49
SASKATOON & REGION ECONOMIC REVIEW & OUTLOOK Presentation by Mike Jordan Director of Government Relations May 15, 2017 *check against delivery
SASKATOON & REGION
ECONOMIC REVIEW & OUTLOOK Presentation by Mike Jordan
Director of Government Relations
May 15, 2017
*check against delivery
Global & United States Growth
Canadian Review & Outlook
Saskatchewan Review & Outlook
Saskatoon Review & Outlook 2016-17 Employment
Income
Consumer Spending
Housing
Demographics
Output
OVERVIEW
GLOBAL TRENDS
Global growth to pick up after slow recovery from economic
downturn.
-2
0
2
4
6
8
2015 2016 2017f 2018f
Re
al G
DP
An
nu
al
Ch
an
ge
(%
)
Canada US China India Euro Area U.K. World
Source: International Monetary Fund, World Economic Outlook, April 2017
China and the United States represent 33%
of Global GDP
0 5 10 15 20 25 30 35
China
Euro Area
Oil Importing Emerging Economies
Rest of World
United States
Share of Global GDP, 2016 (%)Source: Bank of Canada, International Monetary Fund
About 30% of Saskatchewan Exports, or $16
Billion, goes to the US and China.
$3.384
$12.540
$0 $2 $4 $6 $8 $10 $12 $14
Turkey
United Arab Emirates
Indonesia
Pakistan
Brazil
Mexico
Japan
India
China
Others
United States
Saskatchewan Exports 2016: Top 10 CountriesC$ Billions Total = $26.5 Billion
Source: Industry Canada, Trade Data Online
THE US OUTLOOK
US Real GDP Growth is expected to grow at an above
average pace due to monetary policy and expansionary
fiscal policy.
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2010 2011 2012 2013 2014 2015 2016 2017f 2018f
US Real GDP Growth (%)Source: Bureau of Economic Analysis & RBC Economics
Strong Employment growth suggests positive momentum
-100
-50
0
50
100
150
200
250
300
350
400
2010 2011 2012 2013 2014 2015 2016 2017
Source: Bureau of Labor Statistics, RBC Economics Research
U.S. payroll employment growthChange from previous month (Thous.)
'Steady State?'
Courtesy: RBC Economics
US Growth will drive down the Unemployment Rate.
2
3
4
5
6
7
8
9
10
11
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: Bureau of Labor Statistics, RBC Economics Research
Forecast
%
Unemployment rate: U.S.
Courtesy: RBC Economics
The Federal Reserve Board will tighten rate
policy due to economic growth.
1
2
3
4
5
6
7
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Source: Federal Reserve Board, RBC Economics Research
Forecast
%
Fed Funds Rate
Courtesy: RBC Economics
CANADIAN OUTLOOK
Increased exports and energy investment
will improve GDP growth for Canada.
-10
-8
-6
-4
-2
0
2
4
6
8
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: Statistics Canada, RBC Economics Research
Canada's real GDP growth Quarter-over-quarter % change, annualized rate
Forecast:
Annual Growth Rates
2016
1.4
2018f
2.12017f
2.0Real GDP
2015
0.9
Courtesy: RBC Economics
Business investment is expected to return to
positive territory in 2018.
-30
-25
-20
-15
-10
-5
5
10
15
20
25
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Non-residential investment in Canada
Forecast
Annual Growth Rates
Non-residential
Source: Statistics Canada, RBC Economics Research
Year-over-year % change
GDP (YoY)
2017f
0.6
2016f
-7.4
2015
-11.5
2018f
3.4
Federal fiscal policy decisions will increase
government spending and growth in 2017 and 18.
-6
-4
-2
2
4
6
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Year-over-year % change
Government Spending and GDP
Forecast
Source: Statistics Canada, RBC Economics Research
Annual Growth Rates
Government Spending
2018f
2.1
2017f
1.6
2016f
2.0
2015
1.5GDP
The Canadian Dollar is expected to remain
relatively weak compared to the US Dollar.
60
70
80
90
100
110
Cen
ts/
US
$
Per US $
Source: Bank of Canada
Average Private Sector Forecasts
A weak Canadian dollar will help to improve Canadian
exports. However, potential US trade policy changes
provide a risk.
-20
-15
-10
-5
5
10
15
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Year-over-year % change
Canadian Exports and GDP
Source: Statistics Canada, RBC Economics Research
GDP (YoY)
Forecast
Annual Growth Rates
2018f
1.92017f
1.5
2016f
0.9
2015
3.4Exports
Courtesy: RBC Economics
Bank of Canada will keep rate policy steady
through 2017, but will tighten in 2018
Courtesy: RBC Economics
SASKATCHEWAN
OUTLOOK
Higher oil prices are expected to be a key factor for
returning the Saskatchewan economy to positive growth.
0
20
40
60
80
100
120
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017f 2018f
West Texas Intermediate Crude Oil Price US dollars per barrel
Source: US Energy Information Administration
As a result, after two years of decline, the Oil & Gas Sector
is intending to increase investment in 2017.
