June 1, 2015

Global Economics

Global Forecast Update

Another Slow Start For The Global Economy

A recurring theme is that the global economy is still struggling to generate

increased traction. Particularly worrisome is the chronic underperformance
Contents
of the U.S. and the continuing slowdown in China, the world's two largest
economies, and the multiple headwinds still affecting the global economy. Overview.............................. 1-2
Increasingly, a prolonged period of above-trend growth appears less likely. Forecasts
International ...................... 3-4
The U.S. has been slow to recover even as most of the early-year
Commodities........................ 4
headwinds have dissipated. The West Coast dock strike has been settled North America...................... 5
and two-way trade is moving again. The delays and disruptions to travel Provincial ............................. 6
and shipments triggered by a prolonged stretch of severe winter weather Financial Markets ............. 7-8
are long gone, though the spring has been repeatedly punctuated with
periodic bouts of adverse wet, dry and windy conditions. Ford’s shutdown
to retool two of its largest truck assembly plants is over, and motor vehicle
Global Output Growth:
production is gearing up. There are new concerns that seasonality issues
Lower For Longer
could be exaggerating the recent stream of worse-than-expected
economic news out of the U.S., but the recent spate of weakness appears 6 Real GDP annual % change
more fundamental and global in scope because the problems are proving 2000-07
5
to be more durable. avg.
2010-14
avg.
Many of the world's major oil-producing countries, including the U.S., 4

Canada and Mexico, are experiencing a significant retrenchment in

3
investment, jobs and output associated with the collapse in international
crude oil prices, notwithstanding the relatively modest rebound in prices. 2
Even with some recent giveback, the close to 20% appreciation in the
U.S. dollar over the past year is taking a large bite out of American 1

exports and foreign earnings. Importantly, there is an absence of

0
synchronized growth, especially among the larger emerging market forecast
economies (EMEs) which provided important support during and after the -1
recession. Some EMEs are implementing much needed structural 2000 02 04 06 08 10 12 14 16f

reforms. China's slowdown reflects a number of policy-induced measures Source: Scotiabank Economics, IMF.
to help transition from export- and investment-dependent growth, a credit-
fuelled real estate boom, and government corruption, though recently enacted stimulus should help slow the
deceleration in output growth. Others EMEs are in severe recession, most notably Brazil, Venezuela, Argentina,
and Russia, as well as Greece where large public sector debt burdens remain incompatible with a near-term
revival in growth. In the countries hardest hit by the financial crisis internationally, increased regulatory oversight
is reinforcing bank lending caution. And recurring geopolitical troubles, particularly in the Middle East and
southern Mediterranean areas, are an added source of instability and uncertainty that continues to undermine
confidence and growth.
Chronic economic underperformance is one reason why businesses have been slow to invest and consumers
slow to spend. In the first quarter, world trade volumes, which combine both exports and imports, contracted at a
seasonally adjusted rate of 1.5%. The slide came on the heels of a weakening trend in the second half of last
year, when world trade volumes posted moderating gains of 2.0% and 1.2% in the third and fourth quarters
respectively. Export volumes declined in the first three months of the year in both advanced and emerging
economies, paced by slides in the U.S. and Asia/Pacific. While import volumes remained positive but quite

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 June 1, 2015
Global Economics
Global Forecast Update

