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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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Headline news: Oil plunges on supply-side shocks
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
2007 2009 2011 2013 2015
WTI USD/barrelSaudi Arabia: Retaining market share, prices reflect supply/demand
Source: U.S. Federal Reserve, Central 1 Credit Union Latest: 3/18//2015
$48
|
Main sources of supply increases last year
-0.4
0.0
0.4
0.8
1.2
1.6
Q1-14 Q2-14 Q3-14 Q4-14
Saudi Arabia Libya Iraq U.S.
Million barrels/day
Increase in petroleum production since Dec. 2013
Source: U.S. Dept. of Energy – EIA.
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Oversupply to last well into 2015
-2
-1
0
1
2
3
78
82
86
90
94
98
Q1-12 Q1-13 Q1-14 Q1-15 Q1-16
Balance (RHS) Production Consumption
Million barrels/day
World Oil Production and Consumption BalanceMillion barrels/day
Source: U.S. EIA, Short-term Energy Outlook, Feb. 2015.
|
Source: Bank of Canada.
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Price plunge unexpected; higher prices after 2015
20
40
60
80
100
120
2004 2009 2014 2019
Actual
Consensus Aug-14
Consensus Dec-14
Futures
US$ per barrel
Source: U.S. BEA, Consensus Forecasts, NYMEX. Forecast: 2015 - 2019.
WTI Oil Price: Actual and Forecasts
|
Large downgrade to first half 2015 forecast
0
1
2
3
4
Q1-12 Q1-13 Q1-14 Q1-15 Q1-16 Q1-17
Actual
Oct-14
Jan-15
Apr-15
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
|
Canada’s outlook lowered, sharp cut to income growth
0
1
2
3
4
5
2010 2012 2014 2016
Source: Statistics Canada, Bank of Canada MPR. Latest: 2014 estimated, forecast 2015 to 2017.
1.5
2.0
2.5
3.0
3.5
2010 2012 2014 2016
Actual 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
Q1-12 Q1-13 Q1-14 Q1-15 Q1-16 Q1-17
Actual
14-Oct
15-Jan
15-Apr
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
|
Will the Bank of Canada cut again?
0.60
0.70
0.80
0.90
1.00
1.10
1.20
1.30
1/1/11 1/1/13 1/1/15 1/1/17
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%
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
2000 2004 2008 2012 2016
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
2008 2009 2010 2011 2012 2013 2014 2015
Expansion/Contraction Demarcation
Index
JP Morgan Global Manufacturing PMI
Source: Bloomberg, Central 1 Credit Union
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China’s manufacturing slowdown
46
48
50
52
54
56
58
2013 2014 2015
Non-manufacturing
Manufacturing
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
07 08 09 10 11 12 13 14 15
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
-1000
-800
-600
-400
-200
0
200
400
600
123
126
129
132
135
138
141
144
08 10 12 14
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
0
500
1,000
1,500
2,000
2,500
1991 1995 1999 2003 2007 2011 2015
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
0.00
0.50
1.00
1.50
2.00
Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17
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
0.70
0.75
0.80
0.85
0.90
0.95
1.00
1.05
1.10
1/1/2010 1/27/2012 2/21/2014
CAD at more than five-year low
CDN in USD
Daily Exchange Rate
0.70
0.75
0.80
0.85
0.90
0.95
1.00
1.05
1.10
2011 2013 2015 2017 2019
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
1992 1997 2002 2007 2012 2017
Nominal
Real
Per cent change in GDP
B.C. Economic Growth, Actual and Forecast
Source: Statistics Canada, C1CU. Latest actual: 2011. Forecast: 2014 - 2017.
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Mild improvements in B.C. labour market
2.14
2.16
2.18
2.20
2.22
2.24
2.26
2.28
2.30
2010 2011 2012 2013 2014 2015
Seas. Adj. 3-mo ma
Persons - millionsB.C. Employment
0 1 2 3
AWE
Hours Worked
Part-time
Full-time
Total EMP
2014 Performance
Source: Statistics Canada, Central 1 Credit Union. Latest actual: Mar/15
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Population growth edges higher in 2014
-20
-10
0
10
20
30
40
50
60
1998 2001 2004 2007 2010 2013
International Interprovincial
SOURCE Statistics Canada Central 1 Credit Union)
0.50
0.75
1.00
1.25
1.50
1998 2001 2004 2007 2010 2013
Per 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
2007 2009 2011 2013
Per Cent
Y/Y Retail Sales Growth
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
2007 2009 2011 2013 2015
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.
