Global Economics

November 29, 2013

Global Forecast Update

Dithering Growth, Withering Inflation
Global growth is expected to build momentum gradually, with every region contributing to the improving prospects for 2014 and 2015. Scotiabank Economics outlook for real activity, and the assumptions underpinning the forecast, have not fundamentally changed. However, the continuing unevenness of the economic reports from around the world highlights the persistent difficulty that many countries both in the advanced and emerging market regions are having in generating and sustaining traction. And at the same time, inflation pressures in more and more countries continue to moderate, presenting another set of challenges to government, businesses, and households alike.
Index Overview Forecasts International Commodities North America Provincial Financial Markets 1-2 3-4 4 5 6 7-8

The momentum of world trade appears to be picking up, but the most recent data for September doesnt fully take into account the economic and financial market turbulence over the summer and into the fall emanating from the budget-challenged United States, or escalating geopolitical tensions surrounding the Syrian conflict. According to the CPB Netherlands Bureau for Economic Policy Analysis, world trade volumes grew by 0.8% in September from the previous month, essentially reversing the decline registered in August. While the volume of exports in the advanced economies was largely flat in the month, export volumes accelerated for the most part in emerging market economies, and import growth turned positive in both advanced and emerging market economies. The worlds largest container shipping line has indicated that the demand for containers posted a 5% year-over-year advance in the third quarter, breaking free from a lacklustre performance that persisted through the first half of the year. In the United States, there is still a lingering, albeit diminishing, impact on the economy from the tapering talk over the summer and the partial federal government shutdown in the fall which combined to boost longer-term borrowing costs and undermine consumer and business confidence and spending. The rebound in housing activity lost considerable momentum as the sharp increase in mortgage costs and erosion in confidence dampened home sales and construction. Anecdotal evidence suggests that conditions in the housing sector have stabilized, but with borrowing costs down but still elevated relative to the lows in the spring, and many Americans focussed on the rollout of the Affordable Care Act, the revival in activity may be slow to build. There is also considerable volatility in the order books for U.S. durable goods. Septembers solid rebound was partially reversed in October, and was largely caused by the massive swings in monthly orders for commercial airplanes which remain a relative bright spot in manufacturing. Even so, outside of defense and aircraft sectors, the trend in orders has softened. The re-emergence of negative growth in France has dulled the nascent recovery in the euro zone that is being led by Germany and the competitive realignment of producers in the periphery countries. The recovery in Japan is continuing, but there is concern that next years consumption tax could short-circuit the rebound in consumer spending and dampen the gains associated with the export-led revival. Some emerging market and developing economies, China, India and Brazil for example, have introduced a number of structural reforms that will take time to fully implement. Canada and Australia are challenged by the slowdown in commodity and manufacturing activity, in addition to the reduced pace of domestic spending in response to waning pent-up demand and growing housing affordability issues. Both countries continue to be challenged by competitive issues associated with persistently strong foreign exchange rates in recent years, evidenced by increasing plant closures and layoffs, though recent currency weakness should provide some buffer going forward. Yet, there are some indications that turnarounds are emerging. In the third quarter, Ireland posted its fastest employment growth since 2007, with the 3.2% year-over-year increase translating into a net gain of 58,000 workers. With the Irish economy moving back into positive growth territory, the authorities are planning to exit the bailout organized during the nations financial and banking crisis during the Great Recession. Mexicos output advanced by a stronger-than-expected 1.3% year-over-year gain in the third quarter, while almost 144,000 workers were added to the countrys labour rolls in October. Chinas real GDP posted a 7.8% yearover-year gain in the July-September period, a slight acceleration from the 7.5% yearly rise in the prior

Global Forecast Update is available on: www.scotiabank.com, Bloomberg at SCOT and Reuters at SM1C