modest in the advanced economies, they dropped sharply in most emerging market Chronic Underperformance
regions outside of Latin America. China’s Lunar Holidays may account for some, 10 Real GDP annual % change
but not all, of the retrenchment.
8
More recent data indicate that the weakening trend in the world’s economic 2000-07
momentum has yet to reverse course. The Markit Purchasing Managers’ composite 6
2008-09
index for global manufacturing edged lower in May, with the smoothed six-month
2010-16f
growth trend contracting at a 3% annualized rate. U.S. manufacturing activity edged 4
higher in May, but is 9% below its peak in August 2014, while China’s PMI has
2
been below the 50 level that separates expansion from contraction for five out of
the last six months. Similarly, the global composite index for industrial production 0
also declined, pulling the six-month growth trend down to an annualized rate of just
under 2%. And while U.S. ‘core’ durable goods orders — non-defense capital goods -2
orders excluding aircraft — increased modestly in April for the second month in a
-4
row, the smoothed six-month growth trend has dropped at an annualized rate of just China U.S. Canada Euro zone
5¼%. Canada’s new orders data for manufactured goods are significantly lagged,
Source: Scotiabank Economics, National Bureau of
with the smoothed six-month growth trend slumping to an annualized rate of only Statistics of China, BEA, Statistics Canada, Eurostat.
0.7% in March as the downturn in oil-related activity increasingly offset prior gains
attributable to reviving U.S. activity. North American rail shipments are still moderating in response to less-than-buoyant
industrial activity, and reduced demand for coal and crude oil.
On the plus side, U.S. housing-related activity is showing signs of reviving. New home sales, construction starts and building
permits rebounded in April. There is a glimmer of hope that this important sector is rebuilding momentum on the back of a
much improved job market, after sharply higher mortgage rates in 2013 short-circuited the sector’s recovery. Auto sales
appear poised to move steadily higher against the backdrop of continuing job gains, comparatively low prices at the pump,
and historically low borrowing costs. Tourism flows appear to be improving as well, with U.S. and Chinese travel expenditures
gradually increasing alongside cheaper fuel prices.
The current mix of economic and financial market conditions should be very supportive of stronger and more sustainable
activity throughout the NAFTA region, and internationally as well. The list includes historically low borrowing costs in most
countries around the world, increasing monetary stimulus in many advanced and emerging market economies, significant
foreign exchange revaluations that should boost the export competitiveness of most countries, sharply lower prices for
gasoline, cash-rich corporations, a lengthy period of outsized job gains in the U.S., the increasing wealth generated by rising
asset prices (equities, real estate and collectibles, for example), and increased fiscal initiatives and infrastructure expenditures
in a number of nations.
That these highly stimulative factors have yet to reinvigorate U.S. and global growth suggests that the underlying problems are
more structural than cyclical. There is still too much supply relative to demand internationally. Key commodity markets are a
case in point. While crude oil prices have begun to firm on expectations that the sharp decline in U.S. rig counts is leading to
reduced output, the potential for sizeable oversupply conditions still endures around the world. Excess capacity persists in
most labour markets and many industrial sectors, highlighting the weakness in investment spending. And the continuing rise in
private and public sector indebtedness leaves less flexibility for households and governments to finance sharply higher
expenditures. The Bank for International Settlements calculates that outstanding debt in the globe’s twelve largest economies
has essentially doubled to around US$125 trillion since 2007, with emerging market economies accounting for the largest
increase through this period. Even though many Americans have successfully deleveraged their balance sheets, the
demographic profile of potential borrowers — students and newly formed households — is collectively constrained by existing
high levels of debt, and an underwhelming job market for higher-paying and more permanent positions.
Persistent structural deficiencies increase the odds that potential output gains around the world are likely to be on the ‘softer
side’, although pent-up consumer and business demand in some countries and regions still could temporarily provide a
stronger boost to activity. Growth should be led by the U.K. and the U.S. in the advanced nations, and India and China among
the emerging market countries. In this environment, the U.S. dollar and sterling should strengthen further among the advanced
nations, with the continuing improvement in U.S. job conditions and a modest upward bias in wages and prices enabling the
Fed to begin raising the funds rate gradually in the second half of the year. While U.S. bond yields are biased higher, the
extent of the rise will be limited by the differential economic performances and policy settings among the advanced nations.