-60
-40
-20
0
20
40
60
Oil & Gas Sector Capital Expenditure in Saskatchewan Year over Year Change % Source: CANSIM 029-0045
However, the same can’t be said of the Mining Sector.
-60
-40
-20
0
20
40
60
80
Mining Sector Capital Expenditure in Saskatchewan Year over Year Change (%)Source: CANSIM 029-0045
Given the weak demand and low prices, potash production
is anticipated to remain under pressure.
-20
-15
-10
-5
0
5
10
15
20
2011 2012 2013 2014 2015 2016* 2017*
*2016 and 2017 are estimates Source: Saskatchewan Industry and Resources, RBC Economics Research
% change, year-over-year
Potash production: Saskatchewan
Courtesy: RBC Economics
The decline in resource prices and lower investment has
impacted the governments balance sheet
-1519 -1289 -685 -304
15
2015/16 2016/17 2017/18 2018/19 2019/20
Budget Balance Millions $
Source: Saskatchewan 2017-18 Budget and RBC Economics
However, Saskatchewan still has one of the lowest Net
Debt to GDP Ratios in Canada
0
10
20
30
40
50
60
Perc
en
tag
e o
f N
om
inal
GD
P
FY: 2017/18
Source: RBC Economics, Fiscal Reference Tables
Lower resource investment has also impacted employment.
The Unemployment Rate is about 1% higher than 20 year
average, while Employment Rate is at 20 year average.
0
1
2
3
4
5
6
7
8
Ma
r-9
7
Ma
r-9
8
Ma
r-9
9
Ma
r-0
0
Ma
r-0
1
Ma
r-0
2
Ma
r-0
3
Ma
r-0
4
Ma
r-0
5
Ma
r-0
6
Ma
r-0
7
Ma
r-0
8
Ma
r-0
9
Ma
r-1
0
Ma
r-1
1
Ma
r-1
2
Ma
r-1
3
Ma
r-1
4
Ma
r-1
5
Ma
r-1
6
Ma
r-1
7
Saskatchewan Unemployment Rate (%)Seasonally Adjusted
Source: CANSIM 282-0087
Unemployment rate Average
56
58
60
62
64
66
68
70
Ma
r-9
7
Ma
r-9
8
Ma
r-9
9
Ma
r-0
0
Ma
r-0
1
Ma
r-0
2
Ma
r-0
3
Ma
r-0
4
Ma
r-0
5
Ma
r-0
6
Ma
r-0
7
Ma
r-0
8
Ma
r-0
9
Ma
r-1
0
Ma
r-1
1
Ma
r-1
2
Ma
r-1
3
Ma
r-1
4
Ma
r-1
5
Ma
r-1
6
Ma
r-1
7
Saskatchewan Employment Rate (%) Seasonally Adjusted
Source: CANSIM 282-0087
Employment rate Average
In 20 years, real (inflation adjusted) average weekly wages grew
by 30 percent in Saskatchewan. This means on average,
consumer purchasing power grew by about 1.5% per year.
-5
0
5
10
15
20
25
30
35
Saskatchewan Real Average Weekly Wages (Mar 2017$)Cumulative Change (%)
Sources: CANSIM 282-0071; 326-0020
SaskatchewanKey Economic Indicators Forecast
Percentage Change (Unless Indicated)
-6
-4
-2
0
2
4
6
8
Real GDP (%) Nominal GDP(%)
Retail Sales (%) CPI (%) EmploymentGrowth (000)
UnemploymentRate(%)
2016 2017f 2018f
Source: Saskatchewan 2017-18 Budget; Private Sector Forecasts
SASKATOON & REGION
ECONOMIC OUTLOOK
2017- 18
REGIONAL GROWTH FACTORS
Commodity
SalesCash Flow
Investment
Domestic
Demand
PopulationNet
Migration
National
Unemployment
Labour
Force
Unemployment
Rate
Employment
Source: Adapted from City of Calgary, Corporate Economics
Global
Demand
MAP OF THE SASKATOON
CENSUS METROPOLITAN AREA (CMA)
According to leading indicators, Saskatoon is
the engine of the Saskatchewan economy.
27.4 29.1 29.6
38.4
44.0 42.6
0
10
20
30
40
50
Population Real GDP (2015) Employment Retail Sales Building Permits Housing Starts(units)
Pe
rcen
t
Saskatoon Region Share (%) of 2016 Provincial Economic Indicators
Sources: Statistics Canada; Conference Board of Canada
After significant job losses in 2016, employment is
expected to recover in 2017, but won’t reach long run
average.
-2,000
-1,000
0
1,000
2,000
3,000
4,000
5,000
An
nu
al
Ch
an
ge
in
Em
plo
ym
en
t
Employment Saskatoon CMA
Sources: Statistics Canada, Conference Board of Canada
The composition of Saskatoon’s Labour Market has
changed in 20 years, with the largest gains coming in the
Construction industry.
