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Economic Update & Outlook
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October 12, 2021
Today’s Presenter October 12, 2021 2
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October 12, 2021 3
The long and winding road to recovery
October 2021
Dawn Desjardins
VP & Deputy Chief Economist
(416) 272-7064
dawn.desjardins@rbc.comUS economy on recovery path amidst
elevated uncertainty
Real GDP growth: U.S.
Year to Year % change
7
6
5
4
3
2
1
0
-1 Annual Growth Rates
-2 2019 2020 2021f 2022f
Real GDP 2.3 -3.4 5.6 3.6
-3
-4
2008 2010 2012 2014 2016 2018 2020 2022
Source: Bureau of Economic Analysis, RBC EconomicsCanada challenged by Delta variant though
unlikely to throw economy off course
Real GDP growth: Canada
Year to Year % change
6
4
2
0
-2
Annual Growth Rates
2019 2020F 2021f 2022f
Real GDP 1.9 -5.3 5.1 4.3
-4
-6
2008 2010 2012 2014 2016 2018 2020 2022
Source: Statistics Canada, RBC EconomicsHigh vaccination rate will limit pressure on
health care and reduce need for restrictions
COVID Cases vs Hospitalizations
Left axis: New cases and hospitalizations per million
Right axis: Vaccination rate (at least one dose)
250 80
70
200
60
50
150
40
100 30
20
50
10
0
Hospitalized New cases Vaccinated
Source: Our World in Data, RBC EconomicsLabour market recovery underway but
uneven
Canada employment vs pre-pandemic level
Thousands, change from Feb 2020 to September 2021
183 Professional, Scientific & Technical
94 Educational Services
108 Public Administration
76 Finance, Insurance, Real Estate
22 Forestry, Fishing, Mining, Oil & Gas
-30 Trade
-26 Transport and Warehousing
-36 Business, Building & Other Support Services
-73 Construction
-96 Other Services
-180 Accommodation and Food Services
-200 -100 0 100 200 300
Source: Statistics Canada, RBC EconomicsFiscal support offsets lost wages
Canada Primary vs Disposable Household Income
Indexed to 2019Q4=100
120
Forecast
115
110
105
100
95 Primary income (mostly
wages & salaries)
90 Disposable income (includes
gov't transfers)
85
2019Q4
2020Q1
2020Q2
2020Q3
2020Q4
2021Q1
2021Q2
2021Q3
2021Q4
2022Q1
2022Q2
2022Q3
2022Q4
Source: Statistics Canada, RBC Economics ResearchLots of money on the sidelines
Household savings stockpile in context
Billions of Canadian $
Household excess savings,
accumulated through Q2/21
Total tourism spending in 2019
Total consumer spend on food,
beverage and accomodation services
in 2019
Total consumer spend on clothing &
footwear in 2019
50 100 150 200 250 300
Source: Statistics Canada, RBC EconomicsRBC data shows consumers spending
on goods and now services
Canadians shifting some spending to services as economy reopens
% change from 2019 (pre-shock) levels, 7-day rolling average
40
Goods
Services
30
20
10
Jan-21 Jan-21 Mar-21 Apr-21 May-21 May-21 Jun-21 Jul-21 Aug-21
-10
-20
-30
Source: RBC Economics, RBC Data & AnalyticsHousing sales surged; slowing lately
Home resales: Canada
Thousands of units
700
637
600
543 550
10-year average - 490K 517 505
500 460 490
400
300
200
100
0
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22
Source: Canadian Real Estate Association, RBC Economics Forecast:Businesses are optimistic, planning to
invest
Canadian businesses plan to invest more in 2021
% balance of opinion of investment spending on machinery and equipment over the next 12 months
50
40
30
20
10
0
-10
-20
-30
-40
2018-Q1 2018-Q3 2019-Q1 2019-Q3 2020-Q1 2020-Q3 2021-Q1
Source: Bank of Canada, RBC EconomicsLabour shortages create challenges
Businesses report elevated levels of unfilled positions
Job vacancy rate, in %
7
= 800,000 vacancies 6.0
6 5.8
5.2
5.0
5 4.8
4.5
4.1 4.2 4.2
4 3.7 3.8
3
2
1
0
MB NS NL SK AB NB ON Canada PE QC BC
Q4 2019 Jun-21
Source: Statistics Canada, RBC EconomicsSupply chain disruptions also limiting
growth for now
Chip shortages halting Canadian auto production recovery
Index = 100 in Feb/2020, SA
120
100
80
60
40
20
0
Feb-20 Apr-20 Jun-20 Aug-20 Oct-20 Dec-20 Feb-21 Apr-21 Jun-21
Source: Automative News, RBC EconomicsShortages of inputs and labour lift
business inflation expectations
More businesses expect inflation to exceed BoC target
More businesses expect inflation to exceed BoC target
Percentage of firms' responses to inflation expectation over the next 2 years
Percentage of firms' responses to inflation expectation over the next 2 years
100
100
80
80
2% to 3% above 3%
2% to 3% above 3%
60
60
40
40
20
20
0
0 Q1/19 Q2/19 Q3/19 Q4/19 Q1/20 Q2/20 Q3/20 Q4/20 Q1/21 Q2/21
Q1/19 Q2/19 Q3/19 Q4/19 Q1/20 Q2/20 Q3/20 Q4/20 Q1/21 Q2/21