2
 June 1, 2015
Global Economics
Global Forecast Update

International 2000-13 2014 2015f 2016f

Forecast Changes
Real GDP (annual % change)
World (based on purchasing power parity) 3.9 3.3 3.1 3.6 International
 Signs of a moderate recovery
Canada 2.2 2.4 1.6 2.0 are emerging in the Japanese
United States 1.9 2.4 2.2 2.8 economy, though substantial
challenges remain in place. Real
Mexico 2.4 2.1 2.6 3.1
GDP increased by 0.6% q/q in
United Kingdom 1.8 2.8 2.5 2.3 the first quarter of 2015,
following a 0.3% gain in the final
Euro zone 1.2 0.9 1.5 1.7 three months of 2014.
Germany 1.2 1.6 1.9 2.0 Nevertheless, year-over-year
France 1.4 0.2 1.1 1.4 growth remained in
Italy 0.2 -0.4 0.5 1.0 contractionary territory given the
strong expansion a year earlier
Spain 1.7 1.4 2.6 2.3 ahead of the consumption tax
Russia 4.9 0.6 -4.9 0.5 rate increase in April 2014. We
Turkey 4.4 2.9 3.2 3.9 have made a small upward
revision to our 2015 real GDP
China 9.1 7.4 7.0 6.5 growth forecast, and now expect
India 7.0 7.4 7.5 7.7 the Japanese economy to
expand by 0.7% this year (0.6%
Japan 0.9 -0.1 0.7 1.2 previously).
South Korea 4.4 3.3 3.0 3.5
 First-quarter real GDP growth in
Indonesia 5.8 5.0 5.1 5.7 Germany surprised on the
Australia 3.0 2.7 2.5 2.8 downside, given weaker export
Thailand 4.4 0.9 3.7 4.0 sector performance. Output
expanded by only 0.3% q/q
Brazil 3.5 0.1 -1.4 1.0 following a 0.7% gain in the prior
Colombia 4.2 4.6 3.0 3.4 three months. Accordingly, we
have revised our growth
Peru 5.6 2.4 3.1 4.1 forecasts for Germany, and now
Chile 4.5 1.9 2.6 3.7 expect 1.9% and 2.0%
expansion in 2015 and 2016,
Consumer Prices (y/y % change, year-end) respectively (earlier 2.0% and
1.9%, respectively).
Canada 2.0 1.9 1.8 2.1  Meanwhile, France and Italy
United States 2.4 1.2 1.0 2.2 posted stronger-than-anticipated
Mexico 4.7 4.1 3.2 3.9 momentum in the first quarter,
advancing by 0.6% q/q and
United Kingdom 2.3 0.5 0.6 2.3 0.3% q/q, respectively. This
Euro zone 2.0 -0.2 0.8 1.4 resulted in upward revisions to
the 2015 real GDP growth
Germany 1.7 0.1 1.0 1.5 forecasts: we expect French
France 1.8 0.1 0.7 1.2 output to grow by 1.1% in 2015
Italy 2.3 -0.1 0.5 1.0 (earlier 1.0%) while the Italian
Spain 2.7 -1.0 0.5 1.2 economy is forecast to advance
by 0.5% (0.4% earlier). Our euro
Russia 11.4 11.4 12.9 7.9 zone aggregate real GDP
Turkey 16.6 8.2 7.0 5.9 growth projections remain
unchanged at 1.5% for 2015 and
China 2.4 1.5 1.7 2.1 1.7% for 2016.
India* 10.2 4.3 5.8 6.2  The collapse in oil prices has
Japan -0.1 2.4 0.7 1.0 taken a larger-than-expected toll
South Korea 2.9 0.8 1.2 2.4 on the Colombian economy.
Indonesia 5.6 8.4 4.4 5.4 Accordingly, we have revised
our real GDP forecasts
Australia 3.0 1.7 1.8 2.2 downward for 2015 (to 3.0%
Thailand 2.6 0.6 1.0 2.2 from 3.5%) and 2016 (to 3.4%
from 3.8%).
Brazil 6.5 6.4 8.4 6.0
Colombia 5.1 3.7 3.8 3.5
Peru 2.6 3.2 2.9 2.9
Chile 3.2 4.6 2.8 3.0
* Wholesale Price Index used prior to 2012.

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 June 1, 2015
Global Economics
Global Forecast Update

