Sherry cooper handout

PARTLY CLOUDY: CHANCE OF SHOWERS
September 23, 2010

Dr. Sherry Cooper
Executive Vice President & Chief Economist, BMO Financial Group

1-800-613-0205 www.bmocm.com/economics

Partly Cloudy: Chance of Showers
Dr. Sherry Cooper Executive Vice President and Chief Economist, BMO Financial Group

Global Recovery Cooling
US Jobs Crisis
Second-half Slowdown
Emerging Countries Dominate
Growth

Sovereign Debt Risks Trigger Fiscal Restraint
© BMO Financial Group www.bmocm.com/economics

Page 1-2

Economic Recovery in North America
(q/q % chng : ar)
08 09 10 11
Real GDP Canada 0.5 -2.5 3.0 2.5
US 0.0 -2.6 2.6 2.2
6
V-shaped
3 2.0%
US
1.6%
0
Canada
-3
No Double Dip

-6
US recession Canadian recession forecast
-9
07 08 09 10 11
December ’07 December ’08

Momentum Slows

Economic Downturn Less Severe in Canada
Peak to Trough (% chng)
Employment
0
-1 -0.4

-2
-3 -2.4 -2.5
-4 -3.3 -3.5
-5
-6
-6.1
-7
Germany Canada UK Japan France US


Page 3-4

US Jobless Rates Will Fall, But Gradually
Unemployment Rate (percent)
Spain 20.3
11 Ireland 13.6
10 9.6% Greece 11.0
Portugal 10.8
9
US France 10.0
8 Lagging Indicator Belgium 8.9
8.1%
Canada Finland 8.3
7
5.9% Sweden 8.2
6 Germany 6.9
33-year Low
5 Israel 6.2
4.4%
forecast Japan 5.2
4 Australia 5.1
04 05 06 07 08 09 10 11
UK 4.5
US Job Creation Slow Norway 3.3


US Profits Have Recovered, Jobs Have Not
United States (2007:Q4 = 100)
120

110 Corporate
Profits
100

90 Payrolls

80

70

60
07:4 08:1 09:1 10:1


Page 5-6

Core Inflation Higher in Canada
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

Global Deflation Risk

Fed Still Easy... Monetary Policy
Tightens in Canada First
(% : as of September 22, 2010)

Overnight Rate 10-year Bonds Fixed Mortgage Rate
6 6 7.0
US forecast
5 5 6.5
US 6.0
4 4 2.80% 3.50% Canada
Canada 5.5
3.50% (5-yr)
3 3 (Year-end
’11) 5.0
2 Canada 2 2.55%
[Current] (Year-end
4.5 US
Canada 2.87% ’10) [Current]
1 Canada 1.00% 1 US 2.56% Current 4.0 Canada 4.82% (30-yr)
Spread
US 0% - 0.25% 31 bps US 4.37%
0 0 3.5
05 07 09 11 07 08 09 10 11 07 08 09 10 11

BoC Tightens Bond Yields Will Rise... Eventually

Page 7-8

US Conundrum

Fiscal Stimulus
vs
Budget Deficits

During Election Season


G7 Recovers... Barely for Some
Real GDP – G7 (y/y % chng)
2009 2010 2011
Canada -2.5 Germany 3.1 Canada 2.5
France -2.5 Canada 3.0 US 2.2
US -2.6 Japan 2.9 Germany 2.2
Germany -4.7 US 2.6 UK 2.2
UK -4.9 UK 1.6 France 1.9
Italy -5.1 France 1.5 Japan 1.7
Japan -5.2 Italy 1.1 Italy 1.6

-8 -6 -4 -2 0 0 2 4 6 8 0 2 4 6 8

Europe to Suffer Big Fiscal Drag in 2011
Source: [2010-11] BMO Capital Markets forecasts


