june 2020 - rbc · 2020-06-30 · vices. 80% of job gains came from quebec, where covid-19...

CANADA GDP PLUNGED 11.6% IN APRIL

CHARTING A COURSE FOR RECOVERY

REOPENING OF PROVINCIAL ECONOMIES: DIFFERENT SPEED, SCALE AND OUTCOMES

June 2020

ECONOSCOPE, © ROYAL BANK OF CANADA

IN BRIEF

Volume 44, Number 6

June 2020

RBC ECONOMICS

Craig Wright

SENIOR VICE PRESIDENT &

CHIEF ECONOMIST

Dawn Desjardins

VICE PRESIDENT &

DEPUTY CHIEF ECONOMIST

Robert Hogue

SENIOR ECONOMIST

REGIONAL ECONOMIES

Nathan Janzen

SENIOR ECONOMIST

MACROECONOMICS

Josh Nye SENIOR ECONOMIST

FINANCIAL MARKETS & MACROE-

CONOMICS

Andrew Agopsowicz

SENIOR ECONOMIST

Rannella Billy-Ochieng’

ECONOMIST

Claire Fan

ECONOMIST

Carolyn Freestone

ECONOMIST

Colin Guldimann

ECONOMIST

Samantha Simunyu

MANAGER, PUBLISHING

EDITOR

Farhad Panahov

[email protected]

SUBSCRIPTION INFORMATION

[email protected]

Highlights This Month

2 CANADA GDP PLUNGED 11.6% IN APRIL

As bad as the April output numbers looked, the recovery began in May

6 CHARTING A COURSE FOR RECOVERY

Policymakers acted aggressively to combat the threat from COVID-19

to the health of their citizens.

9 REOPENING OF PROVINCIAL ECONOMIES: DIFFERENT SPEED,

SCALE AND OUTCOMES

Full recovery will be a long and bumpy road for all provinces—easily

stretching into 2022 or beyond in some cases.

ECONOSCOPE® is published and produced monthly by RBC Economics Research. Address all correspondence to the Editor, RBC Economics Research, RBC, 9th Floor,

South Tower, 200 Bay Street, Toronto, Ontario, M5J 2J5.

© Royal Bank of Canada. The material contained in Econoscope 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 obtained from sources considered to be

reliable. Royal Bank of Canada makes no representation or warranty, express or implied, with respect 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. Econoscope is indexed in the Canadian

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Printed on recycled and recyclable paper.


CURRENT TRENDS Nathan Janzen, Josh Nye

HIGHLIGHTS

▲ As bad as the April output numbers

looked, the recovery began in May

▲ Employment up 290k in May - re-

tracing about 10% of March/April loss-

es

▲ April retail sales plunged 26% -

much softer than the -15.6% prelimi-

nary estimate

▲ Canadian housing starts bounced

back to 193.5K in May after falling to

166.5K in April

▲ Exports down unprecedented 30%,

imports -25%, in April

▲ Headline inflation fell to -0.4% year-

over-year

CANADA GDP PLUNGED 11.6% IN APRIL

LATEST AVAILABLE: APRIL

RELEASE DATE: JUNE 30, 2020

All industry-groups posted declines in April as a full month of virus

containment measures took its toll. Manufacturing and construc-

tion output both fell more than 20%, as did retail trade. Health care

and social assistance fell another 10%, education output fell 9%.

Still, the largest 2-month declines were, unsurprisingly, in accom-

modation & food services and arts, entertainment and recreation

which fell 64% and 56%, respectively, over March and April com-

bined. Statistics Canada estimated that GDP increased 3% in

May. That would retrace less than 15% of the March/April de-

clines, but containment measures have continued to ease and

early reports on June have looked significantly less-bad.

