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Manitoba & Canadian Economic Forecast - Robert Hogue
1. RBC ECONOMICS I RESEARCH
The economic outlook for Manitoba
More of the same in store for 2014?
Robert Hogue
Senior Economist, RBC
robert.hogue@rbc.com
Manitoba Home Builders Association Housing Forum
Winnipeg, November 6, 2013
2. Many good news in Manitoba: agricultural is doing well,…
Cash receipts are up 13% y/y
Farm cash receipts: Manitoba vs. Canada
% change, year-over-year
60
Manitoba
50
Canada
40
30
20
10
0
-10
-20
-30
-40
2001
2002
2003
2004
2005
2006
2007
Source: Statistics Canada, RBC Economics Research
ECONOMICS I RESEARCH
2
2008
2009
2010
2011
2012
2013
3. …with bumper crops this year
Manitoba’s major crops are set for record year; yields are excellent
Crop production: Manitoba
Wheat, canola, soybeans, corn,barley, million tonnes
12
10
8
6
4
2
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013p
Source: Statistics Canada, RBC Economics Research
ECONOMICS I RESEARCH
3
4. Non-residential construction sector still very busy
Many projects on the go; spending rising at a double-digit clip
Non-residential building construction: Manitoba
% change, year-over-year
40
30
20
10
0
-10
-20
-30
-40
2001
2002
2003
2004
2005
2006
2007
Source: Statistics Canada, RBC Economics Research
ECONOMICS I RESEARCH
4
2008
2009
2010
2011
2012
2013
5. Residential investment leveling off but at an all-time high…
New home construction still growing; renovation slowing a little
Residential investment: Manitoba
Billion $, 4-quarter trailing sum
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
1991
1993
1995
1997
1999
2001
Source: Statistics Canada, RBC Economics Research
ECONOMICS I RESEARCH
5
2003
2005
2007
2009
2011
2013
6. …and is likely to pick up in the latter part of this year
Housing starts strengthened again in the third quarter
Manitoba housing starts
Thousand units, quarterly averages, SAAR
9
8
7
6
5
4
3
2
1
2000
2001
2002
2003
2004
2005
2006
Source: CREA, RBC Economics Research
ECONOMICS I RESEARCH
6
2007
2008
2009
2010
2011
2012
2013
7. The services sector continues to make headway,…
It is growing at nearly twice the pace of the goods-producing sector
Payroll employment: Manitoba
% change, year-over-year
6
4
2
0
-2
-4
Services
Goods
-6
-8
2002
2003
2004
2005
2006
2007
Source: Statistics Canada, RBC Economics Research
ECONOMICS I RESEARCH
7
2008
2009
2010
2011
2012 2013ytd
8. …driven by real estate, and accommodation and food
Service industries focusing on both consumers and businesses
Payroll employment: Manitoba
% change, year-to-date 2013
Real estate and leasing
Accommodation and food services
Professional and technical services
Arts and entertainment
Health care and social assistance
Finance and insurance
Total services
2
Source: Statistics Canada, RBC Economics Research
ECONOMICS I RESEARCH
8
4
6
8
10
9. International exports are bouncing back,…
Merchandise exports are up 8.3% year to date; strong gains in the US
Merchandise exports: Manitoba
% change, year-over-year
25
20
15
10
5
0
-5
-10
-15
-20
-25
2000
2001
2002
2003
2004
2005
2006
Source: Statistics Canada, RBC Economics Research
ECONOMICS I RESEARCH
9
2007
2008
2009
2010
2011
2012 2013ytd
10. …boosted by booming oil exports
