Ret: Dec/14, MLS® Feb/15
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Housing starts point to steady levels of construction in B.C.
2000 2001M052002M09 2004 2005M052006M09 2008 2009M052010M09 2012 2013M052014M090
10
20
30
40
50
60
SAAR Trend
Units (000s)
Source: CMHC, Central 1 Credit Union Latest : Mar/2015
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Economy growth to shift away from domestic drivers
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0Domestic Demand GDP
Per Cent
Source: Statistics Canada, Central 1 Credit Union. Latest: 2014e
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Exports to exceed import gains through 2017
-8
-6
-4
-2
0
2
4
6
8
10
Exports
Imports
Per cent changeExport / Import growth
Opportunities• Forestry cycle to shift higher on
U.S. housing market demand
• Broad manufacturing, including machinery and equipment
• Demand for agriculture, and food manufacturing to lead gains
• Tourism Demand
Source: Statistics Canada, C1CU. Latest actual: 2013, 2014e. Forecast: 2015 - 2017.
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Exports range-bound but anticipated to pick up
1,800
2,000
2,200
2,400
2,600
2,800
3,000
3,200
3,400Nominal Real
Per CentInt’l Goods Exports - $(millions)
60
70
80
90
100
110
120
130
140Production Exports
Lumber Activity2012=100
Source: Statistics Canada, Central 1 Credit Union Latest actual: Feb 2015
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Exchange rate sensitive sectors to experience boost
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
0
50000
100000
150000
200000
250000
Same-day or One Night Return
Two-Nights or More Return
SOURCE Statistics Canada Central 1 Credit Union)
2004 2005M09 2007M05 2009M01 2010M09 2012M05 2014250,000
300,000
350,000
400,000
450,000
500,000
Per Cent Persons (000s)International Tourist Inflows Canada-US Auto Flows
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B.C. Economic and Housing Forecasts
Indicator 2013 2014 2015f 2016f
Real GDP, % chg. 1.9 2.4 2.7 3.4 3.3
Employment, % chg. 0.1 0.6 1.3 1.6 1.8
Unemployment rate, % 6.6 6.0 5.9 5.9 5.9
Population, % chg. 0.9 1.1 1.1 1.1 1.2
Housing starts, (000s) 27.1 28.3 30.0 31.1 31.6
Source: Statistics Canada, CMHC, Central 1 Credit Union Mar/15 outlook.
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Metro area employment jumps in 2014 on part-time work
1100.0
1140.0
1180.0
1220.0
1260.0
1300.0
monthly, s.a. Annual average
Persons – thousands
Source: Statistics Canada, latest: Feb/2015
Vancouver CMA
LFS metric
Tot. Emp 2.3%
Full-time Emp 1.1%
Part-time Emp 7.1%
Unemployment Rate 5.8%
Annual Growth 2013/14
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Abbotsford employment drops, but monthly trend climbs
2006 2007M01 2008 2009M01 2010 2011M01 2012 2013M01 2014 201574
76
78
80
82
84
86
88
90
92
94
monthly, s.a. Annual average
Persons – thousands
Source: Statistics Canada, latest: Feb/2015
Abbotsford CMA
LFS metric
Tot. Emp -3.7%
Full-time Emp -1.1%
Part-time Emp -11.7%
Unemployment Rate 7.4%
Annual Growth 2013/14
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Unemployment rate in decline, but labour slack persists
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
3
4
5
6
7
8
9
10Abbotsford-Mission Vancouver
Per CentUnemployment Rate
62
63
64
65
66
67
68
69
70
Participation RatePer Cent
Source: Statistics Canada, Central 1 Credit Union Latest actual: 2014
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Retail spending robust, tourism on the mend
-15
-10
-5
0
5
10
15
20Per Cent
Vancouver CMA, Y/Y Retail Sales Growth
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
U.S. Overseas
International Tourist Visits to B.C.Persons (000s)
Source: Statistics Canada, Central 1 Credit Union Latest actual: Ret: Dec/14, MLS® Feb/15
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Non-residential building investment dips, but activity trends higher in second half
Source: Statistics Canada Latest: 2014
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
Abbotsford CMA (L)
Vancouver CMA ( R)
Non-Res Building Investment ($2007)$ mil.
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
Non-Res Permit Volume - LMSW$ mil.