Global Economics

November 29, 2013

Global Forecast Update

quarter. Most of Chinas high-frequency data reports for October retail sales, industrial production and trade, for example suggest that the forward momentum at the end of the third quarter is being sustained. Not every economic indicator in the United States has been negatively affected by monetary and fiscal challenges over the summer and early fall. U.S. payrolls expanded by a better-than-expected 204,000 in October, with continuing job creation and income gains reinforcing the gradual upward trend in motor vehicle sales and production. As well, the number of loaded U.S. rail cars has increased in November by about 4% versus a year earlier, after moving sideways since the spring. Increased auto production should bolster this trend, with the planned pick-up in assemblies for the current quarter expected to add just over half a percentage point to U.S. real GDP. In addition, the strong pace of oil production has begun to ramp up at an even faster rate in recent months, with the average gain from July to October up around 5% from the prior fourmonth period. Canada continues to show signs of piggybacking on the U.S. recovery. Exports of energy and non-energy products rebounded in both August and September, helping to reduce the nations merchandise trade deficit and increase the large surplus with the United States. At the same time, the early-year slowdown in housing activity has given way to increased sales and construction activity following the adjustment to last years regulatory changes to mortgage financing, while many Canadians took advantage of pre-arranged low-rate mortgage financing to beat the recent uptick in borrowing costs. Nonetheless, the pace of growth internationally remains on the softer side. There is no shortage of hurdles that are preventing the global economy from re-establishing a stronger growth trajectory. In particular, Washington has to come up with a new budget deal to avoid another fiscal seizure early in the new year, while the Federal Reserve must do its best during the inevitable tapering of its bond-buying program to minimize the potential for another destabilizing bout of financial market turbulence alongside the expected upward trend in longer-term borrowing costs. Confidence is stimulus, and it is imperative that the private sector takes full advantage of the opportunities to improve competitiveness and expand operations. One adjustment that Scotiabank Economics is making this month is to lower inflation forecasts in quite a few countries around the world. The moderation in price trends is especially visible in the advanced economies. The exception is Japan, where highly stimulative public policies alongside a much weaker yen are helping to reverse the countrys deflationary tendencies, and enabling the country to post a marginal rise in inflation. But elsewhere, price pressures are moderating at both the higher and lower ends of the growth ladder. Even in the traditionally more inflation-prone countries like the United Kingdom, improving growth is being accompanied by decelerating prices that are running just above an annualized 2% so far this year. In the more buoyant U.S. and German economies, inflation rates are slowly losing momentum, tracking around a 1% annualized rate through the first ten months of 2013. Inflation trends are even lower through the rest of the euro zone and Canada where price pressures have slowed to roughly an annualized rate of 1% and 1%, respectively. There are a number of factors, both structural and cyclical, that should continue to reinforce the disinflationary trends. There is still too much excess capacity internationally that is reshaping productive capabilities. Corporate consolidation and plant closures are still visible signs of the excess supply in a demand-challenged world. Competitive realignments are forcing ongoing adjustments to labour costs, particularly in the highly indebted peripheral euro zone countries where there is no recourse to currency devaluation. Wage gains in many of the other advanced nations are less flexible on the downside because of the need to retain trained workers and fill skilled positions. The price of crude oil and many agricultural products has declined from recent highs, which along with persistently low short-term borrowing costs, is helping to reinforce the broad disinflationary trends. The retail sector is being pressured by the slower growth environment, and in some countries, households that have overextended their balance sheets. Seasonal discounting and incentives are needed to clear inventories of electronic equipment, and motor vehicles. And there is less inflation from a variety of other areas, such as health care in the United States and Canada. However, inflation pressures remain much higher in the emerging markets economies where output growth generally remains stronger, or where structural deficiencies, excess credit creation, and chronic debt and currency losses have underpinned inflationary biases. So far this year, consumer price inflation in India, Turkey, Indonesia, Russia and Brazil is running at annualized rates of 10%, 8%, 7%, 7%, and 6% respectively. Additional policy adjustments will be needed to redress the domestic pressure points and avoid the competitive erosion and recourse to currency devaluations that could eventually slow their development. Looking ahead, the diverging inflation trends between the advanced and emerging market economies should eventually stabilize and begin to reverse. Expectations for a gradual acceleration in price trends, particularly among the advanced economies, and a gradual but steady upturn in longer-term borrowing costs, are contingent upon a sustained strengthening in activity around the world.

Global Economics

November 29, 2013

Global Forecast Update

International
Re al GDP World (based on purchasing power parity) Canada United States Mexico United Kingdom Euro zone Germany France Italy Spain Greece Portugal Ireland Russia T urkey China India Japan South Korea Indonesia Australia T hailand Brazil Colombia Peru Chile Consum e r Price s Canada United States Mexico United Kingdom Euro zone Germany France Italy Spain Greece Portugal Ireland Russia T urkey China India* Japan South Korea Indonesia Australia T hailand Brazil Colombia Peru Chile
*WPI inflation.