-14.0

-12.0

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

2.0

2012 2013 2014 2015 2016 2017 2018 2019

Real GDP % change, month-over-month

Source: Statistics Canada


THE (GRADUAL) CANADIAN JOBS RECOVERY BEGAN

IN MAY

LATEST AVAILABLE: MAY


About 25% of jobs lost in the goods producing sector in

March and April were recovered in May, but just 5% in ser-

vices. 80% of job gains came from Quebec, where COVID-19

containment measures were eased earlier, while Ontario,

where measures were eased later, saw another (although

smaller) decline. The increase in the unemployment rate in

May to 13.7% is not a sign of further deterioration, it just

means more of the earlier layoffs are being properly counted

as unemployed. To be clear, labour markets were still excep-

tionally soft in May. Employment is still down 2.7 million from

February. Those job losses have still been heavily concen-

trated in lower wage positions.

.

CANADA RETAIL SALES EXCEPTIONALLY SOFT IN

APRIL



April retail sales plunged 26%. Controlling for price changes,

sale volumes were down 25% from March in April and down

almost a third compared to “pre-shock” February levels. April

sales were down in virtually all sub-categories, except online

sales (not all of which are included in the headline retail sales

count) which were up a whopping 120% compared to a year

ago in April and 56% from March. The level of grocery store

sales was also still 13% above February levels despite a 13%

drop in April. Statistics Canada’s preliminary count of May

retail sales showed an increase of 19%.

5.0

6.0

7.0

8.0

9.0

10.0

11.0

12.0

13.0

14.0

15.0

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Unemployment rate% of labour force


-30.0

-25.0

-20.0

-15.0

-10.0

-5.0

0.0

5.0

2012 2013 2014 2015 2016 2017 2018 2019 2020

Retail sales% change, month-over-month



HOUSING STARTS STILL RESILIENT IN MAY



Canadian housing starts bounced back to 193.5K in May af-

ter falling to 166.5K in April. Starts in Quebec urban areas

jumped to 56K (and 61K including rural areas) after dropping

to zero in April when COVID-19 containment measures effec-

tively shut down new builds in that province. Excluding Que-

bec, starts fell by 20% in May after a surprising

11% increase in April that was in sharp contrast to dramatic

pullbacks in virtually all other economic indicators that month.

There are significant go-forward risks for residential building

activity. Home resales have plunged. Labour markets are still

exceptionally soft despite an increase in May employment.

CANADA EXPORTS AND IMPORTS POSTED RECORD

DECLINES IN APRIIL



The deterioration in the nominal goods trade balance was not

unprecedented - although it was still the largest move in

more than a year. But the pullback in underlying trade flows

certainly was. Motor vehicle exports fell 83% as auto produc-

tion fell to zero in Canada in April with all factories closing.

Energy exports plunged 44% from March, mostly because of

much lower crude oil prices in the month. But imports were

also exceptionally soft. Controlling for price changes, mer-

chandise import and export volumes both declined by about

23% in April.

100

120

140

160

180

200

220

240

260

280

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Housing startsThousands

Source: Canadian Mortgage and Housing Corporation

300

350

400

450

500

550

600

650

700

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Merchandise tradeC$ billions, annualized


Imports

Exports


SOFT DEMAND LIMITING CANADIAN INFLATION



Lower gasoline prices remain a key factor holding inflation

below zero, though pump prices increased month-over-

month in May and weren't responsible for the dip in all items

CPI (-0.4% YoY). Food is still the fastest-rising category in

the CPI basket, and it's one that many Canadians are

spending a larger-than-normal share of their income on at

present. Services inflation slowed to 1.3% year-over-year

from 2.0% in April, marking a nearly seven-year low. Rent

inflation continued to slow from last year's multi-decade

high. BoC's core measures that filter out more extreme

moves in individual components averaged 1.7%.

-2

-1

0

1

2

3

4

5

2012 2013 2014 2015 2016 2017 2018 2019 2020

Consumer price index% change, year-over-year


Latest

month

Previous

monthYear ago

Real GDP Apr -11.6 -17.1

Industrial production Apr -16.2 -22.8

Employment May 1.8 -13.5

Unemployment rate* May 13.7 5.4

Manufacturing

Production Apr -22.5 -29.4

Employment May 5.5 -13.5

Shipments Apr -28.5 -37.1

New orders Apr -31.3 -39.3

Inventories Apr -0.6 -0.6

Retail sales Apr -26.4 -32.5

Car sales Apr -51.4 -74.4

Housing starts (000s)* May 193.5 195.9

Exports Apr -29.7 -35.2

Imports Apr -25.1 -30.5

Trade balance ($billlions)* Apr -3.3 -1.3

Consumer prices May 0.3 -0.4

* Levels are shown for the latest period and the same period a year earlier.

