GLOBAL OUTLOOK:
DOUBLE DIP OR SINGLE SLOG?
September 26, 2010

Douglas Porter, CFA
Deputy Chief Economist & Managing Direc...
Financial Markets See-saw
(as of September 24, 2010)

                Stocks                                  Canadian Dol...
Job Losses in Perspective
(y/y % chng)
                                                                      Cumulative Ch...
Canadian Housing Chills, US Freezes

               Home Sales                                    Existing Home Prices    ...
Changing Gears
Vehicle Sales (mlns : ar)
21                                                         2.1   20

            ...
Canadian Exports: Where Now?
Canadian Exports (% of total)
                     United States                             ...
OECD Fiscal Landscape
2010 (% of nominal GDP)
Deficit vs Debt
                                                            ...
Inflation Below 2%
Consumer Price Index (y/y % chng)
                           Canada                                    ...
Global Equities: New Challenges
(y-t-d % chng : as of September 24, 2010)

Equity Markets
Germany                         ...
Bmo ppt cdn_economic_update
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Bmo ppt cdn_economic_update

  1. 1. GLOBAL OUTLOOK: DOUBLE DIP OR SINGLE SLOG? September 26, 2010 Douglas Porter, CFA Deputy Chief Economist & Managing Director, BMO Capital Markets BMO Capital Markets™ 1-800-613-0205 www.bmocm.com/economics Your ambition achieved.™
  2. 2. Financial Markets See-saw (as of September 24, 2010) Stocks Canadian Dollar Commodities 1600 16000 (US¢) 150 4.50 105 1400 14000 100 120 Copper 3.75 (US$/lb: 1200 TSX 12000 95 rhs) 3.00 (rhs) 90 90 1000 10000 2.25 S&P 85 800 500 8000 60 Oil 1.50 (lhs) 80 (US$/bbl: lhs) 600 6000 75 30 0.75 08 09 10 08 09 10 08 09 10 Concerns: US Slowing, Europe Debt, China Tightening © BMO Capital Markets www.bmocm.com/economics Recovery Gears Down (q/q % chng : ar) 08 09 10 11 Real GDP Canada 0.5 -2.5 3.0 2.5 US 0.0 -2.6 2.7 2.2 8 Canada 4 US 0 Recession Gauges: Length Depth -4 US 18 mnths -4.1% Canada 3 qtrs -3.3% forecast -8 04 05 06 07 08 09 10 11 Expansion Will Be Moderate © BMO Capital Markets www.bmocm.com/economics Page 1-2
  3. 3. Job Losses in Perspective (y/y % chng) Cumulative Chng in Recession % Level Employment Canada -2.4% -417,000 6 US -6.1% -8.4 mln 4 Canada 2 2.4% 0.2% 0 US -2 -2.4% -4 Record -4.7% US recession -6 75 80 85 90 95 00 05 10 US Recession Much Worse © BMO Capital Markets www.bmocm.com/economics Jobless Rates Will Fall Gradually Unemployment Rate (percent) 11 Spain 20.3 10 9.6% Ireland 13.6 Greece 11.0 9 US Portugal 10.8 8 Lagging Indicator France 10.0 8.1% Canada Belgium 8.9 7 5.9% Finland 8.3 6 Sweden 8.2 33-year Low 5 4.4% Germany 6.9 forecast Japan 5.2 4 Australia 5.1 04 05 06 07 08 09 10 11 UK 4.5 US Job Creation Slow © BMO Capital Markets www.bmocm.com/economics Page 3-4
  4. 4. Canadian Housing Chills, US Freezes Home Sales Existing Home Prices Housing Starts (mlns : ar) (y/y % chng : 3-mnth ma) (2005 = 100 : 2-mnth ma) 9 0.6 20 120 Canada Canada (rhs) Canada 8 100 0.5 10 7 80 0.4 0 6 60 US US 0.3 -10 5 US 40 (lhs) 4 0.2 -20 20 03 05 07 09 03 05 07 09 03 05 07 09 Home Sales: US = Existing + New Canada = Existing © BMO Capital Markets www.bmocm.com/economics Tepid Consumer Recovery 08 09 10 11 Canada 2.9 0.4 3.4 3.1 Personal Savings Rate US -0.3 -1.2 1.5 2.2 (% of disposable income : 4-qtr ma) Real Consumer Spending 7 (y/y % chng) 6 6 US 5 Canada 3 4 US 3 Canada 0 2 forecast -3 1 06 07 08 09 10 11 06 07 08 09 10 11 © BMO Capital Markets www.bmocm.com/economics Page 5-6