International 2000-13 2014 2015f 2016f

Forecast Changes
Current Account Balance (% of GDP)
Canada -0.1 -2.1 -3.2 -2.5 Commodities
United States -4.0 -2.4 -2.6 -2.8  WTI oil prices have rallied on
Mexico -1.4 -2.0 -2.8 -2.6 expectations of a production
slowdown in the U.S. shales and
United Kingdom -2.5 -5.5 -4.6 -4.5 a strong spring and summer
Euro zone -0.1 2.1 2.2 2.1 driving season in the United
Germany 4.1 7.5 6.6 6.2 States (underway on the
France -0.4 -1.0 -0.8 -0.6 Memorial Day weekend). U.S.
drilling activity continues to drop
Italy -1.1 1.9 2.3 2.1
(-57.9% y/y), suggesting that
Spain -5.0 0.8 0.6 0.5 U.S. ‘light, tight’ oil output is on
Russia 5.7 3.5 4.5 5.0 the cusp of a decline. Equally
Turkey -4.5 -5.9 -4.9 -5.1 important, U.S. petroleum
demand (as measured by
China 4.3 2.1 2.1 2.0 products supplied) has climbed
India -1.5 -1.5 -1.4 -1.8 by 3.5% in the four weeks to May
Japan 2.9 0.5 2.0 2.2 22 — up 662,000 b/d y/y to
19.766 mb/d. U.S. refineries are
South Korea 2.1 6.3 6.9 6.0
running at a high 93.6%
Indonesia 1.4 -2.9 -2.4 -2.2 operating rate in mid-May —
Australia -4.5 -2.9 -3.1 -2.7 3.7 percentage points above the
Thailand 2.5 3.2 3.7 3.3 89.9% of a year ago. High U.S.
commercial oil inventories have
Brazil -1.2 -4.0 -4.6 -3.8 edged down in the past four
Colombia -1.9 -5.4 -5.8 -5.4 weeks.
Peru -1.3 -4.0 -4.0 -2.2  Global oil industry investment will
Chile 0.3 -1.2 -0.6 -0.4 drop by more than 20% in 2015.
However, Persian Gulf countries
Commodities are ramping up drilling activity in
a bid for increased market share
(annual average)
vis-a-vis the U.S. shales and
WTI Oil (US$/bbl) 63 93 58 65 Russia. Saudi Arabia, the main
Brent Oil (US$/bbl) 65 99 63 70 architect of OPEC’s strategy of
allowing market forces to shake
Nymex Natural Gas (US$/mmbtu) 5.32 4.28 2.95 3.25
out higher-cost non-OPEC
Copper (US$/lb) 2.30 3.11 2.75 2.75 supply, is not expected to
Zinc (US$/lb) 0.79 0.98 1.00 1.50 change policy at the June 5
OPEC meeting. However,
Nickel (US$/lb) 7.58 7.65 6.38 8.75
internal wrangling may
Gold, London PM Fix (US$/oz) 792 1,266 1,185 1,185 eventually emerge, with Iran
Pulp (US$/tonne) 745 1,025 968 975 signalling that it wants other
OPEC producers to make room
Newsprint (US$/tonne) 587 604 558 550
for an increase in its oil exports,
Lumber (US$/mfbm) 280 349 320 360 assuming it secures a nuclear
deal with U.N. Security Council
members plus Germany by June
Provincial GDP Commodity Price Trends 30.
900
5
Annual % change 2014* Index:2002Q1=100  Western Canada’s coking coal
4 2015f 800 production will drop in 2015Q3
alongside significant output cuts
2016f 700 Nickel
3 linked to weak global supply and
Copper demand conditions.
2 600 WTI Oil

1 500
Natural
0 400 Gas
-1 300

-2 200

-3 100
Gold
-4 0
NL PE NS NB QC ON MB SK AB BC 02 04 06 08 10 12 14

* 2014 data are preliminary GDP by industry estimates. Source: Bloomberg, Scotiabank Economics.
Source: Statistics Canada, Scotiabank Economics.

