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Monthly Economic Summary – March 2016

Contents

Global Overview ......................................................................................... 2

British Exit from the European Union: What does it mean? ........................................................ 2

Canadians worry a Trump presidency will jeopardize US trade relations .................................... 2

National Overview ....................................................................................... 3

2016 Federal Budget .................................................................................................................. 3

Canadian Household Debt hits Record High .............................................................................. 4

Canadian CFOs think there is a 42% chance Canada could slip into a recession ...................... 5

Canadian Economic and Financial Indicators .............................................................................. 6

Local Overview ........................................................................................... 7

Regional Business License ......................................................................................................... 7

Co-op funding supports Fraser Valley Students ......................................................................... 7

Labour Force Survey Report ....................................................................... 8

Monthly Housing Statistics .......................................................................... 9

Articles Referenced .................................................................................. 10

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Monthly Economic Summary – March 2016

The summary that is shared below is intended to capture, consolidate and highlight some of the relevant key economic articles that have been recently released from credible sources, globally, nationally and locally. Links for articles referenced are captured on the final page.

Global Overview

British Exit from the European Union: What does it mean?

February’s Economic Summary included an article related to the British exit of the European Union. Here is an update on that story. The World Economic Forum article entitled Brexit would cause a decade of uncertainty: report summarizes a recent Cabinet Office Report on the subject.

The document assesses the potential impact of the process for leaving the European Union. It argues that the negotiations involved could take over 10 years, with significant impact on the UK. The negotiations would be highly complex, with all 27 remaining member states involved, the European Commission and the European Parliament. The report’s authors argue that this would result in a period of uncertainty, with financial, economic and employment impacts.

Any withdrawal from the Union would require renegotiation on a wide range of deals, with a range of difficult issues both around this negotiation and the UK’s future relationship with the EU. The UK economy could also be hit. A potential decade of uncertainty would influence “financial markets, investment and the value of the pound”.

Canadians worry a Trump presidency will jeopardize US trade relations

While Canada currently enjoys a tightknit economic, political and social bond with its most important ally and trading partner, the recent honeymoon enjoyed by leaders of the two countries could come to a swift end when a new president takes office in January, a recent article by The Guardian explains.

Last Thursday, standing beside Prime Minister Justin Trudeau, Barack Obama referred to America’s northern neighbor as “steadfast allies and the closest of friends”. At the state dinner, Trudeau and Obama spent the evening discussing their shared vision for border security, trade and the environment.

That very same evening, Republican presidential candidates, standing on a debate stage in Florida, argued against action on climate change, promoted the need for greater border security and railed against trade deals such as the North American Free Trade Agreement.

“The US [is] by far and away our biggest trading partner,” confirmed Corinne Pohlmann, the senior vice-president of national affairs for the Canadian Federation of Independent Business (CFIB). Of CFIB’s 109,000 privately owned member companies, 50% import from and 25% export to the United States. “From a small- to medium-sized business perspective, it’s often the first place they dip into the trading pool, given that it speaks the same language, has a similar culture, and it’s a truck drive away rather than a ship or an airplane. It’s absolutely integral.”

“Certainly under Trump there’s much more danger that there’s some dramatic change in the rules of the game than under Clinton, who has been around and has experience and understands that changing the rules has dramatic consequences.”

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National Overview

Budget 2016: First Steps in the Path Forward

Justin Trudeau has released his first federal budget and below is a summary of the highlights as reported by Global Public Affairs.

Investments in infrastructure and innovation to grow the economy ($4.2 billion in 2016-17):

Investing $120 billion in infrastructure over 10 years

Announcing an Innovation Agenda

A clean growth economy ($384 million in 2016-17):

After initial investments in 2016, investments ramp up next year to $1.4 billion to accelerate investments in clean energy and technologies, including clean technology in the forestry, fisheries, mining, energy and agriculture sectors; securing a cleaner, more sustainable environment; and supporting Canada’s ecosystems and natural heritage

Canada and the World ($483 million in 2016-17):

Reviewing Canada’s international assistance policy framework to inform Budget 2017, expanding immigration and creating a new defence strategy

Open and Transparent Government ($359 million in 2016-17):

Providing better government by focusing on outcomes (implementing the results and delivery approach brought in the by the Prime Minister), strengthening the public service and reviewing spending and the tax system