  5. 5. Changing Gears Vehicle Sales (mlns : ar) 21 2.1 20 US 18 1.8 Canada 15 (rhs) 15 US 1.5 (lhs) China 10 12 1.2 Crossover Canada: Aug = estimate 9 0.9 5 05 06 07 08 09 10 05 06 07 08 09 10 (3-mnth ma) © BMO Capital Markets www.bmocm.com/economics Global GDP: The Great Divide 2010:Q2 (y/y % chng) 08 09 10 11 World 3.0 -0.6 4.2 3.7 Real GDP Eurozone 0.3 -4.0 1.6 1.5 China 10.3 India 8.8 Brazil 8.8 Korea 7.2 Canada 3.4 US 3.0 Japan 2.4 Eurozone 1.9 UK 1.7 0 2 4 6 8 10 12 © BMO Capital Markets www.bmocm.com/economics Page 7-8
  6. 6. Canadian Exports: Where Now? Canadian Exports (% of total) United States Europe & Emerging Markets 85 16 80 14 12 75 Emerging 10 Markets 70 Europe 8 65 6 60 4 75 80 85 90 95 00 05 10 75 80 85 90 95 00 05 10 Must Broaden Markets © BMO Capital Markets www.bmocm.com/economics Loonie & Commodities: The Ties that Bind Canada (as of September 24, 2010) 1000 120 110 800 C$ (US¢ : rhs) 100 600 90 BoC 80 400 Commodity Price Index 70 (lhs) 200 60 95 97 99 01 03 05 07 09 © BMO Capital Markets www.bmocm.com/economics Page 9-10
  7. 7. OECD Fiscal Landscape 2010 (% of nominal GDP) Deficit vs Debt TROUBLE 15 UK 12 Ireland US 9 Spain France Greece Japan Portugal 6 New Zealand Canada Italy 3 Australia Germany Deficit 0 Surplus -3 -60 -30 0 30 60 90 120 Net Debt Dots represent countries in the OECD, except Norway, which has huge assets © BMO Capital Markets www.bmocm.com/economics Canadian Dollar Outlook: Still Looking Up? (US¢ : as of September 24, 2010) Canadian Dollar Positives: 110 Parity Rate Hikes 100 Global Diversification 90 [Current] 97.58¢ Sounder Finances 80 70 forecast 60 03 04 05 06 07 08 09 10 11 Downside Risk: Sovereign Debt Spillover © BMO Capital Markets www.bmocm.com/economics Page 11-12
  8. 8. Inflation Below 2% Consumer Price Index (y/y % chng) Canada United States 6 6 [Core] [Total] 3 1.7% 1.6% 3 Core 1.1% Core 0 0 Total Total 0.9% ...and Falling forecast -3 -3 07 08 09 10 11 07 08 09 10 11 HST Made Little Impact © BMO Capital Markets www.bmocm.com/economics Monetary Policy Tightens in Canada First (% : as of September 24, 2010) Overnight Rate 10-year Bonds Fixed Mortgage Rate 6 6 7.0 US forecast 5 5 6.5 US 4 4 2.80% 3.50% 6.0 Canada Canada 3 3 3.50% (Year-end 5.5 (5-yr) ’11) US 2 Canada 2 [Current] 2.55% (Year-end 5.0 (30-yr) Canada 2.87% ’10) 1 Canada 1.00% 1 US 2.61% Current 4.5 Spread US 0% - 0.25% 26 bps 0 0 4.0 05 07 09 11 07 08 09 10 11 07 08 09 10 11 BoC Tightens Bond Yields Will Rise... Eventually © BMO Capital Markets www.bmocm.com/economics Page 13-14
  9. 9. Global Equities: New Challenges (y-t-d % chng : as of September 24, 2010) Equity Markets Germany 5.7 DJIA 4.1 TSX 3.9 UK 3.4 S&P 500 3.0 Brazil -0.6 Australia -4.7 Spain -10.2 Japan -10.2 China -20.1 Greece -31.1 -35 -30 -25 -20 -15 -10 -5 0 5 10 S&P 500: Correction Japan: Bear © BMO Capital Markets www.bmocm.com/economics Constraints on Growth Fiscal Restraint Tight Credit Jobless US Cooling Emerging Market Growth Strong C$ Equals Single Slog © BMO Capital Markets www.bmocm.com/economics Page 15-16

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