2000-12

2013f

2014f

2015f

Forecast Changes
International

(annual % change) 3.7 2.2 1.9 2.4 1.7 1.3 1.3 1.3 0.4 1.9 0.6 0.5 2.9 5.2 4.4 9.3 7.2 0.9 4.3 5.4 3.1 4.2 3.4 4.2 5.7 4.5 2.9 1.7 1.6 1.3 1.5 -0.5 0.5 0.2 -1.8 -1.3 -4.1 -2.0 0.0 1.4 3.6 7.7 4.5 1.9 2.7 5.7 2.4 3.5 2.3 4.2 5.1 4.4 3.5 2.2 2.5 3.3 2.5 0.8 1.6 0.6 0.2 0.4 -0.8 0.1 1.4 2.8 3.5 7.3 5.2 1.8 3.3 5.7 2.7 4.0 2.8 4.8 5.4 4.4 3.6 2.5 3.0 3.7 1.7 1.3 1.7 1.1 0.7 0.9 1.3 1.3 2.1 3.0 4.0 7.0 5.7 1.2 3.5 6.0 2.9 4.5 3.4 4.5 5.6 4.7

The euro area recovery softened as expected in the third quarter, with output expanding by 0.1% q/q (down from 0.3% q/q in the prior three months). Nevertheless, the outlook has improved for some of the peripheral economies relative to prior expectations despite still rigorous fiscal tightening, high unemployment and an elevated currency. We have revised up slightly our GDP growth forecast for next year, from 0.7% to 0.8%. At the same time, medium-term inflation dynamics have slowed and we now anticipate additional monetary easing by the European Central Bank in the coming months. We have raised our growth profile for the U.K. in 2014-15. Forwardlooking surveys and labour market indicators suggest that the economy will sustain solid momentum through the first half of 2014, helped by lower inflation and less fiscal drag than earlier projected. We now expect growth of 2.5% in 2014 and 1.7% in 2015. In light of the forward shift in expectations for the fall in the unemployment rate, we now expect the Bank of Englands first interest rate hike to come around the third quarter of 2015. Given slightly slower-than-expected growth momentum in Thailand and Japan in the third quarter, we have made minor revisions to these countries real GDP forecasts. Thailands output growth returned to positive territory in Q3 (increasing by 1.3% q/q) following two quarters of contractions. In year-over-year terms, however, the pace of expansion slowed to 2.7% from 2.9% in Q2. We now expect the countrys annual output to increase by 3.5% this year, compared with the earlier forecast of 3.7%. Japanese real GDP expanded by 0.5% q/q in Q3, following a 0.9% gain in the previous three months. We assess that the slowdown will prove temporary as the economy will likely see a substantial pickup in household spending and residential investment ahead of the planned sales tax increase in April 2014. Japans output growth will likely reach 1.9% this year (compared with the earlier forecast of 2.0%).

(y/y % change, year-end) 2.0 2.5 4.7 2.3 2.1 1.8 1.9 2.4 2.9 3.1 2.5 2.2 11.8 17.3 2.4 6.7 -0.3 3.1 8.0 3.0 2.7 6.5 5.3 2.6 3.2 1.1 1.3 3.9 2.0 0.8 1.2 0.8 0.8 0.4 -1.2 0.1 0.1 6.0 7.0 3.0 6.8 1.0 1.0 8.5 2.5 1.6 6.0 2.6 2.9 2.5 1.7 1.7 4.3 2.2 1.2 1.6 1.3 1.1 1.2 -0.1 0.8 1.0 5.8 6.2 3.3 7.1 1.5 2.2 7.4 3.0 2.5 5.7 3.3 3.0 3.0 1.9 1.9 4.0 2.4 1.4 1.8 1.5 1.1 1.1 0.5 1.3 1.5 5.5 6.0 3.9 6.7 2.1 2.5 6.5 2.9 2.9 5.8 3.0 2.5 3.0

Global Economics

November 29, 2013

Global Forecast Update

International
Curre nt Account Balance Canada United States Mexico United Kingdom Euro zone Germany France Italy Spain Greece Portugal Ireland Russia T urkey China India Japan South Korea Indonesia Australia T hailand Brazil Colombia Peru Chile

2000-12

2013f

2014f

2015f

Forecast Changes
International

(% of GDP) 0.1 -4.1 -1.3 -2.2 0.0 4.1 -0.4 -1.3 -5.4 -8.3 -9.1 -1.2 8.2 -4.2 4.6 -1.4 3.1 2.5 1.8 -4.3 2.8 -1.1 -1.8 -1.2 0.3 -3.3 -2.3 -1.7 -2.9 1.4 6.4 -1.9 0.1 0.5 -2.2 0.9 4.2 2.6 -7.3 2.1 -4.4 1.1 4.2 -3.2 -2.9 -0.9 -3.7 -3.2 -3.5 -4.2 -3.0 -2.2 -1.7 -2.5 1.6 5.9 -1.9 0.2 1.3 -1.1 1.0 4.5 1.8 -7.0 1.9 -4.0 1.5 3.8 -3.0 -2.5 0.0 -3.3 -3.5 -3.3 -4.8 -2.6 -2.2 -2.2 -2.1 1.8 5.5 -1.7 0.3 2.2 0.0 1.1 4.6 0.8 -7.1 1.8 -3.5 1.6 3.3 -2.4 -2.5 0.5 -3.0 -3.2 -3.4 -4.1

