Continuing the now two year old tradition, I invite you all to make forecasts for 2011. Forecasts are for the latest data available on New Year's Day 2012.
Again, you are not allowed to laugh at anyone's forecast a year from now unless you have made one yourself.
Here are my forecasts:
CPI, year over year, November 2011: 1.9%
Unemployment, November 2011: 7.0%
Exchange rate, December 31 2011: US$ 1.10
Bank of Canada overnight rate target, December 31 2011: 2.0%
TSX, December 31 2011: 15,000
My guess is for a continued slow recovery. Canada will continue to strengthen ahead of the US, plus rising oil prices, will cause continued appreciation of the Loonie.
It is very tempting to just forecast 2% for CPI inflation, now that the Bank of Canada seems to have inflation back on target, and is above the zero lower bound on nominal interest rates. But I think the Bank will not fully compensate for the disinflationary effects of the exchange rate appreciation (because of lags). So I have put my own forecast just a little below 2%.
My two biggest unknowns are:
The Eurozone. I think there's a strong possibility that things will get worse, and for one or more countries to leave the Euro. If that happens there may be a flight to the US dollar, which could weaken the CAD/USD exchange rate below my (rather high) forecast.
Canadian house prices. Teranet says that house prices started falling in October ("you can have it fast or you can have it reliable; pick one"), and I think this will continue. How much in one year is anyone's guess. My guess would be around 5%, but I wouldn't be very surprised if it were more.
OK. Let's see yours.
CPI, year over year, November 2011: 1.9%
Unemployment, November 2011: 7.2%
Exchange rate, December 31 2011: US$ 0.99
Bank of Canada overnight rate target, December 31 2011: 1.75%
TSX, December 31 2011: 14,900
Posted by: brendon | January 03, 2011 at 01:15 PM
CPI, year over year, November 2011: 1.5%
Unemployment, November 2011: 7.6%
Exchange rate, December 31 2011: US$ 0.92
Bank of Canada overnight rate target, December 31 2011: 1.00%
TSX, December 31 2011: 11,000
Posted by: BearClaw | January 03, 2011 at 02:08 PM
Sorry - changed TSX. Ignore comment above.
CPI, year over year, November 2011: 1.5%
Unemployment, November 2011: 7.6%
Exchange rate, December 31 2011: US$ 0.92
Bank of Canada overnight rate target, December 31 2011: 1.00%
TSX, December 31 2011: 12,500
Posted by: BearClaw | January 03, 2011 at 02:12 PM
CPI, year over year, November 2011: 2.6%
Unemployment, November 2011: 8.4%
Exchange rate, December 31 2011: US$ 0.97
Bank of Canada overnight rate target, December 31 2011: 1.75%
TSX, December 31 2011: 11,200
CPI will see a surge from increased pricing in foodstuffs due to continued climate chaos that effects the supply.
Unemployment will rise toward the end of the year after the fed foolishly hikes the overnight rate earlier in the year causing our economy to falter again.
The exchange rate will fall because the fed will lower the rate after foolishly raising it.
I've covered the overnight rate.
The TSX will of course weaken on poor economic data toward the end of the year.
Posted by: Robert McClelland | January 03, 2011 at 03:23 PM
CPI, year over year, November 2011: 2.2%
Unemployment, November 2011: 7.8%
Exchange rate, December 31 2011: US$ 1.03
Bank of Canada overnight rate target, December 31 2011: 1.50%
TSX, December 31 2011: 15,500
Posted by: Richard R | January 03, 2011 at 04:09 PM
I'm waiting for Mark to post...
Posted by: Stephen Gordon | January 03, 2011 at 05:18 PM
CPI, year over year, November 2011: 2.1%
Unemployment, November 2011: 6.8%
Exchange rate, December 31 2011: US$ 0.98
Bank of Canada overnight rate target, December 31 2011: 1.50%
TSX, December 31 2011: 13,800
Posted by: Jacques | January 03, 2011 at 06:46 PM
CPI - 2.1%
Unemployment - 7.0%
Exchange rate - US$0.90
Overnight rate - 2.25%
TSX - 14,350
CPI - I think there are inflationary forces coming up, but they'll be held in check with rises in the overnight rate.
