Key Comments/Government GDP GDP by sector Employment Key areas of the economy G20 Summit Government Policies Summary

1. GDP / Canada – Risks
By: Paul Young, CPA, CGA
Date: July 24, 2016

2. Disclaimer
• This presentation is on view of the key market indicators for North
America

3. Paul Young - Presenter
Bio
• CPA/CGA
• 25 years of experience in Academia, Industry and Financial solutions
• Youtube Channel -
https://www.youtube.com/channel/UCAArky1bAXPSuV2NLtUnyLg

4. Agenda
• Key Comments/Government
• GDP
• GDP by sector
• Employment
• Key areas of the economy
• G20 Summit
• Government Policies
• Summary

5. GDP/Comments – Minister of Finance
• Canada's economy should rebound "over the course of the year" from the impact of the Fort McMurray,
Alta. wildfire, Finance Minister Bill Morneau said on Saturday on the sidelines of a G20 meeting
in Chengdu, China. The fire is estimated to have cut daily oil production by more than 1 million barrels
and the Bank of Canada estimates it will shave 1.25 percentage points off economic growth in the
second quarter. "We were approximately right in our expectations in our budget," he said of Canada's
fiscal plan introduced in March, which promised growth spurred by government spending. Speaking to
reporters by telephone, Morneau said the country's growth was also challenged by global uncertainty
following Britain's vote last month to exit the European Union, but that was offset by the strong U.S.
economy. Source – CBC
• Fact 1 – Canada economy was hit harder by unforeseen events like For Mac Fire, but those numbers were not in the
government of Canada’s original government’s growth forecast
• Fact 2 – World has been in slow growth (3.0%)
• Fact 3 – USA economy is not going like gangbusters. The growth is only 1.9% for 2016. The growth is driven by
consumer spending
• Fact 4 – There are recessions in Russia and Brazil
• Fact 5 – Commodity Prices are down 25% to 35%
• Fact 6 - Japan has instituted negative interest rates and held off an increase to their consumption tax.
• Fact 7 – Federal Budget for Canada spending has yet to reach the economy. Many cases the money is for long-term
projects that will take time to get off the ground. The impact to GDP would be only .25 to .30% point to GDP
• Fact 8 – Ontario and Alberta have introduced new carbon tax/pricing that will drive up costs by 6%-8%. Household
spending like food, accommodation and transportation will be hit the hardest.

6. GDP by sector

7. employment

8. Canada’s economy -
• Retail Sales
• 2015 Retail Sales $513B
• 2016 Retail Sales $523B (Estimate)
• Merchandise Trade
• 2015 Exports $526B
• 2016 Exports $520B (estimate)
• Housing Starts
• 2015 Housing Starts 196K (units)
• 2016 Housing Starts 203K (Units)
• Government Spending
• High government debts
• Provincial Deficits
Analysis
• Consumer spending big ticket areas has been
slowed the past few months, i.e. automotive
• Home renovations seem to be driving bulk of the
consumer spending
• Commodity prices have gain some price back, but
are still off 25% to 35%
• Slow world growth means less demand for
Canada Goods and Services
• Government budgets have hurt education and
healthcare
• No new money for infrastructure like roads and
brides. The existing funding from both the gas tax
and build Canada fund were kept
• More funding for clean tech. It can take years for
the impact to show up in the GDP numbers
• Employment has seen lost of jobs in good
producing to be pickup by the service sector

9. G20 Meeting – July 2016
• The world's biggest economies will work to support global growth and
better share the benefits of trade, policymakers said on Sunday after a
meeting dominated by the impact of Britain's exit from Europe and fears of
rising protectionism. Source: CBC
• U.S. Treasury Secretary Jack Lew said he told a meeting of policymakers
from the Group of 20 economies that the United States's economy was
strong and its job market was healthy. The United States could look at fiscal
policy from a position of strength as the country's deficit had fallen, he told
a news conference after a two-day meeting of G20 central bankers and
finance ministers in China. Source: Reuters
• IMF warns G20 of need for broad based policies to ignite global growth
Source: IMF

10. Government Policies
• Interest Rates (set by various banks chairs)
• How long before rates are hiked?
• Taxation
• CPP hikes
• Carbon Tax/Pricing
• Hikes to Consumption and Provincial Sales Tax
• Spending
• Social programs
• Trade
• Expansion of Trade/FIPA Deals
• Infrastructure
• Commitment to roads and transportation
• Commitment to support exports

11. Summary
• Canada growth is projected at 1.3%
• Risks
• Lack of rebound in commodity prices
• Lack of streamlining regulations for pipelines, mines, etc.
• New Taxation, i.e. carbon pricing, CPP hikes, PST hikes, etc
• Consumer spending falls from 3.6 annual growth rate to 1.5% to 2.2% range
• Housing prices are 25-30% over value. Housing prices are growing at 8% clip which is faster than GDP growth
and Wage growth
• Exports do not expand into areas like China, India and/or emerging markets. 1/3 of exports is tied to
energy. Canada lacks the capacity to move oil via pipelines to export market.
• Fall of 2016 the new federal government will released its new oil and gas sector policy
• Trans Canada has filed lawsuit under NAFTA against USA government over the keystone pipeline
• Capital investment in Alberta has dropped by 25-30%.
• Manufacturing upside has been driven by three sectors: 1. Automotive 2. Food Production 3. Forestry.
• Forestry softwood lumber deal has expired . No new deal has been signed. The grace period expires October
2016
• Food Processing has grown, but could see issues as drought conditions exist in parts of Canada.
• Automotive started 2016 with bang, but has slowly fizzle out over the past few months.
• New taxation or increase to hydro rates or other policies could impact manufacturers, especially with cost
increases. The cost increases can impact manufacturers being cost competitive.