mercer 2016 compensation planning seminar - vancouver · economics substantial slowdown in emerging...

Economic Outlook Mercer 2016 Compensation Planning Seminar - Vancouver

September 15, 2015

Helmut Pastrick

Chief Economist

Central 1 Credit Union

|

Economics

Substantial slowdown in emerging markets since 2011

-6

-4

-2

0

2

4

6

8

10

1996 1999 2002 2005 2008 2011 2014

Emerging

World

Advanced

Per cent change in real GDP

Source: IMF WEO Apr. 2015.

Economic Growth: World, Emerging and Advanced Economies

|

Economics

Disinflation is a dominant theme

0

5

10

15

20

25

1996 1999 2002 2005 2008 2011 2014

Emerging

World

Advanced

Per cent change


CPI Inflation: World, Emerging and Advanced Economies

|

Economics

Cyclical pattern; deflation last three years

-60

-40

-20

0

20

40

60

80

1996 1999 2002 2005 2008 2011 2014

Oil

Total

Metals

Per cent change


Commodity Price Inflation: World

|

Economics

China’s slowing growth during economic transition

4

6

8

10

12

14

16

2002 2006 2010 2014 Q1-12 Q1-13 Q1-14 Q1-15

Per cent change at annual rate in real GDP

Source: OECD. Latest: Q2-2015

Economic Growth: China

Annual Quarterly

|

Economics

Renewed plunge in oil price

20

40

60

80

100

120

2013 2014 2015

West Texas Intermediate Oil Price USD/barre l

Source: U.S. Federal Reserve. Latest: 8/28/2015

|

Economics

Substantial imbalance in 2015, less oversupply in 2016

-2

-1

0

1

2

3

78

82

86

90

94

98

102

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, August 2015.

|

Economics

Modest price expectations

20

40

60

80

100

120

Q1-12 Q1-13 Q1-14 Q1-15 Q1-16 Q1-17

Actual

Futures

US$ per barrel

Source: U.S. EIA, NYMEX. Futures as of Sept. 4, 2015.

WTI Oil Price: Actual and Futures

|

Economics

Global Economic Forecasts

Indicator 2013 2014 2015 2016 2017

Global real GDP, % chg. 3.4 3.4 3.3 3.8 3.8

U.S. real GDP, % chg. 2.2 2.4 2.3 2.7 3.0

China real GDP, % chg. 7.7 7.3 6.8 6.3 6.0

Japan real GDP, % chg. 1.6 -0.1 0.8 1.2 0.7

S. Korea, real GDP, % chg. 3.0 3.3 2.6 3.3 3.6

EU real GDP, % chg. 0.2 1.4 1.9 2.0 1.9

Source: IMF, Consensus Forecasts.

Mixed external economic outlook

|

Economics

Two negative quarters; recession in Canada?

-4

-2

0

2

4

6

8

Q1-11 Q1-12 Q1-13 Q1-14 Q1-15

Real FinalDomesticDemand

Real GDP

Per cent change at annual rate

Source: Statistics Canada. Latest: Q2-2015

Economic Growth: Canada

|

Economics

Recession criteria:

• The National Bureau of Economic Research in the U.S. defines a

recession as “a significant decline in activity spread across the economy,

lasting more than a few months”

• Three conditions need to be met: duration, depth, and breadth.

|

Economics

Sharp plunge in investment spending

-0.3

-0.7

-0.2

-7.9

0.5

1.2

0.7

-10 -8 -6 -4 -2 0 2

GDP

Imports

Exports

Business investment

Government

Residential

Consumption

Per cent

Expenditure

Source: Statistics Canada, Central 1 Credit Union.

Change in Real Spending Q4-2014 to Q2-2015: Canada

|

Economics

June’s increase ends five monthly contractions

-0.3

-0.2

-0.1

0.0

0.1

0.2

0.3

0.4

0.5

0.6

Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15

Per cent

Source: Statistics Canada, Central 1 Credit Union. Latest : Jun-15

Monthly Change in Industry GDP: Canada

|

Economics

Oil and gas down, rest of economy growing

92

94

96

98

100

102

104

106


GDP ex. Oil &Gas

Oil & Gas

Jan. 2014=100


Industry GDP: Canada

|

Economics

Oil sands output rising; support sector hardest hit

40

60

80

100

120

140


Non-conventional

Conventional

Support activities

Jan. 2014=100


Oil and Gas Industry GDP: Canada

|

Economics

Plunge in engineering reflects oil/gas cap-ex cutbacks

90

95

100

105

110


Non-residential

Residential

Repair

Engineering

Jan. 2014=100


Construction Industry GDP by Type: Canada

|

Economics

Employment still rising

-30

-15

0

15

30

45

60

75

17.7

17.7

17.8

17.8

17.9

17.9

18.0

18.0

Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15

Change (rhs)

Employment

Persons - millions Persons - thousands

Source: Statistics Canada, Central 1 Credit Union. Latest : Aug-15

Employment: Canada

|

Economics

Sharp rise in Alberta’s EI counts

80

100

120

140

160

180


Alberta

Saskatchewan

British Columbia

Rest of Canada

Jan. 2014=100


Employment Insurance Beneficiaries: Canada

|

Economics

Recession in Canada?

