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Global Economic Research

February 28, 2013

Global Forecast Update


Later Expectations
Expect Slow Global Growth Now ... Output gains remain sub-par throughout much of the world. The performance reflects the restraint imposed by fiscal consolidation, household deleveraging and cautious business spending in most advanced nations, still sluggish global trade, as well as the structural adjustments required to boost competitiveness internationally. The U.S., China and a handful of nations in the Asia-Pacific and Latin America regions are rebuilding gradual momentum, although a stronger and broader global recovery should become more apparent later this year and through 2014.
Index Overview Forecasts International Commodities North America Provincial Financial Markets 1-2 3-4 4 5 6 7-8

The euro zone remains in the grip of its austerity-led recession, though in some of the hardest-hit peripheral countries progress is being made on budgets and labour competitiveness. Nevertheless, progress towards rebooting growth is hindered by exceptionally high unemployment throughout the southern peripheral nations, in addition to evolving political issues surrounding elections, as well as economic adjustment and debt management policies. While Germany's export- and manufacturing-sensitive economy is expected to gear up alongside the revival in activity in the emerging market economies and the U.S., the recent strengthening trend in the euro will create additional drag. France faces a year of increasing fiscal restraint and corporate restructuring that will undercut growth. The U.K. economy continues to languish in response to reduced cross-Channel trade and ongoing budgetary restraint, despite moderate job gains and some resumption in industrial activity. Nevertheless, developing regional economies such as Poland and the Czech Republic are performing better. The Japanese economy has stagnated again, weighed down by the recent softening in global trade that has been exacerbated by increasing political friction with China, and a fall-off in reconstruction-related activity. However, the new government has introduced more stimulative fiscal measures and advocated a more accommodative monetary policy in support of stronger growth and an end to deflation. The sharply weaker yen of the past half year will help revive export earnings and output growth, as reflected in the buoyancy of Japans equity markets. The North American economies are posting moderate growth, though the pace of activity around the turn of the year has been weak and uneven. In the U.S., increased taxes and additional spending restraint, alongside rising gasoline pump prices, are reinforcing consumer and business spending caution. These factors have partially offset the positive momentum generated by the upturn in housing activity, the revival in manufacturing and oil & gas output, and the improving trend in job creation. Rising capital goods orders point to improving industrial activity, notwithstanding the dampening in shipments caused by the temporary production delays in the aerospace sector. The competitiveness of U.S. industry is being boosted by comparatively low wage costs, solid productivity gains, and a U.S. dollar still supportive of expanded exports. Canadian growth has continued to slow, with output gains now consistently below U.S. trends. The persistent softening in export volumes, as well as the fall-off in earnings largely attributable to the deep oil price discount on Western Canadian Select heavy oil, are dragging on growth with imports still running at a faster rate. Moreover, domestic spending has also decelerated alongside the softening in house sales and residential construction, ongoing public sector restraint, and reduced consumer purchases as households increasingly focus on lowering their high debt levels. Expectations for a renewed strengthening in U.S. growth later this year and next should continue to buoy manufacturing and export prospects, particularly for lumber, minerals, energy, petrochemical and transportation-related products. Export earnings will get a slight boost from the Canadian dollar which is now trading slightly below parity with the U.S. currency. Nonetheless, Canadian output growth will likely lag developments in the U.S. by about half a percentage point both this year and next. In contrast, Mexico remains a relative outperformer because of its expanding trade, both to its NAFTA partners, and increasing ties with the faster growing economies in Latin America. The country continues to build upon its competitive strengths sizeable and highly efficient manufacturing investments, lower labour and other production costs, and geographic proximity to the U.S. to bolster shipments and exports. Economic reforms, particularly on the tax and energy fronts, under the new government should help support this advantage, as will expanded upgrades to its oil-generating capabilities over the medium term.
Global Forecast Update is available on: www.scotiabank.com, Bloomberg at SCOE and Reuters at SM1C