The Peruvian economy grew by 4.4% y/y in the third quarter of the year, the slowest pace since the end of 2009. Weaker external demand and lower commodity prices have weighed on economic activity. Accordingly, we are revising our real GDP forecast from 5.7% to 5.1% for 2013 and from 5.7% to 5.4% for 2014. The Peruvian, Chilean and Mexican central banks reduced their respective reference rates in November; however, we do not anticipate a prolonged easing cycle in any of these economies. Meanwhile, Brazil continues to increase its reference rate, taking it to double digits for the first time in almost two years. We assess that the Brazilian monetary authorities may be approaching the end of the easing cycle.

Commodities

Commodities
(annual average) WT I Oil (US$/bbl) Brent Oil (US$/bbl) Nymex Natural Gas (US$/mmbtu) Copper (US$/lb) Zinc (US$/lb) Nickel (US$/lb) Gold, London PM Fix (US$/oz) Pulp (US$/tonne) Newsprint (US$/tonne) Lumber (US$/mfbm) 60 62 5.45 2.22 0.78 7.64 745 730 585 274 98 109 3.70 3.30 0.87 6.95 1,410 936 608 356 92 108 3.75 3.10 0.97 7.25 1,270 940 615 390 90 108 4.00 3.00 1.40 7.60 1,375 970 650 400

Surging light oil production from Texas Eagle Ford & Permian Basins as well as the North Dakota Bakken are beginning to alter oil pricing dynamics across North America. After closing the gap with Brent (the international benchmark) in July, the discount on WTI oil has widened again to US$18 per barrel. WTI oil prices are currently trading around US$92 compared with US$111 for Brent. Wide discounts on WTI are expected to prevail through 2014-15. Western Spruce-Pine-Fir 2x4 lumber prices the bellwether for North America have been one of the strongest performing commodities in 2013. Prices have recently been boosted by strong sales into China. In the first nine months of 2013, Canada remained the top lumber exporter to China, with exports up 3% to 4.848 million cubic metres just edging out Russia at 4.797 million (+17% y/y). U.S. housing permits jumped to 1.03 million units annualized in October (almost a 5-year high) and prices for single-family homes notched big gains in September, suggesting that the housing recovery remains on track.

Provincial GDP
6 annual % change
800 900

Commodity Price Trends

index:2002Q1=100

5 2013f 4 2014f 2015f 3

400 300 200 700 600 500

Nickel Copper WTI Oil

Natural Gas

1
100 Gold 0

0 NL PE NS NB QC ON MB SK AB BC

02 03 04 05 06 07 08 09 10 11 12 13

Source: Statistics Canada, Scotiabank Economics.

Source: Bloomberg, Scotiabank Economics.

Global Economics

November 29, 2013

Global Forecast Update

North America
Canada Real GDP Consumer Spending Residential Investment Business Investment Government Exports Imports Nominal GDP GDP Deflator Consumer Price Index Core CPI Pre-T ax Corporate Profits Employment thousands of jobs Unemployment Rate (%) Current Account Balance (C$ bn.) Merchandise T rade Balance (C$ bn.) Federal Budget Balance (C$ bn.) per cent of GDP Housing Starts (thousands) Motor Vehicle Sales (thousands) Motor Vehicle Production (thousands) Industrial Production Unite d State s Real GDP Consumer Spending Residential Investment Business Investment Government Exports Imports Nominal GDP GDP Deflator Consumer Price Index Core CPI Pre-T ax Corporate Profits Employment millions of jobs Unemployment Rate (%) Current Account Balance (US$ bn.) Merchandise T rade Balance (US$ bn.) Federal Budget Balance (US$ bn.) per cent of GDP Housing Starts (millions) Motor Vehicle Sales (millions) Motor Vehicle Production (millions) Industrial Production Me x ico Real GDP Consumer Price Index (year-end) Unemployment Rate (%) Current Account Balance (US$ bn.) Merchandise T rade Balance (US$ bn.) Industrial Production