Employment Share By
Industry
1996 Share of
Employment (%)
2016 Share of
Employment (%)Change
Professional, Scientific and
Management Services 8.1 9.5 1.4
Construction 4.8 10.6 5.8
Finance, Insurance, Real Estate 6.3 4.8 -1.5
Information & Culture Industries 2.4 1.5 -0.9
Manufacturing Industries 8.8 5.4 -3.3
Education, Health Care, &
Social Services 21.2 23.5 2.2
Accomodation, Food, Arts, &
Entertainment Services 15.9 13.8 -2.1
Primary & Utility Industries 6.0 5.4 -0.6
Public Administration 5.2 4.6 -0.6
Transportation and Warehousing
Services 5.1 5.0 -0.1
Wholesale and Retail Trade 16.2 16.0 -0.2
Total 100.0 100.0
Sources: Statistics Canada, Conference Board of Canada
Saskatoon’s Unemployment Rate has reached its highest
levels in 2016, but is expected to remain steady over the
forecast period.
0
1
2
3
4
5
6
7
8
Ra
te (
%)
Unemployment Rate (%)
Sources: Statistics Canada, Conference Board of Canada
Saskatoon’s employment is more reliant on the resource
sector and commodity prices than say Regina’s.
0
1
2
3
4
5
6
7
8
Trends in the Unemployment RateSaskatchewan CMAs
Source: CANSIM 282-0129
Regina Saskatoon
0
1
2
3
4
5
6
7
8
2001 2004 2007 2010 2013 2016
Saskatoon Unemployment RatesAnnual vs Average (%)
Source:CANSIM 282-0129
Unemployment Rate Average Rate
Commodity
Boom
Commodity
Boom
Consumer prices will remain relatively low in 2017 but will
rise in 2018 above average due to increased economic
activity.
0.0
0.5
1.0
1.5
2.0
2.5
3.0
An
nu
al
Ch
an
ge
(%
)
Consumer Price Index (%)
Sources: Statistics Canada, Conference Board of Canada
Personal Disposable income per capita is expected to rise by
2 % in 2018, albeit lower than the 10 year average…
0
1
2
3
4
5
An
nu
al
Ch
an
ge
(%
)
Personal Disposable Income Per Person Change (%)
Sources: Canada Revenue Agency, Conference Board of Canada. Statistics Canada
which is good for consumer spending & retail sales. After
declining by 6% in 2015 retail sales will see solid growth in
2018.
0
2
4
6
8
An
nu
al
Ch
an
ge
(%
)
Retail Sales Change %
Sources: Conference Board of Canada
Despite economic pressures, population growth in the
Saskatoon region remains steady, largely due to
international immigration.
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
An
nu
al
Ch
an
ge
(%
)
Saskatoon CMA Population Growth
*At July 1st
Sources: Statistics Canada, Conference Board of Canada
International Immigration and new births will continue drive
Saskatoon’s population growth.
Sources: Statistics Canada, Conference Board of Canada
-805 -1082 -850 -1038 -763
1941 2106 2106 1500 1430
47123465
6067
3249 3048
2221
2275
2319
2506 2566
-2,000
0
2,000
4,000
6,000
8,000
10,000
12,000
2014 2015 2016 2017f 2018f
From Other Provinces From Other Sask Communities
From Other Countries Births Over Deaths
Housing Starts are expected to fall in 2017 due to soft
demand and oversupply, but will pick up in 2018.
1000
1500
2000
2500
3000
Un
its
Sources: Canada Mortgage and Housing Corporation, Conference Board of Canada
Housing Sales are anticipated to remain steady over the
forecast period, while average prices will rise slightly
315
320
325
330
335
340
345
350
0
1000
2000
3000
4000
5000
6000
7000
2013 2014 2015 2016 2017f 2018f
Avera
ge S
ale
Price $
Housin
g S
ale
s
Housing Sales (Units) vs Average Sale Price ($ x 1,000)Source: CMHC
MLS Sales Average Price
Source: Canada Mortgage and Housing Corporation
However, in the rental market vacancy rates will stay above long
run levels, while average prices for two bedroom rentals will
remain steady.
1005
1020
1035
1050
1065
1080
1095
1110
1125
0
1
2
3
4
5
6
7
8
2013 2014 2015 2016 2017f 2018f
Avera
ge R
ent
$
Vacacny
Rate
(%
)
Rental Vacancy Rate & Average RentSource: CMHC
Rental Vacancy (%) Two Bedroom Average Rent $
Source: Canada Mortgage and Housing Corporation
Given these inputs, after two years of negative growth
Saskatoon’s economy is expected to return to positive
growth.
-2
-1
0
1
2
3
4
5
An
nu
al
Ch
an
ge
(%
)
Saskatoon CMA Real GDP Growth (%)
Source: Conference Board of Canada
Despite a couple of challenging years, Saskatoon’s
economy has doubled in size 20 years
-10
0
10
20
30
40
50
60
Saskatoon GDP Growth: Cumulative Change (%)Source: Conference Board of Canada
$17.2 Billion
FORECAST RISKS
Commodity Prices
US Trade & Monetary Policies
Federal Infrastructure Investments
Provincial Fiscal Policy
Business Investment
THANK YOU FOR YOUR TIME