Global Economic Research

February 28, 2013

Global Forecast Update


Chile, Peru and Colombia are posting solid economic gains, bolstered by expanded activity and investments in the mining and energy sectors. Brazil continues to underperform, with consumer and business spending remaining modest, though rising infrastructure investments in advance of the World Cup and the Olympics will provide a much-needed lift to growth going forward. Chinas economy is also generating increased momentum, with rising domestic spending reflecting the focus of the country's new leadership leading the way. Households are increasing expenditures on consumer products, in addition to autos and homes, with incomes supported by rising wage gains. Purchasing managers report that industrial and service output continue to advance, bolstered by a strengthening in building activity and renewed trade-related gains. Chinese equity and currency markets imply a renewed sense of optimism by investors over medium-term prospects. Thailands output has revved up on the back of expanded motor vehicle production to meet growing export orders, while South Korea continues to benefit from its expanding, albeit slower paced exports of auto and technology products. Indias growth profile is stuck in comparatively low gear, bogged down by an inadequate infrastructure in need of significant upgrading, and its twin deficit position. Structural economic adjustments will also help to support improved domestic-led growth, though the pace of change is still relatively slow. ... And Faster Global Growth Later. Many countries and regions redressing their significant deficits and debt burdens, especially among the advanced nations, have relied on multi-year spending restraint to help rein in their imbalances. In the hardest-hit nations, deep expenditure cuts have become the norm. But progress has been slow, in part because economic activity has been unable to generate the added revenue growth that could fast-track the restructuring process, and help support the structural changes required to address debt sustainability challenges. Nor are revenues sufficient to meet the challenges of the longer-term unemployed, rising health, education and social assistance costs, increasing unfunded pension liabilities, and advancing infrastructure and environmental requirements. The need for stronger global growth will only intensify in this environment, especially if austerity-fatigue continues to reshape the voting public among the more advanced nations. At present, policymakers are relying more on increased monetary accommodation to stabilize conditions and promote stronger growth, though they may well have to refocus their priorities on implementing tax reform and other incentives to encourage business investment and spending. In many nations, historically low short-term borrowing costs are being supplemented by non-conventional monetary measures to induce borrowing to buy and refinancing activity to bolster cash flows. This has been led by the U.S. and Japan, and closely followed by the U.K., with the amount and duration of quantitative easing (that is, the large-scale asset purchases by major central banks) steadily increased, and no end is in sight. For the time being, the euro zone's bond-buying plan has yet to be tapped. More recently, Japan has announced that it will ramp up its asset purchases in a bid to escape from its chronic underperformance. The more stimulative thrust of public policy has already led to a sharp weakening in the yen, a development that should go a long way towards reviving export earnings and resuscitating business spending. Other countries may well follow suit, implementing more accommodative policies that indirectly lead to weaker exchange rates, and a temporary boost to domestic competitiveness. Reflationary efforts internationally should produce some renewed economic traction as the year progresses, notwithstanding the challenges presented by ongoing deleveraging and restructuring in debt-heavy countries and regions, and ever-present geopolitical risks. Pressure will continue to mount on the larger and mainly Asian emerging market economies to promote stronger domestic-led growth in a bid to further rebalance international trade and economic activity through both monetary and fiscal initiatives. Latin America is more advanced on this front. Both Canada and the U.S. are pursuing expanded trade relationships with the EU and through the Trans-Pacific Partnership to boost their longer-term prospects, as much larger and more diversified markets are essential to maximize export earnings. Growth in the volume of world trade in goods and services has consistently outpaced real output gains over the past thirty years, a reflection of the succession of trade-liberalizing agreements and the development of the emerging market powerhouses. World trade volumes progressively slowed in 2011 and 2012 after the sharp post-recession recovery in 2010, moving lower in conjunction with the moderation in global output growth. However, more stimulative policy in both the advanced and emerging market economies easier monetary conditions and an increasing focus in infrastructure investments should reinforce a further gradual strengthening in the pace of economic growth and world trade.

Global Economic Research

February 28, 2013

Global Forecast Update

International
Re al GDP World (based on purchasing power parity) Canada United States Mexico United Kingdom Euro zone Germany France Italy Spain Greece Portugal Ireland Russia China India Japan South Korea Indonesia Australia T hailand Brazil Colombia Peru Chile Consum e r Price s Canada United States Mexico United Kingdom Euro zone Germany France Italy Spain Greece Portugal Ireland Russia China India Japan South Korea Indonesia Australia T hailand Brazil Colombia Peru Chile