Page 9-10

Emerging Markets Lead
(ann % chng)
08 09 10 11
Real GDP World 3.0 -0.6 4.2 3.7
12 10 11
09
9
6
3
0
-3
-6
China India Brazil Asia Latin Canada Japan US Europe
(excl China, America
Japan & India) (excl Brazil)

China’s Growth Slows
Ranked by 2010 Source: [2010-11] BMO Capital Markets forecasts


US Dollar Still on a Downtrend
(as of September 22, 2010)
Feb ’02
Broad Trade-weighted US$ Peak to 2010
% Chng (vs US$) Present Y-T-D
140
February 27, forecast Japanese Yen 59.3 10.0
2002 Peak
130 Australian $ 85.3 6.5
Swiss Franc 73.1 4.9
120 March 9, Mexican Peso -28.0 3.6
2009
Canadian $ 56.1 2.2
110
Chinese Yuan 23.7 2.0
100 Trade-weighted US$ -21.8 0.2
July 15, 2008 Trough UK Pound 10.6 -3.1
90 Euro 55.0 -6.5
00 02 04 06 08 10

Sovereign Risks

Page 11-12

Canada and Europe: Separate Ways
(as of September 22, 2010)

Canadian Dollar Chinese Yuan
(US$ per currency) (yuan/US$ : inverted scale)
1.1 1.7 6.0
C$ First Change Since
(lhs) July 15, 2008
C$ Range 1.6 6.5 US$ Trough
1.0 C$ Parity 1.5
7.0
0.9 97.06¢ 1.4
7.5
1.3
0.8 Euro 1.339
[Current] 1.2 8.0
(rhs)
forecast
0.7 1.1 8.5
05 06 07 08 09 10 11 05 06 07 08 09 10 11

China Eases Currency Peg

Consumers Wary
Hiring Sluggish in US
Retail Sales Stumble
Canadian Housing Softens

Increase Savings

Page 13-14

Consumer Confidence Up From Lows

Consumer Confidence Index – Conference Board
120

100 Canada
80

60 US
40
Record Low
20
07 08 09 10

...But Wobbly

Canadian Households in Better Shape

Net Worth Household Delinquent
(% of disposable income) Residential Equity Residential Mortgages
650 Record
Highs (% of value of (% of total mortgages)
Canada 80 residential property) 5
600 Subprime
Malaise
70 Canada 4
550
US 60 3 US
500 US
50 2
450 40 1 Canada
400 30 0
90 95 00 05 10 95 00 05 10 95 00 05 10
Delinquent Residential Mortgages = > 90 Days in Arrears


Page 15-16

Canadians Over-leveraged?
(ratio to personal disposable income)

Household Liabilities
1.6
US
1.4

1.2
Canada
1.0

0.8
95 97 99 01 03 05 07 09
Household credit and mortgages plus unincorporated business mortgages


US Housing Slump

Housing Starts Existing Home Sales Existing Home Prices Housing Affordability
(000s : ar) (mlns : ar) (1995:Q1 = 100) Index
3,000 Canada 300 8 0.6 250
(rhs) Canada 200
(rhs) Canada
2,500 250 7 225 180
0.5
2,000 200 6 160
200
US US
0.4 140
1,500 US 150 5 (lhs)
175 US
(lhs)
-27.3% 120
1,000 100 4 0.3 Change
150 from 100
Peak Canada
500 50 3 0.2 125 80
03 05 07 09 03 05 07 09 03 05 07 09 03 05 07 09

Canadian Housing Slowing

Page 17-18

US Commercial Real Estate Still Weak
High Vacancies
Values Rise A Bit From Lows
Construction-loan Deterioration

Canadian Commercial Real Estate Activity Strong

US Commercial Real Estate: Still Shaky
United States
18 200 Commercial
17.7% Real Estate
Price Index
16 180
Office
14 Vacancy
Rate 13.5%
160
12
Industrial
Availability 10.6% 140 S&P/Case-Shiller
10 Rate Home Price Index