Tax Fairness and a Strong Financial Sector: Improving tax compliance and enhancing tax integrity and renewing financial sector elimination Introducing specific tax measures, including:

Deferring further reductions in the small business income tax rate

Repealing the eligible capital property regime and replacing it with a new capital cost allowance class

Not proceeding with the income tax exemption, beginning in 2017, on capital gains on certain disposition of private corporation shares or real estate, where cash proceeds are donated to a registered charity

The accelerated capital cost allowance for certain liquefied natural gas facilities will expire as scheduled, consistent with Canada’s G20 commitments to eliminate fossil fuel subsides in medium term

Restoring the Labour-Sponsored Venture Capital Corporations tax credit Industry and Innovation: Budget 2016 promises that a “bold new plan” for Canada’s innovation agenda. This forthcoming plan will include a redesign and redefinition of how Canada supports innovation and will be developed in partnership with industry and other stakeholders. In the lead up to the new Innovation Agenda, several research institutes and programs are receiving investments to promote research and accelerate business, including:

$14 million over two years, to the Mitacs Globalink program to support funding in support of 825 internships

$87.2 million for Natural Resources Canada projects

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$40 million over two years, starting in 2016–17, to renew the Strategic Investments in Northern Economic Development program

$50 million over two years, starting in 2016–17, to Destination Canada to promote tourism in Canada

The budget outlines some future areas of focus to enhance innovation including: entrepreneurial citizens; science and technology, innovation infrastructure; and supportive business environment for commercialization and growth.

The Budget also contains a section on strengthening innovation networks and clusters. The government will make available up to $800 million over four years, starting in 2017–18, to support innovation networks. The government will also support the creation of a “Canadian Cluster Mapping portal” in collaboration with provinces territories, research institutions and other stakeholders. The government proposes to help “high-impact firms scale up”. This initiative aims to target 1,000 firms in the first few years and will help to provide them with coordinated, tailored, and expanded services from Innovation, Science and Economic Development Canada, the Business Development Bank of Canada, Export Development and other existing government support agencies.

Agri-Food and Consumer Goods: The Budget proposes $385 million over two years to further strengthen and modernize Canada’s food safety system. With these monies, the Canadian Food Inspection Agency is expected to bolster its systems for inspection activities, specifically for higher risk domestic and imported foods. Budget 2016 proposes to provide $30 million over six years to Agriculture and Agri-Food Canada to support advanced research in agricultural genomics. The Minister of Agriculture and Agri-Food is expected to develop an approach for additional investments in agricultural science and research later this year. The Budget also includes $41.5 million, starting in 2016–17, to support the rehabilitation and modernization of select Agriculture and Agri-Food Canada and Canadian Food Inspection Agency research capabilities.

Turning to manufacturing, Budget 2016 proposes that the Government will be eliminating tariffs on about a dozen manufacturing inputs. This initiative is expected to translate into an estimated $9 million in tariff savings over the next five years to Canadian manufacturers in the consumer goods and other sectors. Complimenting this commitment, the Government has pledged to launch public consultations on eliminating tariffs on food manufacturing ingredients other than supply-managed products, specifically those products used in the agri-food processing industry.

Canadian Household Debt hits Record High

A recent Globe and Mail article states that Canadians ended 2015 with a record-high debt burden, as low interest rates and still-soaring regional housing markets fuelled the fastest year of household debt growth since 2011.

Statistics Canada reported that the ratio of household credit-market debt to disposable income, the key measure of the debt load, rose to 165.4 per cent in the final quarter of the year, eclipsing the upwardly revised previous record of 164.5 per cent in the third quarter. That means

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that at the end of the year, households held more than $1.65 in debt for every dollar of annual disposable income.

For all of 2015, household debt rose 4.9 per cent, the fastest pace in four years, to a record $1.92-trillion. That included a 6.3-per-cent surge in mortgage debt, also the fastest since 2011, reflecting low borrowing costs and surging real estate prices in key regions, especially in Toronto and Vancouver. Disposable income, meanwhile, grew by a more modest 3 per cent.

“Interest rates have been hovering at a low level for a long time, which has played a significant role in spurring Canadians’ appetite for taking on more debt,” said Scott Hannah, chief executive officer of the Credit Counselling Society.