2000-11

2012e

2013f

2014f

Forecast Changes
International

(annual % change) 3.7 2.2 1.8 2.2 1.9 1.4 1.4 1.4 0.7 1.9 1.6 0.8 3.3 5.3 9.4 7.4 0.8 4.5 5.3 3.0 4.0 3.6 4.4 5.6 4.8 3.1 1.9 2.2 4.0 0.2 -0.5 0.9 0.0 -2.2 -1.4 -6.4 -3.2 0.2 3.4 7.8 5.1 1.9 2.0 6.2 3.5 6.5 1.0 3.7 6.3 5.6 3.2 1.6 2.0 3.6 0.9 -0.3 0.5 -0.1 -1.2 -1.7 -4.3 -2.2 1.0 3.5 8.1 6.0 0.8 2.8 6.3 2.6 4.5 3.3 4.1 6.0 5.0 3.8 2.4 2.7 3.9 1.4 1.0 1.3 0.9 0.6 0.3 -0.9 0.3 2.0 3.9 8.3 6.5 1.4 3.5 6.5 3.1 4.2 4.0 5.0 5.5 5.5

We are revising lower our 2013 growth forecasts for the euro area on account of the carry-over from weaker GDP results in the fourth quarter of 2012. We now expect the aggregate euro zone economy to contract by 0.3% this year (versus -0.2% last month). Nonetheless, we remain of the view that the October-December period was the low point of the current cycle, and though the recession will likely persist, a gradual recovery will emerge by mid-year. The renewed growth should be supported by improved activity in Asia and the U.S., policy accommodation from the European Central Bank and, possibly, a less constrictive fiscal stance in some euro area member states. Our 2014 GDP forecast remains at 1.0%. Recent euro strength is dampening price pressures and we have consequently lowered our yearend inflation forecasts. An upward revision to the firstand second-quarter GDP estimates in the United Kingdom lifted the overall 2012 growth figure to 0.2% (from 0% previously). Current conditions, however, remain weak following a 0.3% q/q contraction in the fourth quarter (notwithstanding continued vigor in the labour market). We maintain our previous growth projections for 2013-14. The British pound has depreciated sharply and the possibility of further quantitative easing has increased, through an expansion of the Bank of Englands asset purchase program, sometime in the next few months. South American growth dynamics have diverged. While Chile and Peru maintain a solid economic performance supported by elevated commodity prices, Chinas rebound, and strong local demand Colombias economy continues to decelerate, prompting the central bank to ease monetary conditions, and maintain a strong interventionist policy in the currency market. Brazils mild pick-up in output is expected to speed up in the months ahead.

(y/y % change, year-end) 2.1 2.5 4.8 2.3 2.1 1.7 1.9 2.4 2.9 3.3 2.6 2.2 12.2 2.4 6.6 -0.3 3.2 8.3 3.1 2.6 6.6 5.6 2.6 3.4 0.9 1.9 3.6 2.7 2.2 2.0 1.5 2.6 3.0 0.3 2.1 1.7 6.6 2.5 7.2 -0.1 1.4 4.3 2.2 3.6 5.8 2.4 2.6 1.5 1.7 2.0 3.8 2.9 1.7 2.0 1.6 2.0 1.6 0.2 0.7 1.0 6.4 3.3 7.0 0.7 2.7 5.5 2.8 3.1 5.8 3.0 3.0 3.1 2.0 2.0 3.8 2.4 1.7 2.0 1.7 1.6 1.4 0.6 1.4 1.8 6.1 3.9 6.1 0.9 3.0 5.9 3.0 3.3 5.5 3.5 3.0 3.3

Global Economic Research

February 28, 2013

Global Forecast Update

International
Curre nt Account Balance Canada United States Mexico United Kingdom Euro zone Germany France Italy Spain Greece Portugal Ireland Russia China India Japan South Korea Indonesia Australia T hailand Brazil Colombia Peru Chile

2000-11

2012e

2013f

2014f

Forecast Changes
International

(% of GDP) 0.4 -4.4 -1.2 -2.0 -0.2 3.9 -0.2 -1.4 -5.7 -8.8 -9.7 -1.7 8.6 4.7 -1.0 3.2 2.3 2.1 -4.3 3.2 -1.0 -1.7 -1.0 0.6 -3.9 -3.0 -1.0 -3.2 1.0 6.3 -2.4 -1.0 -0.7 -2.8 -1.5 2.5 4.3 2.6 -4.3 1.0 3.7 -2.8 -3.6 0.7 -3.1 -3.0 -3.8 -3.0 -3.5 -2.7 -1.3 -2.4 0.4 5.4 -1.9 -1.2 -1.0 -2.9 -1.3 3.2 3.7 2.6 -3.9 1.1 3.2 -2.5 -3.7 1.1 -3.1 -3.1 -3.9 -3.7 -3.0 -2.8 -2.0 -1.8 0.5 5.1 -1.7 -1.0 -0.7 -1.6 -0.6 3.5 2.4 2.7 -3.6 1.5 3.3 -2.4 -3.2 1.4 -3.0 -4.0 -3.0 -4.6