2000-12

2013f

2014f

2015f

Forecast Changes
Canada & United States

(annual % change) 2.2 3.0 4.2 3.6 2.9 0.7 3.4 4.7 2.5 2.1 1.8 5.2 1.5 239 7.1 -2.9 37.0 -4.5 -0.3 201 1,595 2,424 0.4 1.7 2.2 0.2 1.1 0.6 1.7 1.6 3.1 1.4 1.0 1.3 -4.5 1.3 224 7.1 -61.5 -8.5 -15.5 -0.8 185 1,735 2,260 1.3 2.2 2.4 -0.3 4.2 0.1 4.4 3.1 3.7 1.5 1.3 1.5 6.0 1.2 205 7.0 -57.5 -3.4 -7.0 -0.4 172 1,745 2,300 2.2 2.5 2.4 -0.2 6.1 0.3 6.0 4.7 4.4 1.8 1.8 1.7 9.0 1.4 243 6.8 -53.5 1.9 1.5 0.1 174 1,760 2,350 2.6

We have edged up our forecast for Canadian GDP growth this year from 1.6% to 1.7% following a stronger-than-expected Q3 output advance. Our forecast for 2014 and 2015 remains unchanged. Economic activity is expected to gradually gain momentum over the next two years as strengthening global demand lifts exports and business investment. Household spending is expected to remain relatively moderate in the face of modest job and income gains, high debt levels and weaker housing affordability. Our forecast for U.S. growth is unchanged from last month, with a stronger and more sustainable recovery taking hold in 2014-15 as fiscal drag eases. Pent-up demand for housing and consumer durables should give the United States the performance edge over Canada through the forecast horizon. We have lowered our forecast for Canadian and U.S. inflation in the face of persistently soft readings. With price pressures restrained by excess production capacity, muted wage gains, retail discounting, and softer food and energy prices, we now expect headline and core inflation in both countries to hold below 2% through 2015. Canada's federal deficit reduction this fiscal year will be constrained by disaster assistance for Alberta and Saskatchewan that is now likely to total more than $3 billion. In the United States, the pace of federal spending cutbacks is still assumed to moderate over the next two years.

1.9 2.3 -2.9 1.9 1.5 4.0 3.3 4.1 2.1 2.5 2.0 7.0 0.3 0.36 6.3 -545 -652 -528 -4.0 1.33 15.1 10.4 0.7

1.6 1.9 14.1 2.2 -2.0 2.5 1.5 3.2 1.5 1.5 1.8 3.6 1.6 2.15 7.4 -391 -700 -680 -4.1 0.92 15.5 10.9 2.4

2.5 2.4 11.6 4.3 -0.4 5.1 4.4 4.0 1.5 1.6 1.7 7.3 1.6 2.21 6.9 -385 -722 -620 -3.6 1.15 16.0 11.3 2.9

3.0 3.0 9.0 5.7 0.2 5.8 5.7 4.9 1.8 1.9 1.8 10.5 1.8 2.52 6.5 -410 -777 -565 -3.1 1.35 16.6 11.7 3.5

Mexico

2.4 4.7 3.9 -11.9 -7.0 1.6

1.3 3.9 5.0 -22.2 -8.8 -0.4

3.3 4.3 4.7 -23.4 -12.4 3.0

3.7 4.0 4.7 -32.0 -21.4 3.3

Mexican real GDP expanded by 1.3% y/y in the third quarter, slightly higher than the 1.1% rate registered in the first half of the year. On a quarter-over-quarter basis, after contracting by 0.6% in the previous three months, output increased by 0.8%. We expect the economy will expand by 1.3% in 2013 followed by an increase of 3.3% in 2014.

Global Economics

November 29, 2013

Global Forecast Update

Provincial Provincial

2000-12 2013f 2013f 2014f 2014f 2015f 2015f 2000-12 Real RealGDP* GDP* (annual % change) (annual % change)

2000-12 2000-12

2013f 2014f 2014f 2015f 2015f 2013f

Forecast Changes
Provinces

BudgetBalances*, Balances*, FY 31 Budget FY March March 31

($millions) ($ millions)

Canada Canada

2.2 2.5 1.8 1.5 1.5 1.9 2.0 2.3 2.1 3.2 2.5

1.7 5.3 1.2 1.2 0.4 0.9 1.4 2.2 3.1 3.2 1.3

2.2 1.3 1.3 1.8 0.9 1.8 2.0 2.1 2.6 3.6 2.2

2.5 2.2 1.6 2.2 1.1 1.9 2.2 2.4 2.6 3.3 2.8

-1,924 187 -36 45 -66 -773 -4,112 56 ** 389 3,348 359

-18,929 -15,500 -7,000 -431 -69 -302 * -508 * -564 -58 18 -500 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Newfoundland & Labrador Newfoundland & Labrador Prince Edward Prince Edward IslandIsland Nova Scotia Nova Scotia New Brunswick New Brunswick Quebec Quebec Ontario Ontario Manitoba Manitoba Saskatchewan Saskatchewan Alberta Alberta British Columbia British Columbia