4
 June 1, 2015
Global Economics
Global Forecast Update

North America 2000-13 2014 2015f 2016f

Forecast Changes
Canada (annual % change)
Real GDP 2.2 2.4 1.6 2.0 Canada & United States
Consumer Spending 3.0 2.7 2.0 2.2  We have again lowered our
Residential Investment 3.8 2.7 3.4 -1.0 forecast of U.S. GDP growth this
Business Investment 3.7 -0.1 -4.0 2.4 year, from 2.6% to 2.2%,
Government 2.7 -0.3 0.6 0.3 following the sharp downward
revision to first-quarter growth
Exports 0.8 5.4 3.1 4.8
and a weaker-than-anticipated
Imports 3.3 1.8 1.6 3.1 handoff to Q2. We continue to
Nominal GDP 4.7 4.3 1.4 4.3 expect activity to gain momentum
over the remainder of the year,
GDP Deflator 2.4 1.8 -0.2 2.3
underpinned by solid consumer
Consumer Price Index 2.0 1.9 1.2 2.1 fundamentals (strengthening job
Core CPI 1.8 1.8 2.2 2.0 and income gains, lower gasoline
Pre-Tax Corporate Profits 5.1 8.8 -7.0 9.0 prices, rising stock market pricing
Employment 1.5 0.6 0.7 0.8 and home values) and pent-up
thousands of jobs 235 111 132 146 housing demand.
Unemployment Rate (%) 7.1 6.9 6.8 6.7  A sharper-than-expected Q1
slowdown fuelled by oil sector
Current Account Balance (C$ bn.) -6.5 -41.5 -64.0 -52.0
cutbacks combined with a
Merchandise Trade Balance (C$ bn.) 33.9 5.0 -23.1 -11.0 somewhat softer U.S. growth
Federal Budget Balance (C$ bn.) -4.5 0.8 1.5 2.0 profile have also prompted us to
per cent of GDP -0.3 0.0 0.1 0.1 revise lower our forecast for
Canadian output growth this
Housing Starts (thousands) 200 188 180 178 year, from 1.8% to 1.6%.
Motor Vehicle Sales (thousands) 1,606 1,851 1,855 1,855 Strengthening U.S. demand
Motor Vehicle Production (thousands) 2,421 2,390 2,430 2,490 alongside a more competitive
Industrial Production 0.5 4.1 0.5 2.6 currency is expected to support
an export-led pickup in industrial
United States activity later in the year. At the
same time, lacklustre
Real GDP 1.9 2.4 2.2 2.8 employment and wage gains will
Consumer Spending 2.3 2.5 3.0 3.1 likely restrain retail and housing
Residential Investment -1.8 1.6 6.3 7.6 activity.
Business Investment 2.0 6.3 3.1 5.0  After a strong final month for
Government 1.2 -0.2 0.6 0.7 fiscal 2014-15 (FY15), easing in
Exports 4.0 3.2 1.7 4.0 Canada’s federal austerity this
fiscal year will be largely
Imports 3.4 4.0 5.5 5.3
delivered through family tax relief
Nominal GDP 4.0 3.9 3.0 4.6 and an expanded child/youth
GDP Deflator 2.1 1.5 0.8 1.7 benefit. In the U.S., buoyant
Consumer Price Index 2.4 1.6 0.4 2.1 federal monthly revenues,
underpinned by taxes owing for
Core CPI 2.0 1.7 1.8 2.0
2014, are expected to leave the
Pre-Tax Corporate Profits 6.9 -0.8 -1.0 5.0 fiscal 2015 deficit virtually
Employment 0.4 1.9 2.1 1.5 unchanged from fiscal 2014.
millions of jobs 0.51 2.63 2.88 2.17
Unemployment Rate (%) 6.4 6.2 5.3 5.0 Mexico
 We have revised our
Current Account Balance (US$ bn.) -537 -411 -473 -526 expectations for Mexican real
Merchandise Trade Balance (US$ bn.) -655 -736 -770 -835 GDP growth in 2015 downward
Federal Budget Balance (US$ bn.) -539 -485 -480 -495 to 2.6% from 2.8%. This reflects
per cent of GDP -4.0 -2.8 -2.7 -2.6 recent data releases, weakness
in certain sectors of the Mexican
Housing Starts (millions) 1.31 1.00 1.12 1.30 economy (i.e. mining, which
Motor Vehicle Sales (millions) 15.2 16.4 17.0 17.3 includes oil and gas activity), and
Motor Vehicle Production (millions) 10.5 11.7 12.1 12.3 downward revisions to our U.S.
Industrial Production 0.9 4.2 2.2 3.2 forecast.

Mexico
Real GDP 2.4 2.1 2.6 3.1
Consumer Price Index (year-end) 4.7 4.1 3.2 3.9
Current Account Balance (US$ bn.) -13.7 -26.5 -33.4 -33.5
Merchandise Trade Balance (US$ bn.) -6.5 -2.4 -11.6 -10.1