Energy almost doubling; now accounting for 15% of Manitoba’s exports
Top commodity exports: Manitoba
% change, year-to-date 2013
Energy
Consumer products
Total merchandise exports
Motor vehicles and parts
Farm products
Aircraft/other transportation equipment
Metallic products
Machinery
-10
10
Source: Statistics Canada, RBC Economics Research
ECONOMICS I RESEARCH
10
20
30
40
50
60
70
80
90
100
11. On a softer note, Manitoba’s factory sales moderated…
Wood, machinery, chemicals up; transportation equipment down
Manufacturing shipments: Manitoba
% change, year-over-year
25%
Manitoba
Canada
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
-25%
2001
2002
2003
2004
2005
2006
2007
Source: Statistics Canada, RBC Economics Research
ECONOMICS I RESEARCH
11
2008
2009
2010
2011
2012
2013
12. …and retail trade has yet to show sustained vigour,…
Retail sales track only 2.2% higher than last year; showed volatility
Retail sales: Manitoba vs. Canada
% change, year-over-year
15
10
5
0
-5
Manitoba
-10
2001
2002
2003
2004
2005
2006
2007
Source: Statistics Canada, RBC Economics Research
ECONOMICS I RESEARCH
12
Canada
2008
2009
2010
2011
2012
2013
13. …partly because job creation slowed in the province
Employment has grown by less than 1% year-to-date
Employment: Manitoba vs.Canada
SA, % change, year-over-year
4.0%
3.0%
Manitoba
2.0%
1.0%
0.0%
-1.0%
Canada
-2.0%
-3.0%
2004
2005
2006
2007
2008
Source: Statistics Canada, RBC Economics Research
ECONOMICS I RESEARCH
13
2009
2010
2011
2012
2013
14. Nonetheless, Manitoba’s unemployment rate remains low,…
At 5.5%, it is the third lowest in the country
Unemployment rate: Manitoba vs. Canada
%, 3-month moving average
10
9
Canada
8
7
6
5
Manitoba
4
3
2
1
0
2000
2001
2002
2003
2004
2005
2006
2007
Source: Statistics Canada, RBC Economics Research
ECONOMICS I RESEARCH
14
2008
2009
2010
2011
2012
2013
15. …which attracts immigrants,…
Net international and interprovincial migration near decades-high
Manitoba net migration
Persons, trailing 4-quarter sum
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
-2,000
-4,000
-6,000
1993
1995
1997
1999
2001
2003
Source: Statistics Canada, RBC Economics Research
ECONOMICS I RESEARCH
15
2005
2007
2009
2011
2013
16. …and which, in turn, boosts population growth
Running at close to 30-year high; no longer lags the Canadian average
Population growth
% change
2.0
Canada
1.5
1.0
0.5
Manitoba
0.0
-0.5
-1.0
1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
Source: Statistics Canada, RBC Economics Research
ECONOMICS I RESEARCH
16
17. Overall, Manitoba economy is sustaining a decent pace…
One of Canada’s fastest growing provinces for the second year running
Real GDP: Manitoba
% change, year-over-year
6
Forecast
4
2.7
2.5
2.6
2
0
-2
Manitoba
Canada
-4
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
* 1997 - 2007 GDP is Mil. Chn. 2002; 2008 - current is Mil. Chn. 2007
** Canada GDP is Mil. Chn. 2007; 2012 GDP is actual
Source: Statistics Canada, RBC Economics Research
ECONOMICS I RESEARCH
17
18. …and is expected to continue to do so next year
Fairly steady growth forecasted; other provinces will pick things up
Provincial real GDP growth in 2014
Annual % change
ALTA.
4.1
SASK.
2.7
CANADA
2.7
MAN.
2.6
ONT.
2.6
B.C.
2.6
N.S.
2.3
QUE.
1.9
P.E.I.
1.7
N.B.
1.5
N.& L.
