RBC ECONOMICS I RESEARCH Canada’s economic outlook: adjusting to the new realities Hotel Association…

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Oil prices likely to remain low during most of 2016
Gradual increase expected to begin later this year although this is subject to substantial uncertainty
3
US economy is a bright spot: it is essentially at full employment…
Jobless rate below 5%, which is broadly consistent with full employment
…and expected to continue to grow at a respectable pace
Several recent indicators have disappointed; this is likely to be a temporary soft patch
Federal Reserve has initiated the long-awaited interest rate liftoff
Increased the fed funds rate for the first time in 10 years (to 0.50%); more hikes to come
Meanwhile, the Bank of Canada will remain on the sidelines
Ongoing adjustments to the oil price shock will require accommodative monetary policy
-1.25
7
Low oil prices and contrasting monetary policies to keep C$ weak
We expect a gradual strengthening in the loonie later this year alongside the modest rise in oil prices
Oil-producing provinces likely to continue to struggle (although agriculture will help Saskatchewan)
10
Job losses are mounting in Alberta, and a turnaround is not yet in sight
Alberta’s jobless rate just surpassed the national mark for the first time since 1988
Strong full-time employment gains recorded in Ontario, Quebec and BC
Canadian economy expected to steer clear of a recession
‘Phase I’ saw mostly the negative shock; we’re entering Phase II when more benefits will kick in
Favourable context for Canadian exports,…
However, full benefits will accrue only progressively and become more sizable by 2017
Risks: what to watch out for
Focus on downside risks but let’s not ignore upside risks
Oil prices: further weakness? Sharp rebound?
Fed policy: global impact of rising in US interest rates?
China: further slowdown/turbulence?
Canada’s housing market: hot markets boiling over?
Alberta: household balance sheets at risk?
16
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49US$/barrel
Source: Bureau of Labor Statistics, Congressional Budget Office, RBC Economics Research
Non-accelerating inflation rate of unemployment
-10-8-6-4-20246810200020012002200320042005200620072008200920102011201220132014201520162017Forecast:
U.S. real GDP
123456720002001200220032004200520062007200820092010201120122013201420152016
%
Source: Bank of Canada, RBC Economics Research
0.60.70.80.91.01.19596979899000102030405060708091011121314151617Forecast
Parity
Annual % change
Annual % change
62-53343402-20-443-310-41065843-1-3-40-20020406080100120
BCABSKMBONQCNBNSPENLTotalFull-time
Net job creation by province in 2015
Change in employment between Q4/2014 and Q4/2015, in thousands
-10-8-6-4-20246820072008200920102011201220132014201520162017
Canada's real GDP
5.32.82.45.0-15-10-551015200020022004200620082010201220142016Annual % change
-15-10-551015202520052006200720082009201020112012201320142015Annual % change
Source: Statistics Canada, RBC Economics Research

RBC ECONOMICS I RESEARCH Canada’s economic outlook: adjusting to the new realities Hotel Association…

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