Source: Statistics Canada, RBC Economics

% change from:

ECONOMY AT A GLANCE


While it’s too early to declare victory

against COVID-19, the economic

downturn that came along with ag-

gressive containment measures in a

large number of developed coun-

tries appears to have bottomed.

The slowing in the number of new

cases has allowed many countries

to start the long process of reopen-

ing their economies. This is a posi-

tive development but the severe

damage wreaked on the global

economy over the space of just the

past few months and uncertainty

regarding the ability to keep the vi-

rus at bay means 2020 will mark a year of unprecedented decline. The world economy is projected to contract by

3% this year, a record-breaking drop and a significantly worse outcome than during the Global Financial Crisis.

Policymakers acted aggressively to combat the threat from COVID-19 to the health of their citizens with policies

that stopped human interaction in areas outside essential services. The impact on economic activity was swift and

broadly based resulting in double-digit declines in output and millions of lost jobs. In the Euro-area, UK, US and

Canada measures to contain the virus that were unveiled in the second half of March were powerful enough to

drive growth rates into negative territory in the first quarter and set up for much larger declines in the second. By

May, many of these countries were in position to relax some of the lockdown measures but progress to the new

post-COVID-19 normal will be calculated and slow.

Outside of aid to fight the pandemic, governments and central banks have provided extraordinary support to help

economies manage through the crisis. Governments unleashed a torrent of spending as well as loans and guaran-

tees in amounts ranging from 15% to 45% of GDP while central banks cut policy rates to record low levels and ex-

panded their balance sheets to ensure financial markets remain liquid and funds available to borrowers. These poli-

cies acted as a bridge for households and businesses to weather the downturn. Many will need to be maintained to

ensure the recovery stays on track even after the threat from the virus on people’s health dissipates.

CHARTING A COURSE FOR RECOVERY

ECONOMIC AND FINANCIAL MARKET OUTLOOK

Craig Wright, Dawn Desjardins, Nathan Janzen

“Policymakers acted aggressively to combat the threat

from COVID-19 to the health of their citizens … “

June 10, 2020


US economy enters new phase

The US economy contracted at a 5% annualized pace in the first quarter, a stunning loss given most measures to

combat the virus were only put in place in the latter half of March. April’s reports were much worse with 20 million

jobs lost, massive declines in household spending and a slump in business activity. With many US states easing

restrictions in May, the economic data began to turn. The combination of a surprising increase in employment, a rise

in auto sales and stronger readings of business activity suggests that the economy hit bottom in April. While the May

reports were good news, they also served to drive home the depth of the destruction to the economy that occurred in

March and April. Even with the 2.5 million jobs recreated in May, there were closer to 20 million fewer workers on

payrolls than before the crisis and the unemployment rate, at 13.3%, was the second highest level on record since

the great depression next to April’s 14.7%. The labour market recovery will continue at a slow pace with policies like

social distancing to remain in place until a vaccine or more effective treatment is developed and delivered across the

country. This slow progression will mean that sales activity won’t return to pre-crisis levels this year and that invest-

ment activity will be limited. Even with activity starting to come back on line in May, we expect real GDP to fall at a

35% annualized pace in the second quarter before staging a partial recovery in the second half of the year. On net,

this will leave US economy about 5% smaller than in late 2019.

Canada emerging from the depths

Canada also turned the corner in May as the number of new infections slowed and parts of the economy reopened.

Losses in output in March and April were unprecedented and created a large chasm which is unlikely to be filled

even as the economy grows in the second half of the year. Like the US, we expect Canada’s GDP will end the year

more than 5% lower than in late 2019.