Unemployment - We're already at 7.6%, and major projects are ramping back up in Alberta.
Exchange - The death of the USD has been greatly overstated. The US economic recovery will accelerate this year, and drive up the dollar. I expect the CAD to perform better against most other global currencies, particularly the yen, which is currently too expensive.
Overnight rate - I hope I'm wrong (since my mortgage is up for renewal in 2012), but I think inflationary pressures will force the bank to raise its overnight rate quite rapidly, starting mid-year.
TSX - It will be another solid, but not extraordinary year for the market, as the economy continues to grow at a similarly solid but not extraordinary rate.
On housing prices - I like the sales pair methodology of the Teranet index, but dislike its geographically narrow view on Canadian housing. The national index is for all intents and purposes the Toronto index, giving a 42% weighting to 17% of the Canadian population. Until it expands to include more diverse markets, I wouldn't use the national index for much. I expect the Calgary index to pick back up this year. I'd also expect housing in some of the completely overlooked markets (Saskatoon, St. John's, and Edmonton in particular) to do well.
Posted by: Neil | January 03, 2011 at 06:50 PM
Second year for me.
CPI, year over year, November 2011: 2%
Unemployment, November 2011: 7.1%
Exchange rate, December 31 2011: US$ 1.04
Bank of Canada overnight rate target, December 31 2011: 1.75%
TSX, December 31 2011: 14,300
Basically a continuing sluggish recovery. Overnight rate stays lower than it might be because of high loonie
Posted by: MOB | January 04, 2011 at 12:27 AM
CPI, year over year, November 2011: 1.7%
Unemployment, November 2011: 7.4%
Exchange rate, December 31 2011: US$ 1.05
Bank of Canada overnight rate target, December 31 2011: 1.5%
TSX, December 31 2011: 14,800
Posted by: Sina Motamedi | January 04, 2011 at 10:47 AM
CPI, year over year, November 2011: 2.5%
Unemployment, November 2011: 8.5%
Exchange rate, December 31 2011: US$ 1.00
Bank of Canada overnight rate target, December 31 2011: 1.0%
TSX, December 31 2011: 15,000
I think we will see deterioration in the U.S. due to poor policy response to their liquidity trap. Also turmoil in Europe. These things will impact us largely by reducing export demand.
On the positive side, I expect continued robust growth in China and other emerging economies which will increase export demand.
I expect a tendency for emerging country demand to push up prices, and that the Bank of Canada will be unwilling to do much about it because of general weakness.
Posted by: Paul Friesen | January 04, 2011 at 12:48 PM
Can't do much worse than last year:
CPI, year over year, November 2011: 1.6%
Unemployment, November 2011: 7.4%
Exchange rate, December 31 2011: US$ 1.01
Bank of Canada overnight rate target, December 31 2011: 1.5%
TSX, December 31 2011: 15,500
Posted by: Jim Sentance | January 04, 2011 at 02:38 PM
I am holding out for the December 2010 unemployment number which will be announced on Friday (the November figure was 7.6%) before making predictions.
Btw Economist estimates that Canada's GDP will grow 2.5% in 2011.
Posted by: Hesam | January 05, 2011 at 06:27 AM
Hesam: you aren't allowed to wait for more data. That's cheating! The rules are that you have to be an idiot, like the rest of us, and make an unconditional forecast based on whatever hunches you've got.
Posted by: Nick Rowe | January 05, 2011 at 06:45 AM
CPI, year over year, November 2011: 1.7%
Unemployment, November 2011: 7.1%
Exchange rate, December 31 2011: US$ 1.05
Bank of Canada overnight rate target, December 31 2011: 1.75%
TSX, December 31 2011: 14,250
Posted by: Mark | January 05, 2011 at 09:52 AM
Is "what Mark said, except add 0.1% to everything" an acceptable answer? :)
Posted by: Mike Moffatt | January 05, 2011 at 10:07 AM
I suspect it isn't. Anyhow, here's my guess based on absolutely nothing.