We have revised our 2014 real GDP growth forecast for Japan upwards from 1.2% to 1.4% on the back of the substantial depreciation of the Japanese yen that should support the countrys export sector. Moreover, Japanese policymakers remain committed to bringing the economy back to a positive growth trajectory through aggressive fiscal and monetary stimulus measures. In the context of the weaker yen and very accommodative monetary policy, we have revised our inflation forecasts for Japan upwards, expecting that consumer price gains will be close to 1% y/y by end-2014. Thailands economy remains robust. Real GDP increased by 3.6% q/q (seasonally adjusted, non-annualized) and by 18.9% y/y in Q4 2012, lifting the overall economic expansion to 6.5% last year. The strong growth momentum will have positive spillover effects on 2013 gains. Accordingly, we have revised our 2013 real GDP growth forecast for Thailand from 4.0% to 4.5%.

Commodities
(annual average) WT I Oil (US$/bbl) Brent Oil (US$/bbl) Nymex Natural Gas (US$/mmbtu) Copper (US$/lb) Zinc (US$/lb) Nickel (US$/lb) Gold, London PM Fix (US$/oz) Pulp (US$/tonne) Newsprint (US$/tonne) Lumber (US$/mfbm) 57 58 5.67 2.10 0.77 7.62 668 718 581 272 94 112 2.83 3.61 0.88 7.95 1,670 872 640 298 94 112 3.75 3.54 1.00 8.25 1,690 910 625 360 96 112 4.00 3.15 1.15 8.50 1,650 950 660 400

Commodities

World GDP
6 5 4 3 2 1 Average: 19802011 annual % change Scotiabank forecast

Commodity Price Trends


900 800 700 600 500 400 300 200 Natural Gas Nickel WTI Oil Copper Index:2002Q1=100

Scotiabanks Commodity Price Index began 2013 on a stronger note, advancing by 3.8% m/m. Investor appetite for riskier assets such as commodities & equities improved alongside the pick-up in Chinas economy. Spot iron ore prices in China (of interest to Labrador producers) have strengthened markedly, with Chinas steel production picking up and iron ore being re-stocked. Lumber & OSB prices also continue to climb across North America, approaching the peaks posted in 2004-05. However, overall market conditions remain skittish, with some industrial commodity prices easing back in mid-February on renewed jitters over euro zone prospects and U.S. fiscal challenges. Leadership within precious metals appears to be shifting from gold to the PGMs (especially palladium). The international palladium market swung from surplus into deficit in 2012, due to lower sales of Russian state stocks and higher auto-catalyst demand. The deficit should widen further in 2013.

0 -1 00 02 04 06 08 10 12 14

100 Gold 0 02 03 04 05 06 07 08 09 10 11 12

Source: IMF, Scotiabank Economics.

Source: Bloomberg, Scotiabank Economics.

Global Economic Research

February 28, 2013

Global Forecast Update

North America
Canada Real GDP Consumer Spending Residential Investment Business Investment Government Exports Imports Nominal GDP GDP Deflator Consumer Price Index Core CPI Pre-T ax Corporate Profits Employment thousands of jobs Unemployment Rate (%) Current Account Balance (C$ bn.) Merchandise T rade Balance (C$ bn.) Federal Budget Balance (C$ bn.) per cent of GDP Housing Starts (thousands) Motor Vehicle Sales (thousands) Motor Vehicle Production (thousands) Industrial Production Unite d State s Real GDP Consumer Spending Residential Investment Business Investment Government Exports Imports Nominal GDP GDP Deflator Consumer Price Index Core CPI Pre-T ax Corporate Profits Employment millions of jobs Unemployment Rate (%) Current Account Balance (US$ bn.) Merchandise T rade Balance (US$ bn.) Federal Budget Balance (US$ bn.) per cent of GDP Housing Starts (millions) Motor Vehicle Sales (millions) Motor Vehicle Production (millions) Industrial Production Me x ico Real GDP Consumer Price Index (year-end) Unemployment Rate (%) Current Account Balance (US$ bn.) Merchandise T rade Balance (US$ bn.) Industrial Production

