RBC ECONOMICS I RESEARCH

The economic outlook for Manitoba
More of the same in store for 2014?

Robert Hogue
Senior Econo...
Many good news in Manitoba: agricultural is doing well,…
Cash receipts are up 13% y/y

Farm cash receipts: Manitoba vs. Ca...
…with bumper crops this year
Manitoba’s major crops are set for record year; yields are excellent

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

Non-r...
Residential investment leveling off but at an all-time high…
New home construction still growing; renovation slowing a lit...
…and is likely to pick up in the latter part of this year
Housing starts strengthened again in the third quarter

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

Payr...
…driven by real estate, and accommodation and food
Service industries focusing on both consumers and businesses

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

Merchandis...
…boosted by booming oil exports
Energy almost doubling; now accounting for 15% of Manitoba’s exports

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

Manufa...
…and retail trade has yet to show sustained vigour,…
Retail sales track only 2.2% higher than last year; showed volatility...
…partly because job creation slowed in the province
Employment has grown by less than 1% year-to-date

Employment: Manitob...
Nonetheless, Manitoba’s unemployment rate remains low,…
At 5.5%, it is the third lowest in the country

Unemployment rate:...
…which attracts immigrants,…
Net international and interprovincial migration near decades-high

Manitoba net migration
Per...
…and which, in turn, boosts population growth
Running at close to 30-year high; no longer lags the Canadian average

Popul...
Overall, Manitoba economy is sustaining a decent pace…
One of Canada’s fastest growing provinces for the second year runni...
…and is expected to continue to do so next year
Fairly steady growth forecasted; other provinces will pick things up

Prov...
Manitoba exporters will benefit from stronger US growth,…
Gains in auto and construction sectors; confidence will rebuild;...
…a slightly weaker loonie…
The Canadian dollar will stay close to parity; still very volatile

Canadian dollar forecast
US...
…and a brighter global growth outlook next year
Expansion of emerging economies to sustain demand for commodities

World G...
Improving export picture also will help the rest of Canada
Net trade gains will offset stable housing and the effect of fi...
Canadian real GDP growth to move above its potential rate
However, some economic slack will persist until 2015

Canada's r...
Interest rates will remain low
We expect the Bank of Canada to keep its rate unchanged in 2014

Interest rates: Canada
%
7...
Non-residential investment to be a catalyst in Manitoba still
Engineering spending likely to crest; ICI building has room ...
Conditions will be conducive to further job creation,…
Employment growth to accelerate slightly to 1.3% in 2014

Employmen...
…and some easing in the unemployment rate,…
Relatively good job prospects will be positive for confidence, immigration

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

Retail sales: Manit...
…and demand for housing
Home resale activity to remained quite stable at historically high levels

Manitoba home resales
T...
Disclaimer

The material contained in this report is the property of Royal Bank of Canada and may not be reproduced in any...
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Manitoba & Canadian Economic Forecast - Robert Hogue

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A global and general economic outlook with a focus on the Manitoba/Winnipeg market.

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Manitoba & Canadian Economic Forecast - Robert Hogue

  1. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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
  30. 30. 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. ECONOMICS I RESEARCH 30

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