CPI, year over year, November 2011: 1.9%
Unemployment, November 2011: 7.2%
Exchange rate, December 31 2011: US$ 1.08
Bank of Canada overnight rate target, December 31 2011: 1.25%
TSX, December 31 2011: 14,133.87 (hooray for specific numbers!)
Posted by: Mike Moffatt | January 05, 2011 at 10:26 AM
CPI, year over year, November 2011: 2.2%
Unemployment, November 2011: 7.0%
Exchange rate, December 31 2011: US$ 1.13
Bank of Canada overnight rate target, December 31 2011: 1.5%
TSX, December 31 2011: 15,250
Housing index: +8%
Posted by: JP Koning | January 05, 2011 at 04:01 PM
CPI, y/y: 2.0%
Unemployment rate, November 2011: 7.3%
Exchange rate, December 31, 2011: 1 CAD = 1.05 USD
Bank of Canada Overnight rate, December 31: 1.75%
TSX, December 31: 13,395.99 (cut-and-pasted from what the Globe's site says is its current value)
Posted by: Stephen Gordon | January 05, 2011 at 04:12 PM
Hesam: you aren't allowed to wait for more data. That's cheating! The rules are that you have to be an idiot, like the rest of us, and make an unconditional forecast based on whatever hunches you've got. - Nick Rowe
It is only 4 days! The post is dated Jan. 3rd and the data comes out Jan. 7th ...
Posted by: Hesam | January 06, 2011 at 04:21 AM
U.S. Companies Added 297,000 Jobs Last Month, More Than Forecast, ADP Says
The forecast was 100,000. Here is the full story from Bloomberg: http://www.bloomberg.com/news/2011-01-05/u-s-companies-added-297-000-jobs-last-month-more-than-forecast-adp-says.html
Right now the forecast is that Canada has created 20,000 jobs in December.
Posted by: Hesam | January 06, 2011 at 05:51 AM
CPI, year over year, November 2011: 2.1%
Unemployment, November 2011: 7.2%
Exchange rate, December 31 2011: US$ 0.97
Bank of Canada overnight rate target, December 31 2011: 1.75%
TSX, December 31 2011: 14,225
Posted by: rprus | January 06, 2011 at 09:38 AM
CPI, year over year, November 2011: 1.9%
Unemployment, November 2011: 7.3%
Exchange rate, December 31 2011: 1 CAD = 0.90 USD
Bank of Canada overnight rate target, December 31 2011: 1.5%
TSX, December 31 2011: 13,000
As far as I know the rule is that you need the growth to be 2% over trend for a year to reduce unemployment by 1%. And I don't think even the wildest optimists think that Canada's GDP will grow more than 4% in 2011 hence my pessimistic jobs number.
Big unknown: when will China finally blow up. If it happens early in the year then I guess my predictions are too optimistic if it happens much later in the year then the numbers might actually turn out to be better.
Posted by: Hesam | January 07, 2011 at 08:41 AM
Nick: Every fun game spawns variants. Would there be any interest in trying to gauge the uncertainty around any of these forecasts? For example, you could ask people to estimate 50% (or 95%) confidence intervals for these things....
Posted by: Simon van Norden | January 10, 2011 at 11:50 AM
Simon: suppose you just have one variable you are trying to forecast. If everyone gives just a point-estimate, you can say who won. It's whoever came closest. But suppose everyone gives both a point-estimate *and* a confidence interval (or standard deviation, or whatever). How could you say who won?
I find that question interesting in its own right, quite apart from it being a response to your comment, on this particular game. I suppose there's an answer to my question, somewhere out there.
Posted by: Nick Rowe | January 10, 2011 at 12:49 PM
What we could do is ask people for predictive distributions. For each variable, we can set out fixed intervals, and ask probabilities that the variable will fall in a particular interval.
Posted by: Stephen Gordon | January 10, 2011 at 12:57 PM
CPI, year over year, November 2011: 2.2%
Unemployment, November 2011: 7.7%
Exchange rate, December 31 2011: US$ 1.03
Bank of Canada overnight rate target, December 31 2011: 1.5%
TSX December 31 2011: 13 400
Housing: -5%
Posted by: Marc Labbé | January 10, 2011 at 02:00 PM