The Bank of Canada has long expressed concern about the elevated levels of household debt, which pose a potential risk to Canada’s financial stability in the event of a sharp economic downturn that would strain consumers’ capacity to meet their debt payments.

Canadian CFOs think there is a 42% chance Canada could slip into a recession

a Global News article states that Chief Financial Officers at Canadian corporations have a pessimistic outlook on the country’s economy and see a 42 per cent chance, on average, Canada will fall back into recession by the end of 2016.

The CFO Global Business Outlook from Duke University asked more than 1,600 execs from countries around the world about the probability of their country slipping into recession this year. The study found that Canadian CFOs think there’s 42 per cent chance of recession by the end of 2016. The survey also found employment will remain flat and business spending will increase one per cent this year.

American CFOs are slightly more optimistic with just 31 per cent thinking the American economy will be in recession by the end of the year.

“The recession outlook has worsened significantly in the last nine months,” said John Graham, a finance professor at Duke’s Fuqua School of Business and director of the survey. “Last June, the odds of recession were low in many countries, including the U.S., Canada and much of Europe. Today, driven in large part by slowing emerging economies and volatile financial markets and commodity prices, the risk is relatively high around the world.”

The executives say the slowdown in China (59 per cent), political turmoil in the U.S. (53 percent), a stock market decline (50 percent) and the price of oil (40 per cent) are the biggest risks to the economy.

The CFO survey mirrors similar polling last week which found Canadian confidence in the economy is at its lowest point in over 20 years. Ipsos polling has been tracking Canadians faith in the economy for more than two decades, and the latest poll found just 36 per cent would rate the Canadian economy as good.

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Canadian Economic and Financial Indicators

The following data has been extracted from the Economist’s Economic and Financial Indicators

tool as at Wednesday March 30, 2016.

Output and Prices

Gross domestic product, % change on a year ago

Industrial production, % change on a year ago

Consumer prices % change on a year ago

Latest Quarter 2016 2017 Latest Latest Year ago

2016

+0.5 Q4 +0.8 +1.6 +2.0 -2.2 Dec +1.4 Feb +1.0 +1.6

Trade, Exchange Rates, Budget Balances and Interest Rates

Trade balance

Current-account balance

Currency units Budget balance

Interest rates

Latest 12 months, $bn

Latest 12 months, $bn

% of GDP, 2016

Mar 29th, per $

Year ago, per $

% of GDP 2016

3-month latest

10-year government bonds, latest

-17.8 Jan -51.6 Q4 -2.9 1.32 1.26 -1.4 +0.85 1.18

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Local Overview

Regional Business License

The March issue of the Greater Vancouver Board of Trade’s Sounding Board publication details the topic of a regional business license. 13 Lower Mainland chambers of commerce have joined forces with the Greater Vancouver Board of Trade to call for an introduction of a regional inter-municipal business license.

Businesses working in multiple jurisdictions know the complex financial and administrative burden encountered when complying with the many regulations. It takes staff time, fees and constant education to keep up with the varying bylaws across the 22 municipalities across Greater Vancouver.

Over the past two years that these programs have existed, local governments are reporting increased licensing compliance, reduced administrative burden, improved information flow between local governments and increased ability to monitor compliance.

Earlier this month, members of the chamber network involved in this initiative took a survey regarding the program. More than 80% of the respondents were supportive of expanding the program. In response to this support, the Greater Vancouver Board of Trade as well as the 13 chambers of commerce will be asking their municipal Councils to implement and additional regional inter-municipal business license program.

Co-Op funding supports Fraser Valley Students

Co-op students at the University of Fraser Valley will benefit from $75,000 in one-time funding, part of a $1.3-million announcement to 16 public post-secondary institutions following the launch of Co-op Week celebrations, says a Provincial Government news release.

The funding will provide outreach to leverage more employers to the program and increase awareness of the benefits of co-op placements to potential employers and students. Co-op students have opportunities to apply their learning, gain employment-related skills, and make connections with employers, better preparing them for entry into the workforce. Employers benefit from the energy, fresh ideas, knowledge and skills of co-op students. Co-op placements also provide employers with an opportunity to assess new talent for future recruitment after graduation.

University of the Fraser Valley President Mark Evered said, "This funding will definitely be put to good use. We know our students value on-the-job learning opportunities, and that employers are keen to hire graduates with such experience. This is a great way to help match them up.”

