Manitoba & Canadian Economic Forecast - Robert Hogue

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

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

…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

3

Non-residential construction sector still very busy
Many projects on the go; spending rising at a double-digit clip

Non-residential building construction: Manitoba
40
30
20
10
0
-10
-20
-30
-40
2001

2002

2003

2004

2005

2006

2007


4

2008

2009

2010

2011

2012

2013

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


5

2003

2005

2007

2009

2011

2013

…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

6

2007

2008

2009

2010

2011

2012

2013

The services sector continues to make headway,…
It is growing at nearly twice the pace of the goods-producing sector

Payroll employment: Manitoba
6
4
2
0
-2
-4
Services

Goods

-6
-8
2002

2003

2004

2005

2006

2007


7

2008

2009

2010

2011

2012 2013ytd

…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

8

4

6

8

10

International exports are bouncing back,…
Merchandise exports are up 8.3% year to date; strong gains in the US

Merchandise exports: Manitoba
25
20
15
10
5
0
-5
-10
-15
-20
-25
2000

2001

2002

2003

2004

2005

2006


9

2007

2008

2009

2010

2011

2012 2013ytd

…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


10

20

30

40

50

60

70

80

90

100

On a softer note, Manitoba’s factory sales moderated…
Wood, machinery, chemicals up; transportation equipment down

Manufacturing shipments: Manitoba
25%

Manitoba

Canada

20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
-25%
2001

2002

2003

2004

2005

2006

2007


11

2008

2009

2010

2011

2012

2013

…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
15

10

5

0

-5

Manitoba
-10
2001

2002

2003

2004

2005

2006

2007


12

Canada
2008

2009

2010

2011

2012

2013

…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


13

2009

2010

2011

2012

2013

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


14

2008

2009

2010

2011

2012

2013

…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


15

2005

2007

2009

2011

2013

…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

16

Overall, Manitoba economy is sustaining a decent pace…
One of Canada’s fastest growing provinces for the second year running

Real GDP: Manitoba
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

17

…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

18

4

5

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


19

…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

20

06

07

08

09

10

11

12

13

14

…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

21

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


22

Non-res.
investment

Net trade

Inventories

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

23

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

24

2008

2009

2010

2011

2012

2013

2014

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
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

25

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


26

2009

2010

2011

2012

2013

2014

…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


2013f 2014f
7.1
6.8
5.4
5.1

27

…which will support stronger consumer spending…
Growth in retail sales forecasted to pick up modestly

Retail sales: Manitoba
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

28

…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

29

Disclaimer

The material contained in this report is the property of Royal Bank of Canada and may not be reproduced in any way, in whole or in part, without express authorization of the copyright holder in
writing. The statements and statistics contained herein have been prepared by RBC Economics Research based on information from sources considered to be reliable. We make no
representation or warranty, express or implied, as to its accuracy or completeness. This publication is for the information of investors and business persons and does not constitute an offer to
sell or a solicitation to buy securities.
®Registered trademark of Royal Bank of Canada.
©Royal Bank of Canada.


30

Manitoba & Canadian Economic Forecast - Robert Hogue

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