2000-11

2012e

2013f

2014f

Forecast Changes
Canada & United States

(annual % change) 2.2 3.1 4.2 3.0 3.4 0.2 3.3 4.7 2.5 2.1 1.8 5.5 1.5 242 7.1 1.5 41.0 -1.2 0.0 200 1,588 2,447 0.0 1.9 2.0 5.3 4.9 -0.9 1.2 2.4 3.3 1.3 1.5 1.7 -2.0 1.2 203 7.2 -70.9 -11.6 -25.0 -1.4 215 1,677 2,464 0.6 1.6 2.0 -4.6 5.3 -0.3 1.6 1.7 3.0 1.5 1.1 1.3 1.0 1.1 192 7.1 -66.0 -8.5 -18.0 -1.0 175 1,690 2,600 1.8 2.4 2.3 -3.1 6.3 -0.3 5.7 3.8 4.2 1.8 2.0 1.8 6.0 1.1 202 6.9 -57.8 1.0 -10.5 -0.5 170 1,695 2,650 3.3

We have trimmed our forecast for Canadian GDP growth in 2013 from 1.7% to 1.6%. The revision primarily reflects a weaker-thanexpected hand-off from the latter months of last year. Activity is being held back by a more cautious consumer, a slowing housing market and ongoing fiscal restraint. We continue to expect a stronger recovery to take hold later in the year and into 2014, with strengthening U.S. and global growth supporting a stronger trajectory for exports and business investment. Our forecast for U.S. output growth in 2013 has been raised slightly, from 1.9% to 2.0%. Strengthening consumer and housing activity and a more positive investment outlook are helping to compensate for federal expenditure restraint. A slightly narrower U.S. federal deficit is now projected for fiscal 2013, though uncertainty remains elevated from the impending federal sequester and the potential policy response as this springs other fiscal deadlines approach. In Canada, central to the upcoming federal Budget for fiscal 2013-14 will be expenditure restraint, given the constrained revenue growth anticipated from the relatively modest output and price increases projected for 2013.

1.8 2.2 -4.6 1.2 1.7 4.1 3.5 4.1 2.2 2.5 2.0 6.5 0.2 0.20 6.2 -553 -642 -481 -3.4 1.38 15.2 10.4 0.5

2.2 1.9 12.1 7.7 -1.7 3.3 2.4 4.0 1.8 2.1 2.1 6.5 1.7 2.24 8.1 -470 -734 -1,089 -6.9 0.78 14.4 10.3 3.7

2.0 2.0 14.1 4.1 -1.3 2.3 1.3 3.8 1.7 1.9 1.8 5.0 1.5 2.03 7.6 -445 -737 -930 -5.7 1.00 15.5 10.9 2.8

2.7 2.7 14.6 5.6 -0.8 4.9 5.0 4.7 1.9 2.1 2.0 7.5 1.8 2.43 7.1 -471 -787 -800 -4.7 1.15 16.0 11.3 3.6

Mexico

With inflation in Mexico decelerating from 3.6% y/y in December to 3.3% in January combined with more dovish central bank rhetoric, we now anticipate that monetary authorities will cut the reference rate by 50 basis points to 4.0% by mid-year, without entering into an extensive easing cycle. We expect the Mexican peso to weaken slightly to 12.9 against the U.S. dollar by the end of the year.

2.2 4.8 3.8 -10.3 -7.5 1.6

4.0 3.6 5.0 -7.3 0.1 3.6

3.6 3.8 4.7 -16.6 -9.4 3.5

3.9 3.8 4.3 -28.5 -14.9 3.9

Global Economic Research

February 28, 2013

Global Forecast Update

Provincial Provincial

2000-11 2012e 2000-11 2012e 2013f 2013f 2014f 2014f Real RealGDP GDP (annual % change) (annual % change)

2000-11 2000-11

2012e 2013f 2013f 2014f 2014f 2012e

Forecast Changes
Provinces

BudgetBalances*, Balances*, FY 31 Budget FY March March 31


($millions) ($ millions)

Canada Canada

2.2 3.1 1.9 1.7 1.8 1.9 1.9 2.2 2.2 3.0 2.6

1.9 1.0 1.1 1.1 0.8 0.9 2.0 2.0 3.1 3.4 2.0

1.6 3.0 1.0 1.4 0.9 1.2 1.5 1.8 2.5 2.6 1.5

2.4 2.0 1.7 2.1 1.7 2.1 2.1 2.2 2.9 3.1 2.6

106 133 -32 70 -77 -623 -3,374 189 ** 393 3,627 540

-26,220 -25,000 -18,000 883 -78 -248 -261 -726 -80 -277 -411 n.a. n.a. n.a. n.a. 0 n.a. n.a. n.a. n.a. 197

