The Economic Outlook Derek Burleton Vice President and Deputy Chief Economist October 2011

GUT-WRENCHING VOLATILITY

CHINA TO HELP KEEP WORLD GROWTH EXPANDING MODERATELY

MAJOR GLOBAL ECONOMIC AND FINANCIAL RISKS Political: ̶ Europe ̶ U.S. budget impasse Economic: ̶ U.S. (risk of double-dip recession pegged at 40%) ̶ China hard landing (less than 15-20%)

COMMODITY PRICES HAVE TRENDED UP

PRECIOUS METALS HAVE TOPPED THE LIST OF GAINERS

UNDERLYING COMMODITY STORY STILL POSITIVE Demand for commodities driven by China, India and other emerging markets. Chinese commodity imports have strengthened in recent months, supported in part by the appreciating renminbi Supply has remained constrained by deteriorating resource quality, delays, rising costs (energy, labour, equipment) and geopolitical risk Commodities increasingly viewed as an alternative store of value

U.S. TREND GROWTH TO AVERAGE CLOSE TO 2%

CANADIAN EXPORTS TIED TO U.S. FORTUNES Canadian Exports by Destination (2011) Source: Statistics Canada, TD Economics

CANADIAN DOLLAR WILL REMAIN COMPETITIVE CHALLENGE

EMERGING MARKETS COOLING BUT REMAIN STRONG

SUPPORTIVE TO COMMODITIES

CANADIAN GOVERNMENTS TURNING THEIR ATTENTION TO DEFICIT FIGHTING

DOMESTIC DEMAND SHOULD REMAIN SOLID

CANADIAN CONSUMERS HEAVILY INDEBTED

CANADIAN HOUSING ACTIVITY HAS COOLED

HOME CONSTRUCTION WILL SOFTEN

OUTLOOK FOR MODEST ECONOMIC GROWTH NATIONALLY

PRAIRIES TO OUTPERFORM

SLACK IN ECONOMY WILL ONLY GRADUALLY DIMINISH

INTEREST RATES TO REMAIN LOW FOR LONGER

KEY TAKE AWAYS RISK FILLED ENVIRONMENT, BUT RISKS NOT ALL ON THE DOWNSIDE MODERATE BUT SLOWER GROWTH TO FACING CANADA’S ECONOMY IN 2012 COMMODITY PRICES TO STAY RELATIVELY HIGH INTEREST RATES TO REMAIN LOWER FOR LONGER

HIGHLIGHTS Aboriginal people’s economic footprint is increasing. Combined household, business and government market income to reach: ̶ $24 billion in 2011; and ̶ $32 billion in Economic development corporations, in particular, have helped contribute to the surge. Market represents lucrative opportunities for all Canadian businesses. Challenges remain on tap, including boosting education attainment levels.

ABORIGINAL MARKET INCOME BY SECTOR

EVEN WITH RECENT GAINS, LIVING STANDARDS CONTINUE TO LAG BEHIND

OTHER CHALLENGES STILL REMAIN Individuals and communities are still recovering from the aftermath of the global economic downturn. Average personal income for Aboriginal people remains noticeably lower than the national average. Education attainment levels among Aboriginal people continue to trail the national average. Further attention to this issue is needed. Lack of data availability and inconsistency of data limit accurate policy analysis of the complex issues at hand.

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