Tracking Economic and Financial Developments in the Current Global Recession Rob Wright Deputy Minister of the Department of Finance International Seminar on Timeliness, Methodology and Comparability of Rapid Estimates of Economic Trends May 27, 2009 Rob Wright Deputy Minister of the Department of Finance International Seminar on Timeliness, Methodology and Comparability of Rapid Estimates of Economic Trends May 27, 2009

2 Global Recession Impact on Canada Economic Action Plan The Role of Data in Policy Development Outline

3 Global Recession

4 Largest drop in U.S. housing market on record U.S. Housing Starts and Months Supply of Existing Homes U.S. S&P/Case-Shiller Home Price Index thousands, at annual rates level, months supply at current sales rate Housing Starts (left scale) Months supply of existing homes (right scale) Sources: U.S. Census Bureau and U.S. National Association of Realtors. Source: S&P, Fiserv and MacroMarkets LLC. index, 2000 Q1 =100 32%

5 Effects on cost and availability of credit Credit Spreads Notes: These spreads are a measure of banks’ funding costs relative to a risk-free rate and are a gauge of financial market stress and banks’ financing pressures. The rate on the overnight-indexed swap (OIS) is used as a proxy for expected overnight rates. LIBOR is the London Interbank Offered Rate. CDOR is the Canadian Dealer Offered Rate. Daily data up to and including May 8, Source: Bloomberg. basis points ABCP crisis Lehman Brothers bankruptcy

6 Large financial losses worldwide Source: Bloomberg. Up to and including May 8, IMF ’ s Estimates of Financial Sector Potential Writedowns ( ) Billions, USD World Equity Markets % change since January 1, 2007 *Europe includes Euro area and the U.K. Source: IMF’s Global Financial Stability Report, April 2009.

7 Most severe and synchronized global recession since WWII, with a rapid deterioration in economic prospects in late 2008 Evolution of Private-Sector Average Forecasts for Real GDP Growth in 2009 per cent Source: Blue Chip Economic Indicators - January 2008 to May Date of forecast per cent World Economic Growth per cent Forecast Actual Note: World real GDP growth on a purchasing-power parity basis. Source: International Monetary Fund World Economic Outlook, April 2009.

8 Impact on Canada

9 Strong household and business balance sheets Housing market didn’t have same excesses as the U.S. Canadian banking sector considered the soundest in the world Best fiscal position in the G7 Canada is facing the recession from a position of strength

10 Canada has been less affected than other industrialized nations… Source: Statistics Canada; U.S. Bureau of Economic Analysis (advance report for 2009Q1); Eurostat Flash Estimates; U.K. Office for National Statistics; Federal Statistical Office of Germany; National Institute for Statistics and Economic Studies of France; National Institute for Statistics of Italy; Economic and Social Research Institute of Japan. Change in real GDP 2008Q2-2008Q4

11 …but employment has been declining Index, January 2005 = 100 Sources: Statistics Canada; U.S. Bureau of Labor Statistics. U.S. Canada U.S. enters recession Canada enters recession Index of Total Employment

12 Economic Action Plan

13 Key elements of Canada’s Economic Stimulus Help Canadians and Stimulate Spending ($12.8 billion) EI/training/Tax relief Stimulate Housing Construction ($7.8 billion) Social housing/Home Renovation and First-Time Home Buyers’ Tax Credits Build Infrastructure ($11.8 billion) Provincial/Territorial/Municipal/Federal Support Businesses and Community Adjustment ($7.5 billion) Community Adjustment Fund/RInC/CCA/automotive sector/clean energy technologies

14 Canada’s Economic Action Plan Compared to Stimulus Packages in Other G7 Countries Fiscal stimulus flowing in 2009 and 2010, share of GDP Source: Government releases. For comparability, stimulus estimates have been put on a Canadian fiscal year basis (April-March) for France, Germany, Italy and the U.S. *This represents the current estimate of the planned provincial spending. Provincial- Territorial from Economic Action Plan Provincial- Territorial additional

15 Key element of Canada’s Economic Action Plan: The Extraordinary Financing Framework Insured Mortgage Purchase Program$125 billion New 10-year Canada Mortgage Bond $10 billion Canadian Lenders Assurance Facility- Canadian Life Insurers Facility- EDC and BDC $13 billion ABS Facility $12 billion Bank of Canada $40 billion Expanded authorities to strengthen financial system

16 Canada expected to be the least affected country reflecting underlying strengths per cent IMF Economic Outlook for G7 Countries per cent Source: International Monetary Fund World Economic Outlook, April

17 The Role of Data in Public Policy Development

18 Process of policy development is lengthy  Research and analysis required to understand when and where policy change and reform are needed  Designing policy  Developing consensus (political, public) We rely on high quality and timely data throughout the process The Role of Data in Public Policy Development

19 How can statisticians improve public policy? Identify and close data gaps Priority to long term issues and trends But need to be able to adapt to current developments, if possible  Identify turning points Consult users  Government, private sector, researchers

20 Adjust existing products to be even more relevant in current environment Labour Force Survey (LFS)—add questions to address how people deal with unemployment (training, schooling, relocation) Survey of Employment, Participation and Hours (SEPH)—add questions about sales and production prospects across sectors of the economy Turning Points

Tracking Economic and Financial Developments in the Current Global Recession Rob Wright Deputy Minister of the Department of Finance International Seminar on Timeliness, Methodology and Comparability of Rapid Estimates of Economic Trends May 27, 2009 Rob Wright Deputy Minister of the Department of Finance International Seminar on Timeliness, Methodology and Comparability of Rapid Estimates of Economic Trends May 27, 2009