1.3
0
1
2
3
Sources: Statistics Canada, RBC Economics Research
ECONOMICS I RESEARCH
18
4
5
19. Manitoba exporters will benefit from stronger US growth,…
Gains in auto and construction sectors; confidence will rebuild; politics
U.S. real GDP
Quarter-over-quarter annualized % change
10
Forecast:
8
6
4
2
0
-2
-4
Annual Growth Rates
-6
-8
Real GDP
2011 2012
1.8
2.8
2013f 2014f
1.6
2.6
-10
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: Bureau of Economic Analysis, RBC Economics Research
ECONOMICS I RESEARCH
19
20. …a slightly weaker loonie…
The Canadian dollar will stay close to parity; still very volatile
Canadian dollar forecast
US$/C$
1.10
Forecast
1.00
Parity
0.90
0.80
End of period rates
2012 2013f 2014f
0.98
1.00 0.95
US$/C$
0.70
0.60
95
96
97
98
99
00
01
02
03
04
05
Source: Bank of Canada, RBC Economics Research Forecasts
ECONOMICS I RESEARCH
20
06
07
08
09
10
11
12
13
14
21. …and a brighter global growth outlook next year
Expansion of emerging economies to sustain demand for commodities
World GDP growth
Year-over-year % change
6
IMF Forecast
5
4
3.2
3
3.6
2.9
2
1
-1
-2
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: International Monetary Fund, RBC Economics Research
ECONOMICS I RESEARCH
21
22. Improving export picture also will help the rest of Canada
Net trade gains will offset stable housing and the effect of fiscal restraint
Canadian real GDP growth composition
Percentage points
2.0
2012
2013f
2014f
1.5
1.0
0.5
0.0
-0.5
-1.0
Consumer
spending
Government
spending
Residential
investment
Source: Statistics Canada, RBC Economics Research
ECONOMICS I RESEARCH
22
Non-res.
investment
Net trade
Inventories
23. Canadian real GDP growth to move above its potential rate
However, some economic slack will persist until 2015
Canada's real GDP growth
Quarter-over-quarter % change, annualized rate
Forecast:
8
6
4
2
0
-2
-4
Annual Growth Rates
-6
-8
Real GDP
2012 2013f
1.7
1.7
2014f
2.6
-10
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: Statistics Canada, RBC Economics Research
ECONOMICS I RESEARCH
23
24. Interest rates will remain low
We expect the Bank of Canada to keep its rate unchanged in 2014
Interest rates: Canada
%
7
Forecast
10 Year Bond Yield
6
5
4
3
2
BoC Overnight Rate
1
0
2000
2001
2002
2003
2004
2005
2006
2007
Source: Bank of Canada, RBC Economics Research Forecasts
ECONOMICS I RESEARCH
24
2008
2009
2010
2011
2012
2013
2014
25. Non-residential investment to be a catalyst in Manitoba still
Engineering spending likely to crest; ICI building has room to grow
Non-residential capital expenditure: Manitoba and Canada
% change, year-over-year
20
Manitoba
15
Forecast
10
5
0
-5
Canada
-10
-15
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: Statistics Canada, Haver Analytics, RBC Economics Research
ECONOMICS I RESEARCH
25
26. Conditions will be conducive to further job creation,…
Employment growth to accelerate slightly to 1.3% in 2014
Employment growth: Manitoba
Year-over-year, % change
3.0%
Forecast
2.5%
2.0%
1.5%
1.3%
0.9%
1.0%
0.5%
0.0%
-0.5%
2002
2003
2004
2005
2006
2007
2008
Source: Statistics Canada, RBC Economics Research
ECONOMICS I RESEARCH
26
2009
2010
2011
2012
2013
2014
27. …and some easing in the unemployment rate,…
Relatively good job prospects will be positive for confidence, immigration
Unemployment rate: Manitoba vs. Canada
%, SA
9
Canada
8
Forecast
7
6
5
Manitoba
4
3
2
Canada
Manitoba
1
Annual Rate
2011 2012
7.4
7.2
5.4
5.3
2000 2001 2002 2003 2004 2005 2006
2007 2008 2009 2010 2011 2012 2013 2014
Source: Statistics Canada, RBC Economics Research
ECONOMICS I RESEARCH
2013f 2014f
7.1
6.8
5.4
5.1
27
28. …which will support stronger consumer spending…
Growth in retail sales forecasted to pick up modestly
Retail sales: Manitoba
% change, year-over-year
12
Forecast
10
8
6
4.4
4
2.6
2
0
-2
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: Statistics Canada, RBC Economics Research
ECONOMICS I RESEARCH
28
29. …and demand for housing
Home resale activity to remained quite stable at historically high levels
Manitoba home resales
Thousand units
16
14.0 13.9 14.3
14
12
10
8
6
4
2
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: CREA, RBC Economics Research
ECONOMICS I RESEARCH
29