5
 June 1, 2015
Global Economics
Global Forecast Update

Provincial
Provincial 2000-13
2000-13 2014
2014 2015f
2015f 2016f
2016f 2000-13
2000-13 2014
2014 2015f
2015f 2016f
2016f Forecast Changes
Real GDP*GDP*
Real BudgetBalances*,
Budget Balances*, FYFY March 31 31
March
(annual
(annual % change)
% change) ($millions)
($ millions) Provinces
 With a slower-than-expected
Canada
Canada 2.2 2.4 1.6 2.0 -3,102 -5,150 800 1,500 start to 2015, real GDP growth
for the year is trimmed for most
provinces, mirroring less
Newfoundland & Labrador
Newfoundland & Labrador 3.1 -2.9 -0.6 -0.8 167 -389 -924 -1,093 buoyant U.S. growth and, in
Prince Edward
Prince Edward IslandIsland 1.9 1.3 1.5 1.6 -40 -46 -35 n.a. several instances, further
Nova Scotia
Nova Scotia 1.5 1.6 1.6 1.8 23 -679 -102 -98 softness in residential
New Brunswick
New Brunswick 1.3 0.0 0.8 1.2 -97 -499 -255 -477 construction. For Atlantic
Canada through April, the lack
of significant job creation from a
Quebec
Quebec 1.8 1.4 1.7 1.9 -836 -2,824 -2,350 0 year earlier leaves projected
Ontario
Ontario 1.9 2.3 2.5 2.5 0 -10,453 -10,933 -8,512 2015 employment lower and the
region’s annual unemployment
Manitoba
Manitoba 2.4 1.1 2.3 2.4 -6 ** -522 -424 -422 rate slightly higher.
Saskatchewan
Saskatchewan 2.4 1.4 0.4 1.7 n.a. n.a. 41 107  Alberta early in 2015 performed
Alberta
Alberta 3.3 4.4 0.1 1.6 n.a. -302 248 n.a. relatively strongly on several
British Columbia
British Columbia 2.6 2.6 2.3 2.4 198 353 879 284 indicators, such as housing
starts and job creation.
* 2014
4 data are data
*201 preliminaryare preliminary
GDP by industry estimates. estimates * *FY15 and
FY15 and FY1 FY16:
6: Provinces' Provinces'
estimates; ** FY04-FY13. estimates; However, the slowdown
of GDP by industry at basic prices. ** FY04-FY13. expected over the rest of the
year is expected to dampen the
province’s annual averages.
Employment
Employment Unemployment
Unemployment Rate Rate Consequently, we continue to
(annual
(annual % change)
% change) (annual average,
(annual average, %) %) look for positive, but very
modest real GDP growth for
Alberta, with its new
Canada
Canada 1.5 0.6 0.7 0.8 7.1 6.9 6.8 6.7 government’s preference for
avoiding program spending cuts
Newfoundland & Labrador
Newfoundland & Labrador 1.3 -1.7 -0.8 -0.9 14.6 11.9 12.4 12.8 limiting some of the near-term
Prince Edward
Prince Edward IslandIsland 1.5 -0.1 0.3 0.6 11.3 10.6 10.6 10.6 downside risk.
Nova Scotia
Nova Scotia 0.8 -1.1 0.4 0.6 8.9 9.0 8.9 8.7  Headline CPI inflation from
New Brunswick
New Brunswick 0.6 -0.2 0.1 0.4 9.5 9.9 10.0 9.9 January to April has been
roughly zero in Atlantic Canada
Quebec 1.4 0.0 0.8 0.8 8.1 7.7 7.3 7.2 on a year-over-year (y/y) basis,
Quebec
compared with the 1.0% national
Ontario
Ontario 1.4 0.8 0.9 1.0 7.2 7.3 6.9 6.9 rise. In part this reflects modest
y/y price hikes, excluding food
Manitoba
Manitoba 1.0 0.1 0.9 0.8 5.0 5.4 5.3 5.1 and energy, of just over 1.0% in
Saskatchewan
Saskatchewan 1.3 1.0 0.3 0.7 4.9 3.8 4.4 4.2 each Atlantic province except
Alberta
Alberta 2.7 2.2 0.1 0.8 4.8 4.7 5.6 5.5 Nova Scotia, where a stronger
1.6% y/y gain is reported.
British Columbia
British Columbia 1.3 0.6 0.7 0.9 6.7 6.1 5.9 5.9
 To date in 2015, the average
price on residential home sales
has surged from a year earlier in
Housing
HousingStartsStarts Motor
Motor Vehicle SalesSales
Vehicle
British Columbia and Ontario.
(annual, thousands
(annual, thousands of units)of units) (annual, thousands
(annual, thousands of units)
of units) Conversely, in five provinces,
average home sale prices are
Canada
Canada 200 189 180 178 1,606 1,851 1,855 1,855 unchanged from a year earlier or
lower.
Atlantic
Atlantic 12 8 8 8 117 137 137 135  The spring Budgets signalled
fiscal restraint for the majority of
Quebec
Quebec 45 39 35 37 407 420 426 427 Provinces during fiscal 2015-16
Ontario (FY16), aside from substantial
Ontario 72 59 59 59 607 719 726 729
infrastructure investment in
several regions. Over the next
Manitoba
Manitoba 5 6 6 6 45 56 56 56 few years, the expected rise in
Saskatchewan
Saskatchewan 5 8 6 7 44 56 53 52 provincial and municipal service
Alberta
Alberta 34 41 37 34 211 269 258 256 fees towards full cost recovery
will likely impact both
British Columbia
British Columbia 27 28 29 27 175 194 199 200
households and businesses.

