Economic Outlook

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Hear directly from RBC Global Asset Management Chief Economist, Eric Lascelles in his monthly and quarterly updates. Representing RBC GAM Investment Strategy Committee's (RISC) economic views, Eric shares timely insights and the expectations of RBC GAM on the global economy.

Monthly Economic Outlook Webcast

Monthly Economic Outlook Webcast

Making sense of an altered landscape - February 2017

Eric Lascelles, Chief Economist, RBC Global Asset Management, shares the latest views on the global economy and offers insight into today’s economic issues.

The webcast includes an audio and slide presentation.

Launch Presentation

Key Highlights

  • Stock markets have strengthened significantly since the U.S. presidential election, accompanied by higher government bond yields and narrowing credit spreads.

  • Trump has been delivering on his campaign promises, and these actions have more potential negatives for Canadian GDP than positives. Negative implications include protectionism (potential Trans-Pacific Partnership (TPP) cancellation and tariff threats) and immigration control. Positive implications include expanded military spending leading to increased economic stimulus, infrastructure projects (such as the Keystone pipeline) and lobbying limits.

  • The possible "border adjustability tax" is similar to a sales tax but with a few key differences: domestic wage costs are exempt, and it replaces corporate income tax rather than supplementing it like other countries. RBC GAM sees multiple implications of this proposed tax: it would reward domestic employment, production and exports, while punishing importers. As a result, it would encourage investment, and the U.S. dollar may strengthen even further.

  • Nations most vulnerable to protectionist measures and those likely to be targeted by U.S. actions are vastly different. Exports to the U.S. are significant for some countries, including Mexico, Vietnam and Canada. But those most likely to be targeted are different, as the U.S. takes issue with countries that run a trade surplus against it – China, Germany, Mexico and Japan are on top of that list.

  • Economic slack has decreased in a number of countries, quashing deflation fears. Global leading indicators are, for the most part, on an uptrend as manufacturing accelerates.

  • Emerging market (EM) growth is finally on the mend after five consecutive years of decline, but risks still remain. After the Trump election sell-off in EM stocks, investors reverted back to EM bonds. However, despite challenges from a stronger U.S. dollar and higher bond yields, RBC GAM expects more EM growth for 2017.

  • Chinese household debt is on the rise again, as evidenced by another credit boom. Some evidence suggests efforts are being made to cool this boom, but it remains robust, which explains a relatively healthy Chinese economy. However, China's quick growth is a source of concern for RBC GAM, as it may not be a completely sustainable trend.

  • The Canadian economic outlook is improving nicely. In the latest month, leading economic indicators jumped above historical norms. However, RBC GAM is still forecasting below consensus growth over the next few years due to a wobbly housing market and protectionist threats from the U.S.

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