Canada’s labour market improved in May with employment rising by 290,000, a positive step but only amounting to

10% of the jobs lost in March and April. As Canadians re-entered the labour force, the unemployment rate rose to a

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Canada UK US Germany France Italy Spain Australia

Loans, guarantees, and taxdeferral

Fiscal programs

share of GDP

COVID-19 total government measures

Source: RBC Economics

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

RBA BoC BoE Fed ECB

Year-to-date increase

End of 2019

share of GDP

Central bank balance sheets

Source: Haver, RBC Economics

-8

-6

-4

-2

0

2

4

6

2008 2010 2012 2014 2016 2018 2020

Real GDP growth: U.S.

Annual Growth Rates

Real GDP2021f

4.820182.9

20192.3

2020f-5.5

Year to Year % change

Source: Bureau of Economic Analysis, RBC Economics


record high. Consumer spending, home resales and measures of business sentiment also improved in May albeit

from unprecedented lows. While the May data was encouraging, the recovery will remain slow and depend on con-

tinued progress on curbing the rate of infections.

After falling at an 8.2% annualized pace in the first quarter the economy is likely to record a jaw-dropping 32% annu-

alized decline in the second quarter. Our forecast assumes a gradual pickup in activity in the second half of the year

as operations come back on line. Government programs that helped business and households navigate the darkest

days of the downturn will now act to facilitate the re-entry of workers. Low interest rates and access to credit will also

be instrumental in guiding the economy back to health. We look for the recovery to be gradual and uneven with

some industries, like energy, hospitality and tourism, remaining weak well into 2021.

The severity of the downturn will leave Canada’s economy running significantly below potential at the end of 2020.

Even as more people return to work, the unemployment rate will remain elevated relative to where it was before the

health crisis. Global demand for Canadian exports, including energy, will also remain subpar weighing on business

investment. Consumers are also likely to remain hesitant and will face challenges once payments that were deferred

during the crisis need to be paid. Low levels of immigration (another byproduct of the crisis), and an elevated unem-

ployment rate will likely curb the rebound in the housing market with sales likely to fall by almost 20% and prices,

which have held up well so far, likely to come under stronger downward pressure over the second half of the year.

the expansion. For its part, the Federal Reserve will need to keep borrowing costs low for an extended period. With

these supports in place, we expect the economy will grow at double-digit rates in the second half of the year.

-8

-6

-4

-2

0

2

4

6

2008 2010 2012 2014 2016 2018 2020

Real GDP growth: Canada

Annual Growth Rates

Real GDP2021f

4.220182.0

20191.7

2020f-5.9

Year to Year % change

Source: Statistics Canada, RBC Economics


The end of the Great Lockdown is

still a long way away but we’re see-

ing positive steps across Canada.

All provinces are now reopening

parts of their economy gradually.

And as they do, businesses are call-

ing back laid-off workers and in-

creasing work hours—getting the

wheels of the economy spinning

again. Barring any setbacks at con-

taining the spread of COVID-19, we

believe this reopening process will

set the stage for a meaningful eco-

nomic recovery over the second half

of this year and into 2021. The pace

of the recovery will be uneven

across the country. Some provinces

are proceeding a little more quickly

than others with lifting lockdown

restrictions—in part reflecting further progress at containing the pandemic. We believe this will give Manitoba, British

Columbia and New Brunswick a head-start on the recovery. Low oil prices pose an additional hurdle for oil-producing

provinces leaving Newfoundland and Labrador, Alberta and Saskatchewan as the weakest performers.

We have updated our provincial forecast based on data recently released and the latest government reopening

plans. The main story hasn’t really changed from all interim updates since March—we expect all provincial econo-

mies to contract severely this year—though we now believe contractions won’t be quite as massive as we thought

previously. The May labour report showed an earlier pick-up in jobs and hours worked than we anticipated for most

provinces, which we believe marked the turning point. Other economic indicators—including housing starts and

RBC’s proprietary consumer card spending data—also point to some near-term resilience or strengthening.