With stronger crop production adding to other positives, we have edged up our real GDP forecasts for Alberta, Saskatchewan and Manitoba for 2013. Alberta and Saskatchewan continue to be buoyed by historically high net interprovincial in-migration. Labour force participation rates for most provinces changed little this year, though Saskatchewan, and especially Prince Edward Island, registered an uptick. For PEI, its elevated participation rate has hampered improvements in its unemployment rate, despite robust job creation this year. Conversely, participation rates fell in British Columbia alongside softer job creation. Saskatchewan and Alberta are leading provincial gains in average weekly earnings for the first threequarters of 2013, each with a 3.4% year-over-year increase. Earnings increases are trailing the rest of the country in British Columbia (+1.1%), Manitoba (+0.6%) and New Brunswick (+0.1%), while the remaining provinces are close to the national gain of 1.9%. Strengthening demand for motor vehicles is expected to lift North American auto production above 16 million units this year for the first time since 2005, boosting the industry-wide capacity utilization rate to 90% the highest level in nearly a decade. After lagging for re-tooling during much of 2013, assemblies in Canada will ramp up in the final months of 2013, adding nearly half a percentage point of overall economic activity the largest contribution to growth since the economic expansion began in mid-2009. Mid-year updates for fiscal 201314 from Central Canada and the three most western Provinces underline continuing expenditure oversight. For the Provinces as well as Ottawa, lower-thanprojected GDP price inflation is contributing to current revenue constraints.

-1,600 * -2,500 -9,220 * -11,741 -580 58 0 -1,146

* * * *

-518 11 15 165

**2000-07: 2000-07: Estimated; 2012: basic prices, Industry basis. estimated; 2012: basic prices, industry basis.

* Final. FY13 & FY14& estimates: documents. ** FY04-F *Final. FY13 FY14Provincial estimates: Provincial documents. ** FY04-FY12.

Employment Employment (annual % change) Canada Canada

Newfoundland & Labrador Newfoundland & Labrador Prince Edward Island Island Prince Edward Nova Scotia Nova Scotia New Brunswick New Brunswick Quebec Quebec Ontario Ontario Manitoba Manitoba Saskatchewan Saskatchewan Alberta Alberta British Columbia British Columbia 1.5 1.0 1.5 0.9 0.6 1.4 1.4 1.2 1.0 2.6 1.5 1.3 1.5 2.0 0.0 -0.2 1.1 1.4 0.9 3.4 2.7 0.0 1.2 1.1 0.8 0.8 0.5 1.0 1.1 1.0 1.8 2.3 1.1

(annual % change)

Unemployment Rate Unemployment Rate

(annual average, %)

(annual average, %) 7.1 11.4 11.3 9.0 10.7 7.7 7.6 5.3 4.1 4.6 6.6

1.4 1.2 1.1 1.2 0.7 1.1 1.2 1.2 2.1 2.4 1.4

7.1 14.8 11.3 8.8 9.5 8.2 7.1 5.0 5.0 4.8 6.7

7.0 11.0 11.0 8.9 10.5 7.5 7.4 5.1 4.0 4.3 6.5

6.8 10.7 10.8 8.8 10.3 7.4 7.3 5.0 4.0 4.0 6.4

Housing HousingStarts Starts (annual, of units) (annual, thousands thousands of units) Canada Canada Atlantic Atlantic 201 12 45 73 5 5 34 27 185 11 37 60 7 8 35 26 172 10 35 56 6 7 34 23 174 10 36 56 6 7 35 24

Motor Vehicle Sales Motor Vehicle Sales (annual, of units) (annual, thousands thousands of units) 1,595 115 406 604 45 43 208 174 1,735 129 412 644 53 58 259 180 1,745 130 414 646 54 59 261 181 1,760 131 416 651 55 60 264 183

Quebec Quebec Ontario Ontario Manitoba Manitoba Saskatchewan Saskatchewan Alberta Alberta British Columbia British Columbia

Global Economics

November 29, 2013

Global Forecast Update

Quarterly Forecasts
Canada Real GDP (q/q, ann. % change) Real GDP (y/y, % change) Consumer Prices (y/y, % change) Core CPI (y/y % change) United States Real GDP (q/q, ann. % change) Real GDP (y/y, % change) Consumer Prices (y/y, % change) Core CPI (y/y % change)

