Canadian Economic Forecasts 2010. Make yours now!

Continuing the ancient (well, one year old) tradition of this blog, I am inviting all readers to make their Canadian economic forecasts for 2010.

Same rules as last year.

In particular, you aren't allowed to laugh at anyone else's forecast unless you have made one yourself!

Here are my forecasts:
CPI, November 2010, year over year: +1.5%
Unemployment, November 2010: 7.8%
US/Can exchange rate, December 31 2010: US$ 1.05 (yep, above parity).
Bank of Canada overnight rate target, December 31 2010: 1.5%
TSX, December 31 2010: 13,000

My hunch is that US (and world) private savings rates will remain higher than before the recession, and recovery in the US will be slower than in Canada. If I am right, then the Fed will keep US interest rates low; that will prevent the Bank of Canada raising its overnight rate target more quickly, and will also result in a strong Loonie, and below-target inflation. Low interest rates and a modest recovery will mean a modest rise in the TSX.

I still have a high degree of uncertainty, though less than this time last year. My main worry is that something will go badly wrong in Eurozone financial markets. I find it very hard to predict how that would affect Canadian financial markets.

OK, let's see yours!

Comments

[MattM]

Based on almost nothing:

CPI 2.5%
Unemployment 7.4%
CAD/USD 0.95 (CAD below parity with USD)
Rate target 2.0%
TSX 12,000

Employment growth will be good and inflationary pressures will emerge, causing BoC to increase rates. Resource prices won't move dramatically, leaving CAD/USD where it is today. Stock indices will be basically flat, as higher rates will pull some money out of the market (and because a lot of the recovery has already shown up in asset prices).

[MOB]

FWIW based on econ 101 20 years ago and wild guesses

CPI - 1.5%
Unemployment 7.9%
CAD/USD 0.99
Overnight rate 1.25
TSX 11,100

Not a full on double dip, more of a flatline with slow growth that modestly disappoints markets. Commodity prices stabilize near or somewhat below current levels. Inflation is out there somewhere, but not in 2010 in a big way. Moderate inflation and a very tepid recovery mean still ultra-low rates. CAD appreciates modestly and approaches parity.

[brendon]

I am on a blogging hiatus but I can't pass up a forecast.

CPI 1.9%
Unemployment 8.2%
CAD/USD 0.99
Overnight Rate 1.25
TSX 12,750

[m]

CPI -3%
Unemployment 15%
CAD/USD 0.70
Overnight Rate 0%
TSX 7,000

[rp]

Market correction + stagflation:
CPI 3%
Unemployment 11%
US/Can 0.95
Bank of Canada 1.25%
TSX 9,000

[rp]

Oops, I meant CAD/USD. And 9000 might be high. Oh well. My prediction last year came close to annual lows. I did not expect the "recovery" to be so strong, although I did expect a big bear market rally, but lasting less than a year. Most of Q1 and Q2 looked like balance sheet fraud to me, and I find it highly unlikely that big US banks can "earn their way out" by doubling down with fat spreads as policy makers inflate the bad debts away. But in Canada I think we'll get 4-7% inflation in food and commodities and our housing bubble will pop. The BoC will concoct some excuse to keep rates too low while housing crashes. Savers and seniors on fixed income will be nuked.

[Mike Moffatt]

Given my predictions last year (CPI, November 2009, year over year: +0.8%, Unemployment, November 2009: 7.8%, US/Can exchange rate, December 31 2009: US$ 0.78, Bank of Canada overnight rate target, December 31 2009: 0.5%, TSX, December 31 2009: 9,400) I probably shouldn't be making predictions.

My big goof was being overly bearish on oil prices, which led to both my USD/CAD exchange rate and TSX predictions being too low. Had oil gone to $40 a barrel, then I think I would have been a lot closer.

[Mike Moffatt]

I went back and looked at that discussion. I posted this:

"I'm not expecting it to bottom out, but I do think it will be weak - I based my "forecasts" on that as well. Particularly my exchange rate forecast. To have the CDN$ at .90 or so, you need oil at $65-$70. It is certainly possible for oil to be at this level (or even a whole lot higher) but I'm not convinced the global economy will be strong enough to support it."

WTI Cushing Spot: 79.36

Whoops!

[Jim Sentance]

Absolutely no basis for this, as I'm not one of those Macro people, but just in case I get to say so there:

CPI 0.7%
Unemployment 8.4%
CAD/USD 0.89
Overnight Rate 1.25
TSX 8,750

Double dip here we come.

[Alex Plante]

Here's my big-picture predictions:

- Over the next few years, China is going to restructure their industrial base from export-oriented Walmart junk to products for their domestic market. When this transition is complete,which will take around 5 years, they will float the Yuan, which will soar against the US dollar and become the new world reserve currency.
- Peak oil has arrived, which means that the world's economy cannot grow by more than 1-2% for at least the next few decades. Economic growth thus becomes a zero-sum game.
- The BRICs will continue to grow fast, but this will cause oil and other resource prices to soar.
- OECD countries will stagnate, and a few countries will experience financial crises.
- The transmission mechanism for OECD stagnation will be strong growth in the BRICS + their strong currencies + shortages of commodities will lead to soaring commidity prices, which will depress OECD countries.
- The apparent stagnation of the OECD countries will hide tremendous restructuring:
1) Fast growth in regions that produce food and energy;
2) Tremendous investment in energy efficiency, alternative energy, and public transit;
3) When the Yuan rises, Fast growth in industrial production, except for cars;
4) Little new housing construction, but much retrofitting (insulation, subdividing houses to make apartments to rent out, etc.);
5) Areas dependent on finance, tourism and retirees will stagnate (Florida, Arizona, Spain, Greece, etc..);
6) Holliwood and the computer game industry will boom.
7) We will also, unfortunately, still see some spectacular financial collapses. Some major countries could even go bankrupt.

I have no idea what this means to 2010 Canadian numbers, but I'm guessing that the Prairies and Newfoundland will do very well, B.C., Quebec and the Maritimes so-so and Ontario will continue to stagnate.

[www.facebook.com/profile.php?id=611985302]

UWAG (Unscientific Wild Ass Guess)

CPI 1.25
Unemployment 9%
CAD/USD 1.02
Overnight Rate 0.75
TSX 11,000

The dollar will go over par, people will freak, some intervention will happen. US bad news will leak into Canada.

[Mark]

CPI, November 2010, year over year: +2.1%
Unemployment, November 2010: 7.5%
US/Can exchange rate, December 31 2010: US$ 1.01
Bank of Canada overnight rate target, December 31 2010: 1.0%
TSX, December 31 2010: 13,500

[Stephen Gordon]

CPI, November 2010, year over year: 2.0%
Unemployment, November 2010: 8.0%
US/Can exchange rate, December 31 2010: 1 CAD = 1.05 USD
Bank of Canada overnight rate target, December 31 2010: 1.25%
TSX, December 31 2010: 12,500

[JP Koning]

Don't know much about the others, but 1 CAD = 1.09 USD and the Teranet housing price index up 10% y-o-y.

[Matthew]

My forecast is the average of all of your forecasts! Hey-O!

[Todd Kuipers]

Haven't done a forecast set like this in 20 years...

CPI, November 2010, year over year: 3%
Unemployment, November 2010: 8%
US/Can exchange rate, December 31 2010: CAD1.00 = USD1.00
Bank of Canada overnight rate target, December 31 2010: 2%
TSX, December 31 2010: 15,000

The one prediction that I wonder the most about is the USD/CAD exchange - even though the Americans are working at tanking their currency the perception of Canada as inextricably linked to the US will likely keep us under par.