The GDP recovery path we assume for most provinces now generally has a slightly higher cyclical bottom in April-

May compared to our May Provincial Outlook Update. We expect Manitoba, BC and New Brunswick will recover the

most ground lost by year-end, with Newfoundland and Labrador, Alberta and PEI trailing all provinces. Full recovery

will be a long and bumpy road for all provinces—easily stretching into 2022 or beyond in some cases. The mainte-

REOPENING OF PROVINCIAL ECONOMIES: DIFFERENT SPEED, SCALE AND OUTCOMES

PROVINCIAL OUTLOOK

Robert Hogue

“Full recovery will be a long and bumpy road for all

provinces—easily stretching into 2022 or beyond in

some cases.”

June 10, 2020


nance of some forms of social distancing, permanent business closures, weakened balance sheets and lower in-

migration will restrain the economic rebound. We expect the impact of COVID-19 on some sectors like home construc-

tion will continue to grow well into 2021. Lower in-migration levels are poised to sap demand for new housing units,

causing housing starts to fall in virtually every province next year. Still, despite many possible cross-currents, our fore-

cast calls for positive economic growth to return from coast to coast in 2021—though this will say more about extremely

low comparison point in 2020 than the degree of vitality in 2021.

GDP recovery path assumptionsFebruary 2020 = 100

NL 100 84 78 80 86 87 87 86 87 87 87

PE 100 83 89 89 91 93 92 92 92 92 92

NS 100 88 89 88 94 94 95 94 94 94 94

NB 100 88 88 88 94 95 95 95 95 95 95

QC 100 87 74 83 91 94 94 94 94 94 94

ON 100 89 84 83 91 94 94 94 94 94 94

MB 100 93 90 88 93 95 95 95 95 95 96

SK 100 91 85 87 93 94 94 94 93 93 93

AB 100 91 86 86 89 90 90 90 92 92 92

BC 100 87 85 85 93 95 95 95 95 95 95

Feb

2020

Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2020


FORECAST DETAIL - CANADARBC FORECASTS OF THE ECONOMY AND FINANCIAL MARKETS

= Forecast

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2018 2019 2020 2021

Household consumption 2.4 0.4 2.2 1.8 -9.0 -35.7 25.6 6.1 5.1 4.2 5.2 5.3 2.2 1.6 -6.5 4.2

Durables 5.1 -3.0 0.8 -1.3 -23.3 -38.5 28.2 9.2 4.2 2.8 3.2 3.5 1.7 0.4 -11.6 3.9

Semi-Durables 2.6 1.6 1.2 -2.8 -32.6 -39.6 30.5 9.5 4.5 3.0 2.8 3.0 1.7 1.4 -14.4 4.0

Non-durables 1.5 -0.4 1.9 1.1 12.9 -10.5 12.5 3.5 3.5 3.5 4.0 4.0 1.8 1.0 3.1 3.7

Services 2.1 1.4 2.8 3.3 -10.8 -45.8 30.2 6.2 6.0 5.0 6.5 6.5 2.5 2.2 -9.0 4.1

Government expenditures 1.6 1.9 1.6 1.5 -3.8 -18.5 4.5 3.5 3.5 3.0 3.0 3.0 3.0 2.1 -3.4 1.9

Residential investment -4.0 7.2 13.8 1.2 -0.4 -40.2 30.2 8.6 7.0 6.0 6.0 6.0 -1.6 -0.6 -3.5 5.6

Business investment 21.5 -7.8 3.1 -4.8 -2.7 -33.7 1.3 22.0 8.8 5.3 5.5 6.5 1.4 0.4 -7.7 5.5

Non-residential structures 6.9 1.6 7.7 0.7 4.1 -34.4 -10.5 30.5 9.5 5.5 4.2 4.2 -0.6 0.7 -5.2 5.0

Machinery & equipment 46.9 -20.3 -3.7 -13.2 -13.1 -32.5 21.6 7.5 7.5 5.0 6.0 7.9 4.7 -0.1 -11.8 5.4

Final domestic demand 3.4 0.1 3.2 0.8 -6.0 -30.9 18.2 7.3 5.1 4.1 4.7 4.8 2.1 1.3 -5.2 4.0