13Q3

13Q4f

14Q1f

14Q2f

14Q3f

14Q4f

15Q1f

15Q2f

15Q3f

15Q4f

2.7 1.9 1.1 1.3

1.4 2.0 1.1 1.3

2.2 2.0 1.1 1.4

2.4 2.2 1.2 1.4

2.4 2.1 1.4 1.5

2.4 2.4 1.7 1.5

2.5 2.4 1.8 1.6

2.6 2.5 1.8 1.6

2.7 2.6 1.8 1.7

2.8 2.7 1.9 1.8

2.8 1.6 1.6 1.7

1.7 2.0 1.3 1.7

2.4 2.3 1.4 1.6

2.7 2.4 1.6 1.7

2.8 2.4 1.6 1.7

2.9 2.7 1.7 1.7

3.0 2.8 1.7 1.8

3.1 3.0 1.8 1.8

3.0 3.0 1.9 1.8

3.1 3.1 1.9 1.9

Financial Markets
Central Bank Rates Am ericas Bank of Canada U.S. Federal Reserve Bank of Mexico Central Bank of Brazil Bank of the Republic of Colombia Central Reserve Bank of Peru Central Bank of Chile Europe European Central Bank Bank of England Swiss National Bank Asia/Oceania Reserve Bank of Australia People's Bank of China Reserve Bank of India Bank of Korea Bank Indonesia Bank of Thailand Canada 3-month T-bill 2-year Canada 5-year Canada 10-year Canada 30-year Canada United States 3-month T-bill 2-year T reasury 5-year T reasury 10-year Treasury 30-year Treasury Canada-U.S. Spreads 3-month T-bill 2-year 5-year 10-year 30-year 0.98 0.87 0.47 -0.07 -0.62 0.95 0.70 0.40 -0.10 -0.65 0.95 0.70 0.40 -0.15 -0.65 0.95 0.70 0.35 -0.20 -0.65 0.95 0.50 0.20 -0.25 -0.65 0.95 0.45 0.10 -0.25 -0.65 0.95 0.35 0.10 -0.25 -0.70 0.95 0.40 0.10 -0.25 -0.70 0.80 0.30 0.10 -0.25 -0.70 0.75 0.05 0.00 -0.25 -0.65 0.01 0.32 1.39 2.61 3.69 0.05 0.30 1.30 2.55 3.65 0.05 0.40 1.50 2.85 3.80 0.05 0.55 1.80 3.00 3.95 0.05 0.85 2.15 3.30 4.25 0.10 1.15 2.40 3.40 4.40 0.15 1.45 2.60 3.65 4.60 0.15 1.65 2.85 3.85 4.80 0.40 2.00 3.00 4.00 4.95 0.80 2.40 3.20 4.20 5.05 0.98 1.19 1.86 2.54 3.07 1.00 1.00 1.70 2.45 3.00 1.00 1.10 1.90 2.70 3.15 1.00 1.25 2.15 2.80 3.30 1.00 1.35 2.35 3.05 3.60 1.05 1.60 2.50 3.15 3.75 1.10 1.80 2.70 3.40 3.90 1.10 2.05 2.95 3.60 4.10 1.20 2.30 3.10 3.75 4.25 1.55 2.45 3.20 3.95 4.40 2.50 6.00 7.50 2.50 7.25 2.50 2.50 6.00 8.00 2.50 7.50 2.25 2.50 6.00 8.00 2.50 8.00 2.25 2.50 6.00 8.00 2.50 8.00 2.25 2.50 6.30 8.00 2.50 8.00 2.25 2.75 6.30 8.00 2.75 7.75 2.50 3.00 6.60 7.75 3.00 7.50 2.75 3.25 6.60 7.50 3.25 7.50 3.00 3.50 6.60 7.50 3.50 7.50 3.25 3.50 6.60 7.50 3.75 7.50 3.50 0.50 0.50 0.00 0.25 0.50 0.00 0.00 0.50 0.00 0.00 0.50 0.00 0.00 0.50 0.00 0.00 0.50 0.00 0.00 0.50 0.00 0.00 0.50 0.00 0.00 0.75 0.00 0.00 1.00 0.00 1.00 0.25 3.75 9.00 3.25 4.25 5.00 1.00 0.25 3.50 10.00 3.25 4.00 4.50 1.00 0.25 3.50 10.25 3.25 4.00 4.50 1.00 0.25 3.50 10.25 4.00 4.00 4.50 1.00 0.25 4.00 10.25 4.50 4.00 4.50 1.00 0.25 4.00 10.75 4.50 4.25 4.75 1.00 0.25 4.50 11.25 4.50 4.25 5.00 1.00 0.25 5.00 11.50 5.00 4.50 5.50 1.00 0.25 5.00 11.50 5.25 4.50 5.50 1.25 0.50 5.00 11.50 5.50 4.50 5.50 (%, end of period)

