1. Canada Afta’ NAFTA Avery Shenfeld, Chief Economist & Managing Director
December 2017

2. The Trump Rally
Source: Treasury, FRB, CIBC

3. Or the Merkel Magic, the Tokyo Tango, or the Footsie Fest?
Source: Treasury, FRB, CIBC

4. Calm Waters in Stocks Reflect Calm Waters in Economy

5. The Cycle is Old. But Does That Tell Us Anything?
Source: BEA, CIBC

6. Growth Outlook: A Bit Slower Ahead, But Steady

7. Offsetting Surprises in Oil Demand and Non-OPEC Supply
Source: IEA, CIBC

8. Oil Needs to Top $50 to Sustain a US Rebound But OPEC a Threat at $60
Source: CIBC, EIA, Bloomberg

9. US Employment Recovery Still Has Some Room

10. Phillips Curve is Alive and Well for Prime-Age Workers

11. US Wages Held Down by 55+ Cohort; Need Further Tightening in Prime-Age Job Market
Current

12. Unemployment Has to Be Much Lower to Trigger Larger Real Wage Gains and Threaten Inflation Trouble

13. Why Will US Rates Rise Less in this Cycle
Why Will US Rates Rise Less in this Cycle? Less Capital Spending at Any Given Real Interest Rate
Excludes Recession Quarters

14. Nearly at Neutral by End of 2018 as US Output Gap (Economic Slack) Narrows

15. Big US Tax Cuts Not Due Until 2019

16. Tax Plan Would Add to Swelling Treasury Supply (L) And Increase Long US Yields Further (R)

17. Canadian Employment Rate: Back to Prerecession Highs
Source: Statistics Canada, CIBC

18. Two Contributors to Inflation Ahead
Source: Statistics Canada, CIBC *assumes C$ at 80 cents US

19. Both Energy Sector (L) and Rest of Economy (R) Helped 2017 Growth Spurt
Source: Statistics Canada, CIBC

20. What a Difference a Few Months Made!
“Canadian exports and business spending are weaker than you would expect to see” (April 2017)
“We’re seeing widespread strength in business investment and exports
(Sept 2017).”

21. “Widespread Strength in Exports and Capital Spending”. Really?
Source: Statistics Canada, CIBC

22. Markets Brushing Aside NAFTA Concerns in Both Stocks (L) and Currencies (R)

23. NAFTA: The Facts Suggested that Canada Isn’t America’s Problem
Source: Census Bureau, CIBC

24. NAFTA: The Gospel According to Donald
“We can’t let Canada…take advantage and do what they did to our workers and farmers… I want to just mention included in there is lumber, timber and energy”
“We lose with Canada — big-league. Tremendous, tremendous trade deficits with Canada.”

25. Special Duties Are the Big Threat (L), US Launching More Trade Actions Under Trump (R)
Source: Statistics Canada, WTO, CIBC

26. Canadian Rate Hikes Now a Greater Squeeze than in Past
Source: Statistics Canada, CIBC

27. The Housing Market is Slowing, For Now
Source: CREA, CIBC

28. But Not Overbuilt, Judging by Ratio to Household Formation (L) or GTA Rental Market (R)
Source: Statistics Canada, CREA, CIBC

29. Victim of their Own Success: BC, Ontario and Quebec to Slow, Alberta’s 2017 Bounce Tough to Repeat

30. What it All Means: Two’s Company
Canada to 2% growth in 2018, slower in ‘19 as we reach full employment. Core inflation will drift up to 2% trend.
Bank of Canada won’t outgun the Fed on rate hikes. Two quarter-point hikes by BoC through end of 2018 (vs. three for Fed).
Baby bear on long end the start of balance sheet unwind in US (and later, ECB); Canadian 10-year rates near 2.25% at end of 2018, 30s roughly 2.70%.
Equities: slowing in margins constrains upside.
C$ a few cents weaker in 2018.

31. Interest & Exchange Rate Forecast

32. Economic Update