Newfoundland & Labrador Newfoundland & Labrador Prince Edward Prince Edward IslandIsland Nova Scotia Nova Scotia New Brunswick New Brunswick Quebec Quebec Ontario Ontario Manitoba Manitoba Saskatchewan Saskatchewan Alberta Alberta British Columbia British Columbia

-2,628 -1,500 -12,969 -11,859 -999 352 0 -1,840 -567 54 0 -1,228

Projected growth has been edged lower for the majority of provinces for 2012. Recently released information indicates soft year-end retail sales for a number of provinces, particularly New Brunswick, Quebec and British Columbia. As well, international export receipts slowed substantially for Central and Western Canada in the latter months of 2012. For 2013, slightly slower advances are now forecast for British Columbia, Ontario and Quebec, with the anticipated scaling back of housing activity. While growth for both Saskatchewan and Alberta remains buoyant, a mixed commodity price outlook is tempering their expansion somewhat this year. Several positive events are emerging in Nova Scotia in 2013, including investments to prepare for its extensive shipbuilding contracts and the start-up of its new offshore natural gas field. However, with much of the ramp-up in activity likely in the second half of 2013, the full-year boost awaits 2014. Next year, the ongoing U.S. economic recovery is expected to be constructive for Ontario, which still relies on the U.S. for almost four-fifths of its international merchandise export receipts. As U.S. housing construction continues to strengthen over the next two years, provinces with a focus on wood and building product exports, such as British Columbia, Quebec and New Brunswick, should benefit. British Columbias February Budget, given the challenge of eliminating its deficit in fiscal 2013 -14, introduced several revenue increases, including a one percentage point rise in its general corporate income tax rate as of April and a new top personal income tax bracket for 2014 and 2015. Additional restraint is anticipated from a number of other provincial Budgets this spring to sustain their fiscal repair given tempered revenue growth.

* FY13 data: estimates. *FY13 &Provinces' FY14 data: Provinces' estimates. **FY04-FY11. ** FY04-FY11.

Employment Employment (annual % change) (annual % change) Canada Canada


Newfoundland & Labrador Newfoundland & Labrador Prince Edward Island Island Prince Edward Nova Scotia Nova Scotia New Brunswick New Brunswick Quebec Quebec Ontario Ontario Manitoba Manitoba Saskatchewan Saskatchewan Alberta Alberta British Columbia British Columbia 1.5 0.9 1.5 1.0 0.6 1.4 1.5 1.2 0.9 2.6 1.5 1.2 2.3 1.1 0.6 -0.2 0.8 0.8 0.9 2.1 2.7 1.7 1.1 1.5 0.7 0.7 0.4 1.0 1.0 0.8 1.5 1.9 1.0 1.1 1.3 0.8 0.8 0.7 1.0 1.0 1.1 1.6 2.0 1.3

Unemployment Rate Unemployment Rate


(annual average, %)

(annual average, %) 7.2 12.5 11.3 9.0 10.2 7.8 7.8 5.3 4.7 4.6 6.7

7.1 15.0 11.3 8.8 9.4 8.2 7.0 4.9 5.1 4.8 6.7

7.1 12.1 11.0 8.6 10.0 7.6 7.6 5.2 4.5 4.5 6.5

6.9 11.5 10.8 8.3 9.8 7.5 7.5 5.0 4.4 4.4 6.4

Housing HousingStarts Starts (annual, of units) (annual, thousands thousands of units) Canada Canada Atlantic Atlantic 200 12 45 73 5 4 34 27 215 13 47 77 7 10 33 27 175 11 40 58 6 8 29 23 170 10 40 57 5 7 29 22

Motor Vehicle Sales Motor Vehicle Sales (annual, of units) (annual, thousands thousands of units) 1,588 114 405 603 44 42 205 175 1,677 126 416 618 50 55 239 173 1,690 128 417 621 50 56 244 174 1,695 128 418 623 50 56 245 175

Quebec Quebec Ontario Ontario Manitoba Manitoba Saskatchewan Saskatchewan Alberta Alberta British Columbia British Columbia

Global Economic Research

February 28, 2013

Global Forecast Update

Quarterly Forecasts
Canada Real GDP (q/q, ann. % change) Real GDP (y/y, % change) Consumer Prices (y/y, % change) Core CPI (y/y % change) Unite d State s Real GDP (q/q, ann. % change) Real GDP (y/y, % change) Consumer Prices (y/y, % change) Core CPI (y/y % change)

