Monthly Economic Monitor - National Bank of Canada

[Pages:15]

South Africa: The Omicron variant brings a resurgence of cases

Daily new Covid-19 infections, 7-day moving average

22,000 Cases

20,000

18,000

16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0

2020Q2

2020Q3

2020Q4

NBF Economics and Strategy (data from Our World in Data)

2021Q1

2021Q2

2021Q3

2021Q4 2022Q1

World: Much work to do to combat Omicron

Percentages of world population having received one, two and three doses of COVID-19

60 %

Up to 2021Q1

50

Up to 2021Q2

Up to 2021Q3

40

At present

30

20

10

0 1st dose

NBF Economics and Strategy (data from Our World in Data)

2nd dose

Booster dose

Eurozone: Inflation headaches...

Harmonized consumer price index

5.0 % y/y

4.5

4.0

All-items

4.9%

3.5

3.0

2.5

Core

2.6%

2.0

1.5

1.0

0.5

0.0

-0.5

-1.0 2005

2010

2015

2020

NBF Economics and Strategy (Bloomberg data)

Producer price index

24 % y/y

20

16

12

8

4

0

-4

-8

-12

1990

2000

2010

21.9% 2020

... together with scarcities of labour and equipment

Factors limiting manufacturing output

64 % of respondents reporting this factor

60

56

52

48

44

40

36

32

28

24

20

16

12

8

4

0 1995

2000

2005

2010

2015

NBF Economics and Strategy (data from European Commission Business & Consumer Survey)

Scarcity of inputs / equipment

Scarcity of labour

Insufficient demand

2020

2025

World: Price rises not limited to developed economies

Median 12-month inflation

5.6

% y/y 5.2

4.8

4.4

4.0

3.6

3.2

2.8

2.4

2.0

1.6

1.2

0.8

0.4

0.0 2017

2018

NBF Economics and Strategy (OECD data)

2019

2020

Emerging economies

Developed economies

2021

2022

Emerging countries: Surprisingly vigorous inflation ...

Citi Inflation Surprise Index (emerging economies) and FAO Food Price Index

Index

40 30 20 10

0 -10

Food prices (R) Inflation surprises (L)

140 Index

130 120 110 100 90 80 70 60 50 40

-20

-30 2000 2002 2004 2006

NBF Economics and Strategy (OECD data)

2008

2010

2012

2014

2016

2018

2020

2022

... exacerbated by currency depreciation

JP Morgan Emerging Market Currency Index

74 Index

72

70

68

66

64

62

60

58

56

54

52

50 2015

2016

2017

NBF Economics and Strategy (Bloomberg data)

2018

2019

2020

2021

2022

Emerging countries: Sharply rising debt ...

Change in debt as % of GDP, contribution by sector

Debt as % of 2020 GDP, by sector

MEX

Businesses IDN

MYS

Households

ZAF

Governments

COL

THA

CHL SAU

RUS

IND

BRA

TUR CHN ARG

% of 2020 GDP

-10

10

30

50

70

NBF Economics and Strategy (OECD data)

IDN MEX SAU RUS COL TUR ARG ZAF THA IND BRA CHL MYS CHN

0

Businesses Households Governments

% of 2020 GDP

100

200

300

400

China: Easing of monetary policy in store?

Mandatory bank reserve ratios

21 %

20 19 18 17 16 15 14 13 12 11 10

9 8 7 6 5

2013

2014

2015

2016

NBF Economics and Strategy (Bloomberg data)

2017

2018

2019

Large banks Small banks

Rural commercial

banks

2020

2021 2022

... and tightening of monetary policy

Change in policy rates, selected emerging economies

6

%

5

From December 2019 to May 2021

From June 2021 to now

4

3

2

1

0

-1

-2

-3

-4

MEX

ZAF

COL

IDN

RUS

CHL

ROU

IND

BRA

NBF Economics and Strategy (OECD data)

U.S.: Inflation at a 40-year high

Consumer Price Index, headline and core

10 % y/y

9

8

7

6

5 Core

4

3

2

1

0

-1

-2

-3 1985

1990

1995

NBF Economics and Strategy (data from Refinitiv)

2000

Headline

2005

2010

2015

6.8% 4.9%

2020

2025

U.S.: Core inflation continues to accelerate

Median CPI and 16% Trimmed Mean CPI, % monthly change

.8 % m/m

.7

.6

Trimmed

Mean CPI

.5

.4 Median CPI

.3

.2

.1

.0

-.1 1990

2000

2010

2020

NBF Economics and Strategy (data from Cleveland Fed)

Median CPI and 16% Trimmed Mean CPI, % 12-month change

5.6 % y/y

5.2

4.8

4.4

4.0

Trimmed

Mean CPI 3.6

3.2 Median CPI

2.8

2.4

2.0

1.6

1.2

0.8

0.4 1985 1990 1995 2000 2005 2010 2015 2020 2025

U.S.: A surge of prices way out of the ordinary

Deviation of 12-month all-items inflation from 10-year average

5 Standard deviations

4

3

2

1

0

-1

-2

-3

-4

1930

1940

1950

1960

1970

1980

NBF Economics and Strategy (data from Bloomberg and FRED St. Louis)

1990

2000

2010

2020

U.S.: Inflation tensions palpable in NFIB survey

Net % of businesses saying inflation is their most pressing problem and net % who have raised prices

%

22 20 18 16 14 12 10

8 6 4 2 0

2002 2004 2006 2008 NBF Economics and Strategy (data from Refinitiv)