Global Economics

November 29, 2013

Global Forecast Update

Financial Markets
Exchange Rates Am ericas Canadian Dollar (USDCAD) Canadian Dollar (CADUSD) Mexican Peso (USDMXN) Brazilian Real (USDBRL) Colombian Peso (USDCOP) Peruvian Nuevo Sol (USDPEN) Chilean Peso (USDCLP) Canadian Dollar Cross Rates Euro (EURCAD) U.K. Pound (GBPCAD) Japanese Yen (CADJPY) Australian Dollar (AUDCAD) Mexican Peso (CADMXN) Europe Euro (EURUSD) U.K. Pound (GBPUSD) Swiss Franc (USDCHF) Swedish Krona (USDSEK) Norwegian Krone (USDNOK) Russian Ruble (USDRUB) T urkish Lira (USDTRY) Asia/Oceania Japanese Yen (USDJPY) Australian Dollar (AUDUSD) Chinese Yuan (USDCNY) Indian Rupee (USDINR) South Korean Won (USDKRW) Indonesian Rupiah (USDIDR) T hai Baht (USDT HB)

13Q3

13Q4f

14Q1f

14Q2f

14Q3f

14Q4f

15Q1f

15Q2f

15Q3f

15Q4f

(end of period)

1.03 0.97 13.09 2.22 1906 2.79 505

1.06 0.94 13.15 2.25 1900 2.76 508

1.07 0.93 13.23 2.25 1900 2.75 510

1.08 0.93 13.13 2.28 1900 2.73 515

1.07 0.93 13.21 2.29 1910 2.73 515

1.06 0.94 13.39 2.30 1920 2.70 520

1.06 0.94 13.40 2.28 1920 2.68 520

1.05 0.95 13.40 2.25 1910 2.65 510

1.04 0.96 13.50 2.23 1900 2.65 500

1.03 0.97 13.52 2.20 1890 2.60 490

1.39 1.67 95 0.96 12.70

1.39 1.70 95 0.94 12.41

1.39 1.71 95 0.93 12.37

1.39 1.72 96 0.97 12.15

1.36 1.69 100 0.96 12.35

1.33 1.66 103 0.99 12.63

1.33 1.64 104 0.99 12.64

1.30 1.62 106 0.99 12.76

1.29 1.59 108 0.98 12.98

1.27 1.57 110 0.98 13.13

1.35 1.62 0.90 6.43 6.01 32.4 2.02

1.31 1.60 0.93 6.68 5.90 33.0 2.02

1.30 1.60 0.95 6.65 5.85 33.0 2.02

1.29 1.59 0.96 6.67 5.80 32.8 2.01

1.27 1.58 0.98 6.73 5.80 32.7 2.01

1.25 1.57 1.00 6.80 5.75 32.7 2.00

1.25 1.55 1.00 6.76 5.70 32.8 1.99

1.24 1.54 1.02 6.77 5.65 32.8 1.98

1.24 1.53 1.02 6.69 5.65 32.9 1.97

1.23 1.52 1.03 6.71 5.60 32.9 1.96

98 0.93 6.12 62.6 1075 11406 31.2

101 0.89 6.08 62.5 1070 11800 32.5

102 0.87 6.08 61.0 1070 11900 32.6

104 0.90 6.07 62.0 1060 12000 32.8

107 0.90 6.05 63.5 1050 12100 32.9

109 0.93 5.98 64.5 1040 12200 33.0

110 0.93 5.94 65.0 1030 12125 33.3

111 0.94 5.90 65.3 1025 12050 33.5

112 0.94 5.86 65.5 1020 11975 33.8

113 0.95 5.86 66.0 1020 11900 34.0

Central Bank Rates

7 6 U.S. 5 4 Forecast 3 2 Euro zone 1 0 04 05 06 07 08 09 10 11 12 13 14 Canada U.K.

Global Inflation
10 y/y % change
7 6 % U.S.

10-Year Yields

8 China 6 4 2 0 -2 U.S. -4 07 08 09 10 11 12 13 14 Canada Euro zone Forecast

Forecast

5 4 Canada 3 2 1 0 04 05 06 07 08 09 10 11 12 13 14

Source: Bloomberg, Scotiabank Economics.

Source: Bloomberg, Scotiabank Economics.

Source: Bloomberg, Scotiabank Economics.

Scotiabank Economics
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