Exports -2.7 9.0 -0.4 -4.5 -11.3 -44.8 33.5 26.0 5.4 2.0 2.5 2.2 3.1 1.3 -8.9 6.4

Imports 10.0 -4.4 0.2 -3.2 -10.7 -46.8 37.8 24.5 4.0 2.0 2.0 1.8 2.6 0.6 -9.5 5.9

Inventories (change in $b) 23.8 18.8 8.4 9.4 -2.0 -12.0 4.0 7.0 4.5 4.0 4.5 4.5 13.0 15.1 -0.7 4.4

Real gross domestic product 1.2 3.2 1.1 0.6 -8.2 -32.0 20.0 8.0 5.0 4.0 5.0 5.0 2.0 1.7 -5.9 4.2

OTHER INDICATORS YEAR-OVER-YEAR PERCENTAGE CHANGE UNLESS OTHERWISE INDICATED

Business and labour

Productivity 0.6 0.4 0.5 0.7 2.4 17.7 9.1 2.5 0.7 -12.2 -5.1 1.7 -0.1 0.6 7.9 -4.1

Pre-tax corporate profits -3.5 3.4 -5.4 5.5 -3.1 -55.5 -24.9 -7.7 -3.3 104.1 34.5 17.2 2.5 -0.1 -23.4 28.4

Unemployment rate (%)* 5.8 5.6 5.6 5.7 6.3 13.5 9.5 8.5 8.1 7.7 7.4 7.0 5.8 5.7 9.5 7.6

Inflation

Headline CPI 1.6 2.1 1.9 2.1 1.8 -0.1 -0.1 -0.1 0.0 1.3 1.4 1.6 2.3 1.9 0.4 1.1

Core CPI 1.9 2.3 2.2 1.9 1.8 0.9 0.5 0.7 0.5 1.2 1.5 1.5 1.9 2.1 1.0 1.2

External trade

Current account balance ($b) -69.3 -35.7 -45.9 -37.2 -44.4 -72.7 -74.0 -63.9 -64.2 -60.8 -57.9 -49.8 -222.0 -188.0 -63.7 -58.2

% of GDP -3.1 -1.5 -2.0 -1.6 -1.9 -3.5 -3.4 -2.9 -2.8 -2.7 -2.5 -2.1 -10.0 -8.5 -2.8 -2.7

Housing starts (000s)* 187 224 223 201 208 170 186 191 181 185 194 196 213 208.7 188.9 189.0

Motor vehicle sales (mill., saar)* 2.02 1.94 1.97 1.93 1.74 0.85 1.47 1.53 1.59 1.64 1.69 1.73 2.04 2.0 1.4 1.7

INTEREST AND EXCHANGE RATES %, END OF PERIOD

Overnight 1.75 1.75 1.75 1.75 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 1.75 1.75 0.25 0.25

Three-month 1.67 1.66 1.65 1.66 0.21 0.25 0.25 0.20 0.20 0.25 0.25 0.30 1.64 1.66 0.20 0.30

Two-year 1.55 1.47 1.58 1.70 0.42 0.40 0.45 0.50 0.50 0.50 0.60 0.70 1.86 1.70 0.50 0.70

Five-year 1.52 1.39 1.40 1.69 0.59 0.50 0.55 0.60 0.60 0.65 0.80 0.90 1.89 1.69 0.60 0.90

10-year 1.62 1.47 1.36 1.70 0.70 0.70 0.65 0.70 0.70 0.85 1.00 1.10 1.97 1.70 0.70 1.10

30-year 1.89 1.69 1.53 1.76 1.31 1.20 1.15 1.10 1.10 1.20 1.30 1.35 2.18 1.76 1.10 1.35

Canadian dollar 1.33 1.31 1.32 1.30 1.41 1.36 1.38 1.40 1.38 1.37 1.36 1.35 1.36 1.30 1.40 1.35