8 Retail 120
Vacancy Rate Prices Bottoming
6 100
07 08 09 10 07 08 09 10
Vacancy/Availability Rates = (percent) Price Indexes = (2000:Q1 = 100)


Page 19-20

Canadian Commercial Real Estate Deals
Rebound in Early 2010
REITs and Private Investors
+22.8% Y-T-D Gain
Rise in Transaction Values

Consistent Strength Across All Major Cities

Canada in Better Shape than US...
Overbuilding Pushes Calgary Vacancy Rate Up
Office Vacancy Rate (percent)
20 20
17.7%
15.7%
15 US 15
Calgary
10 10.1% 10 Toronto 10.1%
9.6%

5 Canada 5 Vancouver

0 0
05 06 07 08 09 10 05 06 07 08 09 10
Source: CB Richard Ellis


Page 21-22

Toronto: Commercial Real Estate Boom
Coming Soon:
Southcore Financial Centre
Bremner Tower (+ Delta Hotel)
18 York
Completed:
Telus House, RBC Centre,
Bay-Adelaide Centre... 4 mln sq ft
Others Renovate

Banks Take On More Space

Toronto’s Luxury Hotels
Continue Construction
Opening Soon:
Ritz-Carlton ... (2010)
Trump Tower ... (2011)
Four Seasons ... (2012)
Shangri-La ... (2012)


Page 23-24

Stocks Volatile Because of Uncertainty
Financial Market Returns – Local Currency (% chng : as of September 22, 2010)

Dividend Yields 2010 Since 2009 2008
TSX Stocks Y-T-D Peak
2.7% TSX 3.4% -19% 31% -35%
DJIA 3.0% -24% 19% -34%
S&P 500 Nasdaq 2.9% -18% 44% -41%
2.0% S&P 500 1.7% -28% 23% -38%
Returns Since Bonds
March 9, 2009 GoCs 7.2% -1% -2% 13%
(local currency)
US Treasuries 11.1% -1% -5% 15%
TSX Commodities
+60.5% CRB Index -1.6% -41% 23% -36%
S&P 500 Gold 17.8% 0% 24% 6%
Oil -8.4% -50% 78% -54%
+67.7%


TSX Outperforms
(January 1, 2002 = 100 : as of September 22, 2010)

Local Currency US$-terms
350 350

300 300

250 250 TSX
200 200
TSX
150 150

100 100
S&P 500 S&P 500
50 50
02 03 04 05 06 07 08 09 10 02 03 04 05 06 07 08 09 10


Page 25-26

REITs Fare Better in Canada
Real Estate Investment Trusts (January 1, 2007 = 100 : as of September 21, 2010)
Local Currency US$-terms
140 140

120 120

100 100

80 80
TSX
TSX
60 60

40 S&P 500 40 S&P 500
20 20
07 08 09 10 07 08 09 10


Global Equities: New Challenges
(y-t-d % chng : as of September 22, 2010)

Equity Markets
Germany 4.2
TSX 3.4
DJIA 3.0
UK 2.6
S&P 500 1.7
Brazil -0.4
Australia -4.3
Japan -9.3
Spain -11.6
China -20.1
Greece -31.1
-35 -30 -25 -20 -15 -10 -5 0 5


Page 27-28

Challenges to Growth
Fiscal Restraint
Private Deleveraging
Confidence
Jobless US

Canada Subject to Global Downdraft

Opportunities for Canada
Emerging Market Growth
Demand for Food and
Industrial Materials
Canadian Banks Strong
Foreign Demand
Strong Currency


Page 29-30

Sherry cooper handout

Recomendados

Recomendados

Más contenido relacionado

La actualidad más candente

La actualidad más candente (13)

Destacado

Destacado (18)

Similar a Sherry cooper handout

Similar a Sherry cooper handout (15)

Más de Chris Fyvie

Más de Chris Fyvie (20)

Último

Último (20)

Sherry cooper handout