Quick Facts:

Between now and 2024, British Columbia expects to have almost one million job openings

Approximately 42% of job openings will require college education or apprenticeship training

36% will require university and/or significant work experience 18% will require high school and/or occupation-specific training

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Labour Force Survey Report

The Labour Force Survey is a monthly survey which measures the current state of the Canadian labour market and is used, among other things, to calculate the national, provincial, territorial and regional employment and unemployment rates. The latest Labour Force Survey was released by Statistics Canada on Friday, February 5, 2016. Below is the relevant information that was released as part of this report.

Abbotsford-Mission:

Employment rate came in at 61.3% in February. This rate is higher that the Provincial (59.9%)

and the National (61.2%) rate.

The unemployment rate decreased by 0.2% February at 7.1%. The Provincial rate is 6.7% and

the National rate is 7.2%.

British Columbia:

British Columbia was the lone province with more people working in February (+14,000). This brought total employment gains to 69,000 or 3.0% on a year-over-year basis, the highest rate of growth of all the provinces. In addition, British Columbia has outpaced the national year-over-year employment growth rate since June 2015. The unemployment rate in the province was 6.6% in February, unchanged from the previous month.

Canada:

Employment was virtually unchanged in February (-2,300 or 0.0%) as gains in part-time work were offset by losses in full time. The unemployment rate rose by 0.1 percentage points for the third consecutive month, reaching 7.3% for the first time since March 2013.

Employment increased among men aged 55 and older in February, while the other demographic groups saw little change.

Employment fell in health care and social assistance, educational services, 'other services,' and natural resources. At the same time, there were more people working in construction, in business, building and other support services, as well as in agriculture.

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Monthly Housing Statistics

The Fraser Valley Real Estate Board’s Monthly Statistics Package for February 2016 indicates that February was another record-setting month for Fraser Valley real estate. In February, the Fraser Valley Real Estate Board processed 2,387 sales on its Multiple Listing Service® (MLS®), an increase of 79 percent compared to February 2015 and 78 per cent more then was processed in January. To give a historical perspective, sales in February were 46 per cent over the 10-year average for that month; and, 4 per cent higher than the previous record of 1,948 sales in February 1992. Charles Wiebe, President of the Board said of this month’s record numbers, “In my twenty-five years of real estate, I have never seen such consistent demand for housing in the Fraser Valley.” The Board received 3,283 new listings in February, an increase of 26 per cent compared to February of last year, and another record high for February. The total active inventory for February was 5,127, down 35 per cent from last year’s 7,864 active listings. Across Fraser Valley, the average number of days to sell a single family detached home in February 2016 was 21 days, compared to 41 days in February 2015. The MLS® HPI benchmark price of a Fraser Valley single family detached home in February was $714,000, an increase of 23 per cent compared to February 2015 when it was $581,400. In February, the benchmark price of townhouses was $337,300, an increase of 13.5 per cent compared to $297,200 in February 2015. The benchmark price of apartments also increased year-over-year by 11.2 per cent, going from $189,700 in February 2015 to $211,000 in February 2016.

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Articles Referenced

Global

http://www.weforum.org/agenda/2016/02/brexit-would-cause-a-decade-of-uncertainty-report?utm_content=buffer57703&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer

http://www.theguardian.com/business/2016/mar/15/trump-impact-on-canada-us-trade-relations-nafta-republicans

National

http://us3.campaign-archive2.com/?u=cd2e2c87bb7cfd6ca8070a603&id=e4d6f7e369&e=4c785d00ab

http://www.theglobeandmail.com/report-on-business/economy/canadians-debt-burden-still-growing-hits-record-in-fourth-quarter/article29172712/

http://globalnews.ca/news/2576557/canadian-cfos-think-there-is-a-42-chance-canada-could-slip-into-a-recession/

http://www.economist.com/node/21604509

Local

https://www.boardoftrade.com/news/sounding-board/read-sounding-board

https://news.gov.bc.ca/releases/2016AVED0020-000381?WT.cg_n=HootSuite

Labour Force Survey

http://www.statcan.gc.ca/daily-quotidien/160311/dq160311a-eng.htm

Housing Statistics

http://www.fvreb.bc.ca/statistics/Package%20201602.pdf