The New, Lower Plateau: Growth, Rates and Energy Prices Avery Shenfeld, Chief Economist & Managing Director August 2016
Turning Japanese Bond Buyers Really Think So 1 Japan 10Y Bond Yield (%) 10Y Bond Yield (%) 6 4 5 3 4 2 3 1 2 0 1 US Canada -1 0 May-99 Jul-03 Jan-16 Sep-07 Mar-95 Nov-11 Source: Bloomberg, CIBC
Its Cool Man: 2 Global Growth was Much Hotter Pre-Recession 5 yrs before 2012A 2013A 2014A 2015A 2016F 2017F 2018F recession, avg World* 4.8 3.5 3.3 3.4 3.1 2.9 3.3 3.1 US 2.9 2.2 1.5 2.4 2.4 1.6 2.1 1.9 Canada 2.6 1.8 2.2 2.5 1.1…
Brexit Exposures in North America Arent Large (L), 3 EU Has a Lot at Stake in Keeping Trade with UK Open (R) 25 bn US Exports as % Canadian Exports 75 of GDP as % of GDP 70 20 65 15 60 55 10 50 UK Exports to EU 45 5 EU…
Brexit: Quiet Diplomacy is Key to the Outcome, 4 But is Boris the Right Man for the Job
Submerging Markets and the Inevitable China Slowdown 5 14 Per Capita GDP (% Yr/Yr) 12 10 China Since 1990 8 6 4 Regression of Japan 2 and Korea Development Paths 0 0 5 10 15 20 25 30 Per Capita GDP (Current Source:…
EM Slowdown Not a Large Hit to US, 6 But a Big Issue for Commodity Prices Impact of 1%-point slowing in Contributions to Commodity Price Weakness (%) Emerging markets 0 0.0 -5 -0.1 -10 -0.2 -15 -0.3 -20 -25 -0.4 -30 -0.5…
Key Emerging Markets Still Have Energy-Use Upside (L), 7 China Leans on Fossil Fuels in Energy Mix (R) Source: World Bank, CIBC
Policy Eases in Asia (L), EM Growth Pick-up in 17 (R) 8 Change in Policy Rate from Year-Ago (%) Emerging Market Growth (%) 6.0 0.0 -0.2 5.0 -0.4 4.0 -0.6 3.0 -0.8 2.0 -1.0 1.0 0.0 2013 2014 2015 2016F 2017F Source:…
EM Oil Demand Tied to GDP Pace (Duh) 9 Source: World Bank, IEA, CIBC
EM Demand Growth Still Slower than in 2015 Due to Price Impacts 10 Source: World Bank, IEA, CIBC
Progress Towards a Balance (L), 11 But Excess Inventory Can Meet 2017 Demand Growth (R) World Oil Balance (mn bbl/day) 3.0 2.5 2.0 1.5 1.0 0.5 0.0 -0.5 15Q4 OPEC Demand Non-OPEC 16Q4 Balance Supply* Growth Supply Balance…
Oil Supply Ample at Price Just Under 60/bbl WTI 12 Source: BP, CIBC
2 Henry Hub Stalled US Nat-Gas Output (L), 13 But A Decade of Demand Filled at Less than 3 Source: UC Davis, CIBC
Narrowing Differentials Limit LNG as a Relief Valve 14 Source: World Bank, CIBC
The Plateau: Oil Sub-60, Gas Sub-3 for Several Years 15 2015 2016 (f) 2017 (f) 2018 (f) Oil (WTI) /bbl 49 42 51 57 Natural Gas (Henry) /Mn Btu 2.61 2.40 2.95 2.80 Source: Bloomberg, CIBC
Producers Should Be Patient in Hedging, 16 But Outlook Not as Bullish as Equity Analysts Assume Source: Bloomberg, CIBC
US: Gonna Party Like its Nineteen Ninety-Eight 17 Today The Late 90s Experience 65 ISM Manufacturing (Index) GDP Growth (% Yr/Yr) ISM Manufacturing (Index) 65 5% 60 60 4% 55 55 3% 50 2% 50 1% 45 45 Jan-12 Dec-14…
Underlying Strength in US Retail Sales (L), 18 Credit Conditions Favourable for More Borrowing (R) Core Retail Sales Growth Credit Card 90+ Day (3mo/3mo Annualized Growth) Delinquency Rate (%) 3.5 8 3.0 7 6 2.5 5 2.0 4 1.5 3…
US Housing Needs to Rise as Echo-Boomers Age 19 Change in Population (y/y mn's) US Housing Starts (mn units) 2.5 1.2 Fcst 2015 2020 (F) 2.0 0.8 1.5 0.4 1.0 0.0 0.5 0.0 -0.4 2005 1995 2000 2010 2015…
Secular Stagnation: Not Just a Fringe Theory Anymore 20 Real Business Fixed Non-Defense Capital Goods Investment (%) ex-Aircraft (SA, Mil. ) 0 70000 -1 65000 -2 -3 60000 -4 Q4 Q1 Q2 2015 2016 2016
US Hiking Cycle Needs to be Gradual as 21 Healthy Job Gains Needed to Restore Wage Inflation Average Hourly Earnings Growth (Prod. and Non-Sup. Employees, Yr/Yr) Monthly Payrolls Gain to Get Prime-Age 5 E/P Ratio Back to Pre-Crisis Avg…
Current Account Deficit Will Limit US Upside Post-Fed Hike 22 4 Current Account Balance (% GDP) 2 0 -2 -4 -6 EZ US UK Source: Statistics Canada, CIBC
The Hole in Canadas Doughnut: Energy 23 Cdn GDP Growth by Industry (YoY) 0.75 Productivity (% pts Chg 1.5% 0.50 2015 vs 2014) 0.25 1.0% 0.00 -0.25 -0.50 0.5% -0.75 -1.00 0.0% -1.25 Business Sector Labour Sector…
Federal/Provincial Stimulus is Modest vs 2008-10 24 0.5% Boost/Drag to GDP From Change in Cyclically Adjusted Deficits 0.4% 0.3% 0.2% Federal Provincial 0.1% 0.0% -0.1% -0.2% 2015 2016 2017 Source: IMF, Budget…
Canadian Workers: 25 Now on Sale in Manufacturing and Exportable Services Average Hourly 60 US/hr Earnings Mfg (US/hr) 28 50 26 40 US 24 Canada 30 22 20 20 18 10 16 0 14 USA Cda (in US) 12 10 '97 '98 '00 '02 '04 '05 '07…
Has The Bank of Canada Set The Goalposts 26 USDCAD The C has strengthened (with) Non-resource exports profile is higher oil prices...their net weaker than previously projected, 1.10 effect will need to be assessed in part because…
What it All Means: 27 Economic Growth, Bond Yields, and Energy at New, Lower Plateau Global growth remains tame by pre-recession standard US GDP rebounds to 2% pace, with 75 bps of rate hikes through 2017; Bond yields creep higher…
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