*Quarterly averages, level

Source: Bank of Canada, Statistics Canada, RBC Economics Research forecasts

GROWTH IN THE ECONOMY PERIOD-OVER-PERIOD ANNUALIZED PERCENT CHANGE UNLESS OTHERWISE INDICATED

Annual2019 2020 2021


FORECAST DETAIL - UNITED STATESRBC FORECASTS OF THE ECONOMY AND FINANCIAL MARKETS

= Forecast

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2018 2019 2020 2021

GROWTH IN THE ECONOMY PERIOD-OVER-PERIOD ANNUALIZED PERCENT CHANGE UNLESS OTHERWISE INDICATED

Consumer spending 1.1 4.6 3.1 1.8 -6.8 -40.8 25.7 11.9 8.0 5.6 4.1 4.1 3.0 2.6 -6.7 5.4

Durables 0.3 13.0 8.1 2.7 -13.2 -39.4 23.0 9.8 6.8 2.5 3.0 3.0 6.3 4.8 -7.2 3.8

Non-durables 2.2 6.5 3.9 -0.6 7.7 -35.7 22.4 9.2 6.8 2.5 3.5 3.5 3.0 3.2 -2.5 4.2

Services 1.0 2.8 2.2 2.4 -9.7 -42.6 27.1 13.1 8.6 7.0 4.5 4.5 2.5 2.1 -7.9 6.1

Government spending 2.9 4.8 1.7 2.5 0.8 -9.0 1.5 1.5 2.1 1.0 2.0 2.0 1.7 2.3 -0.3 1.0

Residential investment -1.1 -2.9 4.6 6.5 18.5 -21.9 16.7 7.8 7.2 4.5 5.5 5.5 -1.5 -1.5 3.7 5.5

Business investment 4.4 -1.0 -2.3 -2.5 -7.9 -42.6 9.1 8.9 6.9 4.9 2.5 3.8 6.4 2.1 -10.9 2.2

Non-residential structures 4.0 -11.1 -9.9 -7.3 -3.9 -30.0 -14.1 18.6 12.6 7.2 6.5 6.5 4.1 -4.3 -11.2 4.5

Non-residential equipment -0.1 0.8 -3.8 -4.2 -16.7 -75.7 22.5 8.2 6.4 5.5 4.0 4.0 6.8 1.3 1.6 4.1

Intellectual property 10.9 3.6 4.6 2.8 1.0 -12.6 7.6 4.0 4.0 3.0 2.0 2.0 7.4 7.5 0.2 2.7

Final domestic demand 1.8 3.6 2.2 1.5 -4.8 -34.8 19.0 9.6 6.8 4.7 3.8 3.8 3.0 2.3 -5.5 4.4

Exports 4.2 -5.7 0.9 2.1 -8.7 -61.1 24.8 8.2 3.5 2.0 3.5 4.5 3.0 0.0 -14.9 -0.1

Imports -1.5 0.0 1.8 -8.4 -15.5 -56.2 26.2 8.6 4.5 2.2 2.0 2.5 4.4 1.0 -16.0 0.9

Inventories (change in $b) 116.0 69.4 69.4 13.1 -67.2 -75.0 -20.0 0.0 12.0 25.0 25.0 25.0 48.2 67.0 -40.6 21.8

Real gross domestic product 3.1 2.0 2.1 2.1 -5.0 -35.0 20.0 10.0 7.0 5.0 4.0 4.0 2.9 2.3 -5.5 4.8

OTHER INDICATORS YEAR-OVER-YEAR PERCENTAGE CHANGE UNLESS OTHERWISE INDICATED

Business and labour

Productivity 2.1 2.1 1.7 1.9 0.3 2.3 1.9 1.0 2.7 0.5 1.3 2.5 1.5 2.0 1.4 1.7

Pre-tax corporate profits -2.2 1.3 -1.2 2.2 -8.5 -35.0 -31.7 -25.6 -10.1 24.8 20.3 8.8 3.4 0.0 -25.3 9.3

Unemployment rate (%)* 3.9 3.6 3.6 3.5 3.8 13.7 10.3 7.0 6.7 6.0 5.8 5.6 3.9 3.7 8.7 6.0

