Central 1 Credit Union presentation for the Estate Planning Council of Abbosford

1. Economic Update and Forecast
Bryan Yu
Central 1 Credit Union
April 15, 2015
| 1

2. |
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

3. |
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/barrel
Saudi Arabia: Retaining market
share, prices reflect supply/demand
Source: U.S. Federal Reserve, Central 1 Credit Union Latest: 3/18//2015
$48

4. |
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.

5. |
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 Balance
Million barrels/day
Source: U.S. EIA, Short-term Energy Outlook, Feb. 2015.

6. |
Source: Bank of Canada.

7. |
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

8. |
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

9. |
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

10. |
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

11. |
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

12. |
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

13. |
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

14. |
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

15. |
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

16. |
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

17. |
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

18. |
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 cent
Short-term Interest Rate Futures: Canada and U.S.
Source: Montreal Exchange, CME Group, Central 1 Credit Union. Date: Mar 16/15

19. |
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 Outlook
CDN in USD
Source: Statistics Canada, Central 1 Credit Union. Daily Latest actual: Apr/15

20. |
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.

21. |
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.

22. |
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 - millions
B.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

23. |
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

24. |
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® Sales
Units
Source: Statistics Canada, Central 1 Credit Union Latest actual: Ret: Dec/14, MLS® Feb/15

25. |
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

26. |
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

27. |
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.

28. |
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 Activity
2012=100
Source: Statistics Canada, Central 1 Credit Union Latest actual: Feb 2015

29. |
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 Cent
Persons (000s)
International Tourist Inflows Canada-US Auto Flows

30. |
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.

31. |
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

32. |
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

33. |
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 Rate
Per Cent
Source: Statistics Canada, Central 1 Credit Union Latest actual: 2014

34. |
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

35. |
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.

36. |
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

37. |
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
Persons
Components of Population Change (StatsCan method)

38. |
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
Persons
Components of Population Change (StatsCan method)

39. |
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

40. |
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

41. |
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 Transactions
2013 Growth (%)

42. |
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

43. |
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

44. |
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

45. |
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

46. |
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.

47. |
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

48. |
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

49. Thank You
Bryan Yu
Senior Economist
Central 1 Credit Union
Email: byu@central1.com
Twitter: @bryanyubc