Source: Bank of Canada BOS survey, RBC Economics
Source: Bank of Canada BOS survey, RBC EconomicsInflation pressures will ease albeit
remain above BOC’s 2% target
Energy prices to normalize; strong spending to put floor
under inflation rate
Year over year growth in prices, non-seasonally adjusted
4.0
Forecast
2.0
0.0
-2.0
Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 Q4-22
Other Food Energy MIC Headline CPI
Source: Statistics Canada, RBC EconomicsRates will remain historically low
Interest rates: Canada
end of period
7%
6% Forecast
5%
4%
3%
2%
BoC overnight rate
1%
10 Year Bond Yield
0%
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
Source: BoC, RBC EconomicsCanada’s dollar to trade ≈80¢US
Canadian dollar
US$/C$
1.10
Forecast
Parity
1.00
0.90
0.80
End of period
0.70
2019 2020 2021 2022
US$/C$ 0.77 0.78 0.80 0.79
0.60
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22
Source: Bank of Canada, RBC EconomicsProvinces moving at different speeds
Half of provincial economies projected to recover fully in 2021
Real GDP, annual % change (2020 and 2021) and % change from 2019 to 2021
8
6
5.8 5.7 5.9
4 4.8 5.0 5.1
4.3 4.2
3.6 3.8
2
2.4
0
-2 -3.0
-3.2
-3.8 -3.7
-4 -4.8 -5.0 -5.2
-5.3 -5.3 -5.3
-6 2021
2020 -8.2
-8
2021 vs 2019
-10
B.C. N.S. P.E.I N.B. QUE. MAN. ONT. CA SASK. ALTA. N.& L.
Source: Statistics Canada, RBC EconomicsFor more information please visit:
rbc.com/economics
The material contained in this report is the property of Royal Bank of Canada and may not be reproduced in any way, in whole or in part, without
express authorization of the copyright holder in writing. The statements and statistics contained herein have been prepared b y RBC Economics
Research based on information from sources considered to be reliable. We make no representation or warranty, express or implied, as to its accuracy
or completeness. This publication is for the information of investors and business persons and does not constitute an offer t o sell or a solicitation to
buy securities.
®Registered trademark of Royal Bank of Canada.
©Royal Bank of Canada.Questions
• Please use the CHAT bar to submit
your questions in writing during the
live presentation.
• To register a question over the
phone following the formal portion of
our presentation:
o Enter 1 followed by 4 on your
phone.
o If your question has already been
asked, you can unregister your
question by dialing 1 followed by 3.
Note, this webinar is being recorded, and the
presentation will be made available on our virtual
advice event landing page.
October 12, 2021 22DISCLOSURES Equal Housing Lender. Member FDIC. ® / ™ Registered trademarks of Royal Bank of Canada. Used under license. RBC Bank means RBC Bank (Georgia), N.A., a subsidiary of Royal Bank of Canada. Mortgages are subj ect to approv al, including v erification of acceptable income, credit w orthiness and property v aluations. Minimum and maximum property v alues and maximum loan-to-v alue ratios apply. Homeow ner’s insurance is required for all loans and lines of credit, and flood insurance is required if the property is located in a Special Flood Hazard area. Escrow s may be required. There are closing costs associated w ith these products. 2. 3, 5, 7, or 10-year term refers to the period of time the interest rate is set at the beginning of the loan period w hich is 30 years (360 months); after the initial fixed rate term, the interest rate w ill adj ust annually. Example: 3-Year Adj ustable Rate Mortgage (ARM) calculation assumes a $250,000 loan amount, 4.000% interest rate, 4.764% APR, w ith 20% dow n payment, amortized ov er 360 months = $1,193.54 monthly payment. Example: 5-Year ARM calculation assumes a $250,000 loan amount, 4.125% interest rate, 4.679% APR, w ith 20% dow n payment, amortized ov er 360 months = $1,211.62 monthly payment. Example: 7 -Year ARM calculation assumes a $250,000 loan amount, 4.375% interest rate, 4.699% APR, w ith 20% dow n payment, amortized ov er 360 month s = $1,248.21 monthly payment. Example: 10-Year ARM calculation assumes a $250,000 loan amount, 4.500% interest rate, 4.455% APR, w ith 20% dow n payment, amortized ov er 360 months = $1,266.71 monthly payment. Rates and payments are subject to increase after initial fixed period of loan. If the down payment is less than 20%, mortgage insurance may be needed on the loan. This could increase the monthly payment and the interest rate. Rates subject to increase after consummation. October 12, 2021 RBC Bank Mortgage Solutions 23
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