12Q4

13Q1f

13Q2f

13Q3f

13Q4f

14Q1f

14Q2f

14Q3f

14Q4f

0.7 1.2 0.9 1.2

1.8 1.2 0.7 1.1

2.0 1.3 0.8 1.1

2.2 1.7 1.3 1.4

2.4 2.1 1.7 1.5

2.4 2.2 1.9 1.7

2.4 2.4 1.9 1.7

2.5 2.4 2.0 1.9

2.6 2.5 2.0 1.9

0.1 1.6 1.9 1.9

2.4 1.7 1.8 1.9

2.4 2.0 2.0 1.7

2.6 1.9 2.0 1.8

2.6 2.5 2.0 1.9

2.8 2.6 2.0 1.9

2.8 2.7 2.2 2.0

2.9 2.8 2.2 2.0

2.9 2.9 2.2 2.0

Financial Markets
Ce ntral Bank Rate s Am e ricas Bank of Canada U.S. Federal Reserve Bank of Mexico Central Bank of Brazil Bank of the Republic of Colombia Central Reserve Bank of Peru Central Bank of Chile Europe European Central Bank Bank of England Swiss National Bank Asia/Oce ania Bank of Japan Reserve Bank of Australia People's Bank of China Reserve Bank of India Bank of Korea Bank Indonesia Bank of T hailand Canada 3-month T -bill 2-year Canada 5-year Canada 10-year Canada 30-year Canada Unite d State s 3-month T -bill 2-year T reasury 5-year T reasury 10-year T reasury 30-year T reasury Canada-U.S. Spre ads 3-month T -bill 2-year 5-year 10-year 30-year 0.89 0.89 0.66 0.04 -0.58 0.85 0.75 0.60 0.00 -0.55 0.90 0.85 0.65 0.05 -0.55 0.90 0.85 0.65 0.05 -0.45 0.90 1.00 0.70 0.00 -0.45 0.90 1.15 0.70 0.00 -0.45 0.90 1.10 0.75 0.00 -0.55 0.90 1.05 0.75 -0.15 -0.55 1.00 1.00 0.75 -0.15 -0.55 0.04 0.25 0.72 1.76 2.95 0.10 0.25 0.75 1.85 3.10 0.10 0.25 0.80 1.75 3.00 0.10 0.35 1.10 2.05 3.20 0.10 0.40 1.30 2.25 3.40 0.10 0.50 1.60 2.60 3.75 0.10 0.75 1.80 2.90 4.00 0.10 1.00 2.00 3.25 4.15 0.10 1.30 2.20 3.50 4.20 0.93 1.14 1.38 1.80 2.37 0.95 1.00 1.35 1.85 2.55 1.00 1.10 1.45 1.80 2.45 1.00 1.20 1.75 2.10 2.75 1.00 1.40 2.00 2.25 2.95 1.00 1.65 2.30 2.60 3.30 1.00 1.85 2.55 2.90 3.45 1.00 2.05 2.75 3.10 3.60 1.10 2.30 2.95 3.35 3.65 0.10 3.00 6.00 8.00 2.75 5.75 2.75 0.10 3.00 6.00 7.50 2.75 5.75 2.75 0.10 3.00 6.00 7.00 2.75 5.75 2.75 0.10 3.00 6.00 6.75 3.00 6.00 3.00 0.10 3.25 6.00 6.75 3.00 6.00 3.00 0.10 3.25 6.30 6.75 3.25 6.25 3.25 0.10 3.50 6.30 6.75 3.25 6.50 3.25 0.10 3.50 6.60 7.00 3.50 6.75 3.50 0.10 3.75 6.60 7.25 3.50 7.00 3.50 0.75 0.50 0.00 0.75 0.50 0.00 0.75 0.50 0.00 0.75 0.50 0.00 0.75 0.50 0.00 0.75 0.50 0.00 0.75 0.50 0.00 0.75 0.50 0.00 0.75 0.50 0.00 1.00 0.25 4.50 7.25 4.25 4.25 5.00 1.00 0.25 4.50 7.25 3.50 4.25 5.00 1.00 0.25 4.50 7.25 3.50 4.25 5.25 1.00 0.25 4.00 7.25 3.50 4.25 5.50 1.00 0.25 4.00 7.25 3.50 4.25 5.75 1.00 0.25 4.00 7.25 4.00 4.25 6.00 1.00 0.25 4.00 7.75 4.00 4.50 6.00 1.00 0.25 4.00 8.25 4.50 5.00 6.00 1.00 0.25 4.00 8.25 4.50 5.00 5.50 (%, end of period)