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 June 1, 2015
Global Economics
Global Forecast Update

Quarterly Forecasts 2014 2015 2016

Canada Q3 Q4 Q1 Q2f Q3f Q4f Q1f Q2f Q3f Q4f
Real GDP (q/q, ann. % change) 3.2 2.2 -0.6 1.7 2.0 2.0 2.0 2.1 2.1 2.2
Real GDP (y/y, % change) 2.6 2.5 2.1 1.6 1.3 1.3 1.9 2.0 2.1 2.1
Consumer Prices (y/y, % change) 2.1 1.9 1.1 0.9 1.2 1.8 2.1 2.1 2.1 2.1
Core CPI (y/y % change) 2.0 2.2 2.2 2.2 2.1 2.1 2.0 2.0 2.0 2.0
United States
Real GDP (q/q, ann. % change) 5.0 2.2 -0.7 2.4 3.1 3.2 2.8 2.7 2.5 2.5
Real GDP (y/y, % change) 2.7 2.4 2.7 2.2 1.7 2.0 2.9 2.9 2.8 2.6
Consumer Prices (y/y, % change) 1.8 1.2 -0.1 0.1 0.3 1.0 2.1 2.0 2.1 2.2
Core CPI (y/y % change) 1.8 1.7 1.7 1.7 1.8 1.9 1.9 1.9 2.0 2.1

Financial Markets
Central Bank Rates
Americas (%, end of period)
Bank of Canada 1.00 1.00 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75
U.S. Federal Reserve 0.25 0.25 0.25 0.25 0.50 0.75 1.00 1.25 1.50 1.75
Bank of Mexico 3.00 3.00 3.00 3.02 3.50 3.75 4.00 4.25 4.50 4.75
Central Bank of Brazil 11.00 11.75 12.75 13.25 13.25 13.25 13.25 12.75 12.50 12.00
Bank of the Republic of Colombia 4.50 4.50 4.50 4.50 4.50 4.50 4.50 4.50 4.75 5.00
Central Reserve Bank of Peru 3.50 3.50 3.25 3.25 3.25 3.25 3.25 3.25 3.50 3.50
Central Bank of Chile 3.25 3.00 3.00 3.00 3.00 3.00 3.25 3.50 3.75 4.00
Europe
European Central Bank 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05
Bank of England 0.50 0.50 0.50 0.50 0.50 0.50 0.75 0.75 1.00 1.00
Swiss National Bank 0.00 -0.25 -0.75 -0.75 -0.75 -0.75 -0.75 -0.75 -0.75 -0.50
Asia/Oceania
Reserve Bank of Australia 2.50 2.50 2.25 2.00 2.00 2.00 2.00 2.00 2.25 2.50
People's Bank of China 6.00 5.60 5.35 5.10 5.00 4.90 4.90 4.90 4.90 4.90
Reserve Bank of India 8.00 8.00 7.50 7.25 7.00 7.00 7.00 7.00 7.00 7.00
Bank of Korea 2.25 2.00 1.75 1.75 1.75 1.75 1.75 2.00 2.25 2.50
Bank Indonesia 7.50 7.75 7.50 7.50 7.25 7.25 7.25 7.25 7.50 7.50
Bank of Thailand 2.00 2.00 1.75 1.50 1.50 1.50 1.50 1.75 2.00 2.25

Canada
3-month T-bill 0.92 0.92 0.55 0.65 0.70 0.75 0.75 0.75 0.75 0.75
2-year Canada 1.12 1.01 0.51 0.60 0.75 0.90 1.25 1.50 1.80 2.00
5-year Canada 1.63 1.34 0.76 0.90 1.25 1.50 1.75 1.95 2.10 2.30
10-year Canada 2.15 1.79 1.36 1.60 1.80 1.85 2.10 2.20 2.35 2.50
30-year Canada 2.67 2.34 1.98 2.20 2.40 2.50 2.60 2.70 2.85 3.00
United States
3-month T-bill 0.02 0.04 0.02 0.05 0.30 1.05 1.30 1.55 1.80 2.10
2-year Treasury 0.57 0.66 0.56 0.60 0.95 1.45 1.70 2.00 2.30 2.60
5-year Treasury 1.76 1.65 1.37 1.45 1.65 1.90 2.15 2.35 2.50 2.80
10-year Treasury 2.49 2.17 1.92 2.10 2.30 2.40 2.65 2.75 2.90 3.00
30-year Treasury 3.20 2.75 2.54 2.85 3.00 3.00 3.10 3.20 3.35 3.50
Canada-U.S. Spreads
3-month T-bill 0.90 0.88 0.53 0.60 0.40 -0.30 -0.55 -0.80 -1.05 -1.35
2-year 0.56 0.35 -0.05 0.00 -0.20 -0.55 -0.45 -0.50 -0.50 -0.60
5-year -0.13 -0.31 -0.61 -0.55 -0.40 -0.40 -0.40 -0.40 -0.40 -0.50
10-year -0.34 -0.38 -0.56 -0.50 -0.50 -0.55 -0.55 -0.55 -0.55 -0.50
30-year -0.53 -0.41 -0.56 -0.65 -0.60 -0.50 -0.50 -0.50 -0.50 -0.50

