Economic Summit 2014
Each year the top economists in Canada provide their predictions for the year. We attended the event early on January 7th, 2014.
The overall consensus is that the world is still improving.
Equity markets will increase in 2014, but not by as much as 2013. Canadian equities may increase more than global equities. European equities will increase in 2014 by more than 2013.
The $US will increase against most currencies.
Interest rates are not likely to increase until 2015.
Inflation numbers will stay low in 2014.
Each of the big 5 banks sent their Chief Economist & BNP Paribas again joined the event.
Derek Burleton, Deputy Chief Economist, TD Bank Financial Group, summarized an overall view.
Derek says that 2014 will be better than 2013 with the US being the big driver. He predicts the Canadian dollar will hit $US 0.90 or high 80s. Inflation numbers globally will be very low. A gradual increase could increase 10 year bond yields to 3.1 to 3.6% for the end of 2014. Commodity forecasts are mixed with gold going down more and oil prices from $90 to $95.He expects stable housing prices in Canada and 2.2% to 2.6% GDP in Canada.
Warren Jestin, Chief Economist, Scotiabank, discussed global markets.
Warren predicts good news globally. Europe is picking up 1% or more.US expansion will be 3% or more. China’s growth will slow down to around 7% (from previous 10% average). China is the biggest market in the world for cars and therefore needs the most commodities. China is also a top spot for global tourism dollars. The emerging markets will have growth of over 3%.
Avery Shenfeld, Chief Economist, CIBC World Markets, discussed financial markets.
Avery thinks the Canadian stock market will outperform in 2014. The Canadian market does better when global growth is strong. He expects strong global growth to increase natural gas prices and keep oil prices firm. He expects interest rates in Canada to stay low. 10 year bond rates may get to 3.25% in 2014 and then 3.5% in 2015. He expects the price of gold to continue downward. The Canadian dollar will fall to US$0.90 but may recover to US$0.98 by year end.
Craig Wright, Chief Economist, RBC Financial Group, discussed the U.S. outlook.
Craig expects US GDP growth of 2.5 to 3%. Interest rates will remain low in 2014. The housing market will continue to get better. Corporate balance sheets are in good shape and new investment will increase by 5%. The balance sheets of consumers are also continuing to improve which will increase spending by 4%. The US outlook is also good because the Eurozone has contained the crisis and there will be decent growth in China.
Douglas Porter, Deputy Chief Economist, BMO Capital Markets, discussed the Canadian outlook.
Doug expects GDP growth of 2.3% in 2014. The US and global economy improvement is good news for Canada. Canadian home and auto sales will not be growing, so Canada will be dependent on global growth. There won’t be any interest rate increases in 2014, probably not until later in 2015. He expects house prices to rise by 2% in Toronto in 2014. He expects the Canadian dollar to be at US$0.91 at the end of 2014.
Julia Coronado, Chief Economist, BNP Paribas, discussed the European outlook.
Julia predicts 1% growth in Europe in 2014, but that is an average. Germany will be the star with 1.7% growth. France will have labour market reforms and 0.7% growth. Spain will be at 0.8% growth and Italy at 0.3% growth. Portugal will stay in recession during 2014. She expects 2014 to be better than 2013 in Europe. The good news is that the Eurozone has resolved to stop any breakup. Some regions still face enormous structural and cyclical challenges. She expects another rate cut in Europe.
How did their 2013 predictions work out?
You be the judge click here to read their 2013 predictions.
Here is our quick recap on how they did in 2013:
Last year they all expected US to be the driver in the recovery, with the best equity growth, which turned out to be very accurate.
Inflation was lower than expected.
Markets improved more than expected.
Interest rates stayed lower than expected.