Global Economic Research

February 28, 2013

Global Forecast Update

Financial Markets
Exchange Rate s Am e ricas Canadian Dollar (USDCAD) Canadian Dollar (CADUSD) Mexican Peso (USDMXN) Brazilian Real (USDBRL) Colombian Peso (USDCOP) Peruvian Nuevo Sol (USDPEN) Chilean Peso (USDCLP) Canadian Dollar Cross Rate s Euro (EURCAD) U.K. Pound (GBPCAD) Japanese Yen (CADJPY) Australian Dollar (AUDCAD) Mexican Peso (CADMXN) Europe Euro (EURUSD) U.K. Pound (GBPUSD) Swiss Franc (USDCHF) Swedish Krona (USDSEK) Norwegian Krone (USDNOK) Russian Ruble (USDRUB) Asia/Oce ania Japanese Yen (USDJPY) Australian Dollar (AUDUSD) Chinese Yuan (USDCNY) Indian Rupee (USDINR) South Korean Won (USDKRW) Indonesian Rupiah (USDIDR) T hai Baht (USDT HB)

12Q4

13Q1f

13Q2f

13Q3f

13Q4f

14Q1f

14Q2f

14Q3f

14Q4f

(end of period)

0.99 1.01 12.85 2.05 1767 2.55 479

1.04 0.96 12.87 1.96 1810 2.55 482

1.04 0.96 12.73 1.98 1820 2.53 490

1.02 0.98 12.77 2.01 1840 2.51 497

1.01 0.99 12.93 2.00 1850 2.49 503

1.01 0.99 13.00 2.00 1860 2.49 506

1.00 1.00 12.87 1.98 1870 2.48 509

1.00 1.00 12.95 1.98 1880 2.45 512

0.99 1.01 13.14 1.96 1890 2.45 516

1.31 1.61 87 1.03 12.96

1.35 1.57 88 1.06 12.38

1.34 1.55 89 1.06 12.24

1.31 1.50 92 1.06 12.52

1.28 1.46 94 1.05 12.80

1.27 1.46 94 1.07 12.87

1.26 1.45 96 1.06 12.87

1.25 1.44 97 1.08 12.95

1.24 1.43 99 1.07 13.28

1.32 1.63 0.92 6.50 5.56 30.5

1.30 1.51 0.95 6.62 5.75 30.7

1.29 1.49 0.94 6.59 5.65 30.9

1.28 1.47 0.95 6.56 5.40 31.1

1.27 1.45 0.96 6.54 5.30 31.3

1.26 1.45 0.98 6.55 5.28 31.5

1.26 1.45 0.98 6.51 5.25 31.7

1.25 1.44 1.00 6.52 5.22 31.8

1.25 1.44 1.00 6.48 5.20 32.0

87 1.04 6.23 55.0 1064 9793 30.6

92 1.02 6.22 54.2 1078 9740 30.0

93 1.02 6.20 53.8 1063 9950 30.4

94 1.04 6.15 53.4 1056 10025 30.3

95 1.04 6.10 53.0 1050 10100 30.3

95 1.06 6.09 52.7 1044 10025 30.1

96 1.06 6.07 52.4 1038 9950 30.0

97 1.08 6.06 52.1 1031 9875 29.9

98 1.08 6.04 51.8 1025 9800 29.8

Central Bank Rates


7 6 U.S. 5 4 Forecast 3 2 Euro zone 1 0 04 05 06 07 08 09 10 11 12 13 14 Canada U.K. %

Global Inflation
10 8 6 4 2 0 -2 U.S. -4 07 08 09 10 11 12 13
0

10-Year Yields
7 6 U.S. Forecast %

y/y % change

China Euro zone

5 4 3 Canada

Canada

2 1

04 05 06 07 08 09 10 11 12 13 14

Source: Bloomberg, Scotiabank Economics.

Source: Bloomberg, Scotiabank Economics.

Source: Bloomberg, Scotiabank Economics.

Scotiabank Economics
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This report has been prepared by Scotiabank Economics as a resource for the clients of Scotiabank. Opinions, estimates and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. Neither Scotiabank nor its affiliates accepts any liability whatsoever for any loss arising from any use of this report or its contents.
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