Inflation

Headline CPI 1.6 1.8 1.8 2.0 2.1 0.3 0.0 -0.2 0.1 1.7 2.1 2.3 2.4 1.8 0.6 1.6

Core CPI 2.1 2.1 2.3 2.3 2.2 1.3 0.6 0.5 0.5 1.5 2.0 2.2 2.1 2.2 1.2 1.5

External trade

Current account balance ($b) -548 -505 -502 -439 -396 -221 -246 -280 -284 -291 -303 -319 -491 -498 -286 -299

% of GDP -2.6 -2.4 -2.3 -2.0 -1.8 -1.1 -1.2 -1.4 -1.3 -1.4 -1.4 -1.4 -2.4 -2.3 -1.4 -1.4

Housing starts (000s)* 1204 1257 1288 1433 1487 1300 1310 1310 1315 1315 1320 1320 1248 1298 1352 1318

Motor vehicle sales (millions, saar)* 16.8 17.0 17.0 16.7 15.0 4.8 8.2 14.5 16.0 16.1 16.0 15.9 17.2 17.0 10.6 16.0

INTEREST RATES %, END OF PERIOD

Fed funds 2.50 2.50 2.00 1.75 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 2.50 1.75 0.25 0.25

Three-month 2.40 2.12 1.88 1.55 0.11 0.15 0.15 0.15 0.15 0.15 0.15 0.15 2.45 1.55 0.15 0.15

Two-year 2.27 1.75 1.63 1.58 0.23 0.25 0.30 0.35 0.40 0.45 0.55 0.65 2.48 1.58 0.35 0.65

Five-year 2.23 1.76 1.55 1.69 0.37 0.45 0.50 0.60 0.70 0.75 0.90 1.00 2.51 1.69 0.60 1.00

10-year 2.41 2.00 1.68 1.92 0.70 0.70 0.75 0.90 1.00 1.10 1.25 1.35 2.69 1.92 0.90 1.35

30-year 2.81 2.52 2.12 2.39 1.35 1.35 1.40 1.50 1.55 1.60 1.65 1.70 3.02 2.39 1.50 1.70

Yield curve (10s-2s) 14 25 5 34 47 45 45 55 60 65 70 70 21 34 55 70

*Quarterly averages, level

Source: Bank of Canada, Statistics Canada, RBC Economics Research forecasts

Annual2019 2020 2021


CANADA - US COMPARISONS CURRENT ECONOMIC INDICATORS

FROM

PRECEDING

MONTH

FROM YEAR

AGO

LATEST

MONTH

FROM

PRECEDING

MONTH

FROM YEAR

AGO

LATEST

MONTH

Business

Industrial production* -16.2 -22.8 Apr. 1.4 -15.2 May.

Manufacturing inventory -

shipments ratio (level) 2.4 2.4 Apr. 1.7 1.7 Apr.

New orders in manufacturing -31.3 -39.3 Apr. -13.2 -22.5 Apr.

Business loans - Banks -1.0 11.5 May. 3.2 30.3 May.

Index of stock prices** 2.8 -5.3 May. 5.7 2.3 May.

Households

Retail sales -26.4 -32.5 Apr. 17.7 -6.1 May.

Auto sales -51.4 -74.4 Apr. 34.1 -44.9 May.

Total consumer credit*** -2.1 -2.3 May. -1.6 1.8 Apr.

Housing starts 16.2 -1.3 May. 4.3 -23.2 May.

Employment 1.8 -13.5 May. 2.9 -12.5 May.

Prices

Consumer price index 0.3 -0.4 May. -0.1 0.2 May.

Producer price index**** 1.2 -4.9 May. 2.3 -2.6 May.

Interest rates

Policy rate 1 0.25 1.75 FAL. 0.25 2.50 May.

Government bonds -

(10 years) 0.6 1.7 May. 0.7 2.4 May.

1 latest available

Seasonally adjusted % changes unless otherwise indicated. Interest rates are levels.

*The U.S. series is an index.

**Canada = S&P/TSX; United States = S&P 500

***Excludes credit unions and caisses populaires

****Canada's producer price index is not seasonally adjusted

USCANADA

june 2020 - rbc · 2020-06-30 · vices. 80% of job gains came from quebec, where covid-19...

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