7
 June 1, 2015
Global Economics
Global Forecast Update

Financial Markets 2014 2015 2016

Exchange Rates Q3 Q4 Q1 Q2f Q3f Q4f Q1f Q2f Q3f Q4f
Americas (end of period)
Canadian Dollar (USDCAD) 1.12 1.16 1.27 1.22 1.23 1.26 1.26 1.25 1.25 1.24
Canadian Dollar (CADUSD) 0.89 0.86 0.79 0.82 0.81 0.79 0.79 0.80 0.80 0.81
Mexican Peso (USDMXN) 13.43 14.75 15.26 15.40 15.67 15.50 15.37 15.10 15.04 15.13
Brazilian Real (USDBRL) 2.45 2.66 3.20 3.15 3.20 3.25 3.10 3.10 3.15 3.35
Colombian Peso (USDCOP) 2025 2377 2600 2500 2550 2575 2625 2650 2675 2700
Peruvian Nuevo Sol (USDPEN) 2.89 2.98 3.10 3.18 3.20 3.20 3.30 3.28 3.25 3.25
Chilean Peso (USDCLP) 598 606 625 610 619 625 624 624 624 623

Canadian Dollar Cross Rates

Euro (EURCAD) 1.41 1.41 1.36 1.34 1.33 1.32 1.32 1.30 1.28 1.24
U.K. Pound (GBPCAD) 1.82 1.81 1.88 1.83 1.85 1.90 1.90 1.89 1.90 1.88
Japanese Yen (CADJPY) 98 103 95 100 100 99 102 103 104 106
Australian Dollar (AUDCAD) 0.98 0.95 0.97 0.95 0.93 0.92 0.92 0.93 0.94 0.93
Mexican Peso (CADMXN) 11.99 12.69 12.03 12.62 12.74 12.30 12.20 12.08 12.03 12.20

Europe
Euro (EURUSD) 1.26 1.21 1.07 1.10 1.08 1.05 1.05 1.04 1.02 1.00
U.K. Pound (GBPUSD) 1.62 1.56 1.48 1.50 1.50 1.51 1.51 1.51 1.52 1.52
Swiss Franc (USDCHF) 0.96 0.99 0.97 0.95 0.98 1.02 1.03 1.05 1.08 1.10
Swedish Krona (USDSEK) 7.21 7.81 8.63 8.50 8.55 8.60 8.60 8.60 8.60 8.60
Norwegian Krone (USDNOK) 6.43 7.45 8.06 7.80 7.85 7.90 7.90 7.85 7.75 7.70
Russian Ruble (USDRUB) 39.6 60.7 58.2 55.5 56.5 56.0 55.5 55.0 54.0 53.0
Turkish Lira (USDTRY) 2.28 2.34 2.60 2.73 2.77 2.80 2.78 2.75 2.69 2.65

Asia/Oceania
Japanese Yen (USDJPY) 110 120 120 122 123 125 128 129 130 131
Australian Dollar (AUDUSD) 0.87 0.82 0.76 0.78 0.76 0.73 0.73 0.74 0.75 0.75
Chinese Yuan (USDCNY) 6.14 6.21 6.20 6.17 6.13 6.10 6.08 6.05 6.03 6.00
Indian Rupee (USDINR) 61.8 63.0 62.5 64.0 65.0 66.0 66.4 66.8 67.1 67.5
South Korean Won (USDKRW) 1055 1091 1110 1100 1135 1170 1165 1160 1155 1150
Indonesian Rupiah (USDIDR) 12188 12388 13074 13300 13650 14000 13975 13950 13925 13900
Thai Baht (USDTHB) 32.4 32.9 32.5 33.8 34.2 34.5 34.4 34.3 34.1 34.0

Central Bank Rates Global Inflation 10-Year Yields

7 10 7
% y/y % change
%
6 8 6
U.S. Forecast Forecast
5 U.K. China 5 U.S.
6

4 4 4
Canada
3 Forecast 3
2
Canada 2
2 Euro zone 0
Euro
Canada
zone 1
1 -2 U.S.

0
0 -4
04 06 08 10 12 14 16
04 06 08 10 12 14 16 07 08 09 10 11 12 13 14 15 16
Source: Bloomberg, Scotiabank Economics. Source: Bloomberg, Scotiabank Economics. Source: Bloomberg, Scotiabank Economics.