• Of the three criteria only duration is potentially significant

• Depth is 0.3% and insignificant

• Breadth or pervasiveness is mostly limited to oil and gas support, business

investment, engineering construction, and energy related manufacturing;

other sectors are growing or holding up

• Geographically, Alberta and Saskatchewan experiencing most of downturn

• On evidence to date, no recession; new data will confirm or reject

Modest improvement in 2016

Economic Forecasts: Canada

Indicator 2013 2014 2015 2016 2017

Nominal GDP, % change 3.4 4.4 0.5 3.5 4.2

Real GDP, % change 2.0 2.5 1.0 1.8 2.3

Employment, % change 1.4 0.6 0.8 1.0 1.3

Unemployment rate, % 7.1 6.9 6.8 6.6 6.4

3-mo. T-bill rate, % 0.97 0.91 0.65 0.50 0.85

10-y GoC bond, % 2.26 2.23 1.55 1.75 2.25

U.S.- Canada FX, cents 97.1 90.6 78.1 71.6 73.0

Source: Statistics Canada, CREA, Central 1 Credit Union. Note: Annual averages.

|

Economics

Unemployment rate rising

555

560

565

570

575

580

Jan-13 Jan-14 Jan-15

Persons - thousands

Employment: Saskatchewan

3.0

3.5

4.0

4.5

5.0

5.5


Per cent of labour force

Unemployment Rate: Saskatchewan

Source: Statistics Canada. Note: Seasonally adjusted. Latest: Aug-15

|

Economics

Labour market deteriorating

2.16

2.19

2.22

2.25

2.28

2.31

2.34


Th

ou

san

ds

Persons - mill ions

Employment: Alberta

4.0

4.5

5.0

5.5

6.0

6.5



Unemployment Rate: Alberta


|

Economics

Ongoing improvement

2.24

2.26

2.28

2.30

2.32


Th

ou

san

ds

Persons - mill ions

Employment: B.C.

5.0

5.5

6.0

6.5

7.0

7.5



Unemployment Rate: B.C.


|

Economics

Metro Vancouver growing; rest of B.C. languishes

90

100

110

120

130

140

1996 1999 2002 2005 2008 2011 2014

Vancouver CMA

Rest of B.C.

1996=100

Source: Statistics Canada, Central 1 Credit Union. Note: 2015 is year-to-date August.

Employment Trends Vancouver CMA and Rest of B.C.

|

Economics

Alberta’s 2015 gain not sustainable

0

2

4

6

8

2003 2005 2007 2009 2011 2013 2015

Alberta

Sask.

B.C.

Per cent change

Source: Statistics Canada. Note: Fixed weighted index. 2015 is average to June.

Average Hourly Earnings: B.C., Alberta, and Saskatchewan

|

Economics

Lower inflation rate in 2015

-1

0

1

2

3

4

5

6

2003 2005 2007 2009 2011 2013 2015

Alberta

Sask.

B.C.

Per cent

Source: Statistics Canada. Note: 2015 is average to July.

CPI Inflation Rate: B.C., Alberta, and Saskatchewan

|

Economics

Labour Market Forecasts

Indicator 2013 2014 2015 2016

Alberta Unemployment Rate, % 4.6 4.7 5.8 6.6

Alberta CPI Inflation Rate, % 1.4 2.6 1.0 1.6

Alberta Avg. Hourly Earnings, % 1.9 2.8 3.2 2.4

B.C. Unemployment Rate, % 6.6 6.1 5.8 5.5

B.C. CPI Inflation Rate, % -0.1 1.0 0.8 1.7

B.C. Avg. Hourly Earnings, % 2.6 1.7 2.4 2.9

Sask. Unemployment Rate, % 4.1 3.8 4.9 5.2

Sask. CPI Inflation Rate, % 1.4 2.4 1.7 1.8

Sask. Avg. Hourly Earnings, % 2.3 3.1 2.8 2.6

Source: Statistics Canada, Central 1 Credit Union.

Thank you

mercer 2016 compensation planning seminar - vancouver · economics substantial slowdown in emerging...

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