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Population growth led by Metro Vancouver area, Fraser Valley lags
2005 2006 2007 2008 2009 2010 2011 2012 2013 20140.0
0.5
1.0
1.5
2.0
2.5Greater Vancouver Fraser Valley
Per Cent
Source: BC Stats, Latest: 2014
Lower Mainland-Southwest Population Growth
|
Vancouver driven by international immigration, loses to other regions
SOURCE Statistics Canada Central 1 Credit Union , latest 2013/14
-20,000
-10,000
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
Net NaturalIntra-ProvincialInterprovincialInternational
PersonsComponents of Population Change (StatsCan method)
|
Interprovincial migration negative in Abbotsford, modest lift in international gains
SOURCE Statistics Canada Central 1 Credit Union , latest 2013/14
-1,000
-500
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
Net naturalIntra-ProvincialInterprovincialInternational
PersonsComponents of Population Change (StatsCan method)
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Spring has sprung - Lower Mainland MLS® sales surge in March
2000M01 2001M05 2002M09 2004M01 2005M05 2006M09 2008M01 2009M05 2010M09 2012M01 2013M05 2014M090
1,000
2,000
3,000
4,000
5,000
6,000
Units
Source: CREA, Central 1 Credit Union Latest Mar/15
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200520062007200820092010201120122013201420150
5
10
15
20
25
30
35
40
45
Housing conditions heat up in the Lower Mainland, prices on the rise
Sales-to-Active Listings Ratio*
2006 Jan-07 2008 Jan-09 2010 Jan-11 2012 Jan-13 2014 Jan-15300,000
350,000
400,000
450,000
500,000
550,000
600,000
-30
-20
-10
0
10
20
30
Benchmark price (L)Annualized m/m change ( R)
MLS® Housing Price$(000s)
Source: CMHC, Central 1 Credit Union, * CMAs/CAs Latest actual: Feb/15
Per Cent
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Metro Vancouver sales rise to mid-2000 range, Valley sluggish
SOURCE: Landcor, Latest: 2014, resale properties
2005 2005M12 2006M11 2007M10 2008M09 2009M08 2010M07 2011M06 2012M05 2013M04 2014M03 2015M020
20
40
60
80
100
120
140Fraser Valley Greater Vancouver
Index (2005=100)
Lower Mainland Southwest Resale Transactions2013 Growth (%)
|
Price growth concentrated in Metro Vancouver
80
85
90
95
100
105
110
115
120
125
Fraser Valley
Greater Vancouver
Index (2010=100)
Source: Landcor Data Corp, Central 1 Credit Union note: 6-mth mov. average of s.a. data Latest Feb/15
Lower Mainland-Southwest Median Price by Region
Region Feb/15 (s.a.)
Fraser Valley $325,000
Greater Vancouver $557,000
Median price
|
Fraser Valley detached home value steady, apartments fall
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
Detached Apartment Attached
Index (2010=100)
Source: Landcor Data Corp, Central 1 Credit Union note: 6-mth mov. average of s.a. data Latest Feb/15
Fraser Valley Median Price by Type
|
Housing starts steady on demand growth, Abbotsford construction still weak
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140
200
400
600
800
1,000
1,200
1,400
0
5,000
10,000
15,000
20,000
25,000
Abbotsford CMA (L) Vancouver CMA ( R)
Units
Source: CMHC, Central 1 Credit Union Latest : 2014
Units
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Economic Outlook
Indicator 2013 2014 2015f 2016f
Employment, % change
Vancouver CMA 0.0 2.3 1.0 1.8
Abbotsford CMA 2.6 -3.7 1.5 1.5
Unemployment Rate, %
Vancouver CMA 6.6 5.8 5.7 5.5
Abbotsford CMA 7.7 7.4 6.5 6.3
Population, % change
Vancouver CMA 1.4 1.3 1.3 1.5
Abbotsford CMA 0.5 0.3 0.6 0.8
Source: Statistics Canada, C1CU forecast
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Housing Outlook
Indicator 2013 2014 2015f 2016f
Residential Resale Trans., % change
Metro Vancouver 3.5 19.5 5.0 4.7
Fraser Valley -0.8 19.6 7.1 5.0
Median Resale Price, % change
Metro Vancouver 2.8 7.0 4.0 3.0
Fraser Valley -0.6 3.0 1.0 1.2
Source: Landcor Data Corp., C1CU forecast. Note: Regional Districts.
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Summary:
Global economy showing sporadic signs of emerging from slowdown
Oil prices to remain low in 2015; post modest gains thereafter
U.S. economy poised to gain momentum; expansion to extend
Global economy on improving trend from low oil prices and policy stimulus
Canada’s economy hit by oil price plunge
Another BoC rate cut likely while U.S. Fed makes first hike
|
Summary:
Lower CAD and improving external economies lifts B.C. economy
Lower Mainland-Southwest economy steady, driven by domestic demand, housing, tourism
Population growth mixed and led by Metro Vancouver due to immigration
Housing sales on the upswing, prices rising in Metro Vancouver, mild uplift in Abbotsford area
Construction a growth sector for economy