2010

Net % who have raised their selling prices (R)

Net % saying inflation is their most pressing problem)

2012 2014 2016 2018 2020

60 %

50 40 30 20 10 0 -10 -20 -30

2022

U.S.: Inflation expectations on the rise

Inflation expectations for the next year and for the next three years, New York Fed survey

6.0 %

5.6

5.7%

5.2

4.8

4.4 4.2%

4.0

3.6

3.2

1 year

2.8

3 years

2.4

Inflation expectations for the next year and for the next 5 to 10 years, U Michigan survey

5.5 %

5.0

4.5

1 year

4.8%

4.0

3.5

3.0

2.9%

2.5

2.0 5-10 years

1.5

1.0

0.5

2.0 2014

2016

2018

2020

0.0 2022

NBF Economics and Strategy (data from Bloomberg and New York Fed)

2000

2005

2010

2015

2020

U.S.: Households in very good shape

Real disposable income, 2008-09 and today

32 % change from previous peak

28

24

20

2008/09

16

2020/21

12

8

4

0

-4

-8

Months since previous peak

0

5

10

15

20

25

30

35

NBF Economics and Strategy (data from Bloomberg and Refinitiv)

Deposits in commercial banks

18,000 17,000

US$ billion

16,000

15,000

14,000

13,000

12,000

11,000

10,000

9,000

8,000

7,000

6,000

5,000

2010

2015

2020

U.S.: Inflation is sapping consumer morale

University of Michigan Consumer Confidence Index

105 Index

100

95

90

85

80

75

70 Lowest in 10 years

65

60

55

50 2005

2010

2015

2020

NBF Economics and Strategy (data from Bloomberg)

% of respondents who see their income gains exceeding inflation over the next 12-24 months

28 %, 3-month moving average

26

24

22

20

18

16

14

12

10

8 2005

2010

2015

2020

U.S.: Labour market recovery continues ...

U-6 unemployment rate vs. employment rate

%

U-6 unemployment rate (R)

64

62

60

58 Employment rate (L)

56

54

52

50 2006

2008

2010

2012

NBF Economics and Strategy (data from Refinitiv)

2014

2016

2018

24 % 22

20

18

16

14

12

10

8

+1.0%

6

-1.9%

2020

2022

... and workers are benefiting from labour scarcity

Quit rate

Median growth of hourly wage

3.2 %

3.0

2.8

2.6

2.4

2.2

2.0

1.8

1.6

1.4

1.2

1.0

2005

2010

2015

2020

NBF Economics and Strategy (data from Refinitiv and Atlanta Fed)

6.5 %

6.0 5.5 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5

2000

2005

2010

Workers changing

jobs

Total

Workers staying in same job

2015

2020

U.S.: Could debt derail the recovery?

Household debt Last observation 2021q3

112 2019q4 = 100

108

Residential

104 Other

100

96

92

Share of new mortgage loans going to the most solvent borrowers (credit rating 760 or higher)

75 70 65 60 55 50 45 40

88

84

80 2019

Credit card

2020

2021

NBF Economics and Strategy (data from New York Fed)

35

30

25

20 2005

2010

2015

2020

Canada : An enviable recovery in nominal terms

Gross domestic product: Q3 quarterly growth and % change from pre-pandemic peak (2019Q4)

2021Q3 annualized quarterly growth FR IT DE CA UK US JP 14

12

10

Change from 2019Q4

US CA DE UK FR IT JP 8

Nominal

6

Real

8

4

6 2

4

2

0

0 -2

%

-4

NBF Economics and Strategy (data via Refinitiv)

-2

%

-4

Canada: Hardest-hit sectors surged in Q3

Volume household expenditures on services

105 2019Q4 = 100

100

95

90

85

80

75

70

65

60

55

50

45

40 2019Q4

2020Q1

2020Q2

2020Q3

NBF Economics and Strategy (data via Statistics Canada)

2020Q4

2021Q1

Services ex Covid-hit sectors

Services

Covid-damaged sectors: Transport, recreational, culture, food, accommodation

2021Q2 2021Q3 2021Q4

Canada: Is consumption at risk without generous Covid-19 programs?

Disposable income and disposable income excluding government COVID-19 support (annualized)*

1,500 $ billion

1,450 1,400 1,350

* Cost of programs from 2020Q1 to 2021Q3

Canada Emergency Wage Subsidy ($98.4 B) Canada Emergency Response Benefit ($74.5 B) Canada Recovery Benefit ($25.0 B) Canada Emergency Student Benefit ($2.9 B) Canada Recovery Caregiving Benefit ($3.4 B) Canada Recovery Sickness Benefit ($0.7 B)

1,300

1,250

Disposable income

Trend

Disposable income excluding government Covid-19 support

1,200

1,150

1,100

2016

2017

2018

NBF Economics and Strategy (data via Statistics Canada)

2019

2020

2021

2022

Canada: Savings not disproportionately concentrated among the rich

Distribution by income quintile of excess savings since 2019, as of 2021Q2 (% of total)

Average household disposable income: $183,000

29.8

Average household disposable income: $30,000

11.6 Average household disposable income: $58,000

14.7

19.3

Average household

24.6

disposable income:

$80,000

Lowest Second Third Fourth Highest NBF Economics and Strategy (data via Statistics Canada 36-10-0587-01 and 36-10-0662-01)

Average household disposable income: $80,000

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