0
10
20
30
40
50
60
2000 2002 2004 2006 2008 2010 2012 2014
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
8.0
2000 2003 2006 2009 2012 2015
Domestic 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
2000 2005 2010 2015
Exports
Imports
Per cent change
Export / 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
3,400
2007 2009 2011 2013
Nominal Real
Per Cent
Int’l Goods Exports - $(millions)
60
70
80
90
100
110
120
130
140
2007 2009 2011 2013 2015
Production 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
50
100
150
200
250
0
200
400
600
800
1,000
1,200
2007 2009 2011 2013 2015
Same-day or One Night Return
Two-Nights or More Return
SOURCE Statistics Canada Central 1 Credit Union)
250,000
300,000
350,000
400,000
450,000
500,000
2004 2006 2008 2010 2012 2014
Per CentPersons (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
2006 2008 2010 2012 2014
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
|
Abbotsford employment drops, but monthly trend climbs
74
76
78
80
82
84
86
88
90
92
94
2006 2008 2010 2012 2014
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
|
Unemployment rate in decline, but labour slack persists
3
4
5
6
7
8
9
10
2001 2003 2005 2007 2009 2011 2013
Abbotsford-Mission Vancouver
Per Cent
Unemployment Rate
62
63
64
65
66
67
68
69
70
2001 2003 2005 2007 2009 2011 2013
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
20
2007 2009 2011 2013
Per Cent
Vancouver CMA, Y/Y Retail Sales Growth
0
50
100
150
200
250
300
350
2007 2009 2011 2013 2015
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
100
200
300
400
500
600
700
800
900
1,000
0
10
20
30
40
50
60
70
80
90
2002 2004 2006 2008 2010 2012 2014
Abbotsford CMA (L)
Vancouver CMA ( R)
Non-Res Building Investment ($2007)$ mil.
0
500
1,000
1,500
2,000
2,500
3,000
2000 2004 2008 2012
Non-Res Permit Volume - LMSW$ mil.
|
Population growth led by Metro Vancouver area, Fraser Valley lags
0.0
0.5
1.0
1.5
2.0
2.5
2005 2008 2011 2014
Greater 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
01/02 04/05 07/08 10/11 13/14
Net Natural
Intra-Provincial
Interprovincial
International
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
01/02 04/05 07/08 10/11 13/14
Net natural
Intra-Provincial
Interprovincial
International
PersonsComponents of Population Change (StatsCan method)
|
Spring has sprung - Lower Mainland MLS® sales surge in March
0
1,000
2,000
3,000
4,000
5,000
6,000
2000M01 2002M01 2004M01 2006M01 2008M01 2010M01 2012M01 2014M01
Units
Source: CREA, Central 1 Credit Union Latest Mar/15
|
0
5
10
15
20
25
30
35
40
45
2005 2007 2009 2011 2013 2015
Housing conditions heat up in the Lower Mainland, prices on the rise
Sales-to-Active Listings Ratio*
-25
-20
-15
-10
-5
0
5
10
15
20
25
30
300
350
400
450
500
550
600
2006 2008 2010 2012 2014
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
|
Metro Vancouver sales rise to mid-2000 range, Valley sluggish
SOURCE: Landcor, Latest: 2014, resale properties
0
20
40
60
80
100
120
140
2005 2007 2009 2011 2013 2015
Fraser 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
2007 2009 2011 2013 2015
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
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
2000
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
0
5,000
10,000
15,000
20,000
25,000
0
200
400
600
800
1,000
1,200
1,400
2000 2002 2004 2006 2008 2010 2012 2014
Abbotsford CMA (L) Vancouver CMA ( R)
Units
Source: CMHC, Central 1 Credit Union Latest : 2014
Units
|
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
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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
Thank You
Bryan Yu
Senior Economist
Central 1 Credit Union
Email: [email protected]
Twitter: @bryanyubc
