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					Global Economic Research                                                         March 12, 2010




Highlights                                                              Index
                                                                          2      Forecasts
Canada — A strong broad-based start to 2010, as hiring,
homebuilding and exports post gains.                                      3      Canada

United States — February retail sales rise unexpectedly                   4      United States
despite blizzards.
                                                                          5      Mexico & Developing Americas
Mexico — Peso will remain strong but will not outperform.
                                                                          6      Europe & Asia / Oceania
Latin America — Colombian peso tops charts once more.
                                                                          7      Industry & Commodity
International — Interest rates on hold in Korea, Thailand
and New Zealand.                                                          8      Market Metrics / Fiscal Policy

Industry — Regional Canadian employment trends.                           9      Economic Tables

                                                                        10       Financial Tables




Scotia Economics
Scotia Plaza 40 King Street West, 63rd Floor                This Report is prepared by Scotia Economics as a resource for the
                                                            clients of Scotiabank and Scotia Capital. While the information is from
Toronto, Ontario Canada M5H 1H1
                                                            sources believed reliable, neither the information nor the forecast shall
Tel: (416) 866-6253 Fax: (416) 866-2829                     be taken as a representation for which The Bank of Nova Scotia or
Email: scotia_economics@scotiacapital.com                   Scotia Capital Inc. or any of their employees incur any responsibility.

          Weekly Trends is available on: www.scotiabank.com, Bloomberg at SCOE and Reuters at SM1C
 Global Economic Research                                                                                     March 12, 2010




   Forecasts
Economic Performance (annual % change unless otherwise indicated)
                                       2000-08           2009e         2010f     2011f   2000-08   2009e         2010f    2011f
                                                            Canada                                 United States
Real GDP                                   2.6             -2.6           3.2      2.8       2.4     -2.4          3.6         2.6
Consumer Prices                            2.3              0.3           1.8      2.2       2.9     -0.3          2.5         2.4
Pre-tax Profits                            7.7            -33.2          27.0     16.0       5.3     -4.1         25.0     14.5
Federal Budget Balance ($bn)               8.4            -56.0         -46.0    -30.0      -197   -1413         -1490    -1220
Current Account Balance ($bn)             21.0            -41.3         -37.8    -30.9      -601    -430          -513     -564
Merchandise Trade Balance ($bn)           58.2             -4.3           3.0      9.0      -655    -517          -633     -708
Motor Vehicle Sales (000s)*              1,605            1,461        1,525     1,570      16.4    10.4          11.5     12.2
Motor Vehicle Production (000s)*         2,590            1,425        1,900     2,050      11.5     5.6           7.2      7.5
Housing Starts (000s)*                     207              149          185       175      1.65    0.55          0.70     1.04
Employment                                  1.9             -1.6          1.0      1.6       0.7     -4.3          0.0      2.2
 Jobs Created (000s)*                      301             -272          177      272       0.86    -5.88        -0.06     2.87
Unemployment Rate (%)                      6.9               8.3         8.2      8.0        5.1      9.3          9.8      9.1

                                                            Mexico                                  Euro zone
Real GDP                                   2.8             -6.5           4.2      3.5       1.9     -4.0          1.3         1.1
Consumer Prices                            5.1              3.6           5.4      4.5       2.2      0.9          1.3         1.8

                                                  Latin America (Excl. Mexico)                         Asia
Real GDP                                   3.8             -0.3           3.6      3.7       5.2      1.3          4.8         4.7
Consumer Prices                            8.1              7.1           7.9      4.7       1.6      0.0          1.7         2.0
*In the United States, millions.


Commodity Prices (US$ annual average)
                                                       2000-08                   2009e             2010f                  2011f
Pulp (tonne)                                               662                     720               850                    850
Newsprint (tonne)                                          574                     560               563                    650
Lumber (mfbm)                                              286                     178               237                    250
Copper (lb)                                                1.72                   2.34              3.15                   3.50
Zinc (lb)                                                  0.73                   0.75              0.95                   1.05
Nickel (lb)                                                7.16                   6.50              8.00                   8.25
WTI Oil (bbl)                                             49.93                     62                83                     87
Nymex Natural Gas (US$/mmbtu)                              6.15                   4.15              5.50                   5.50
Wheat (tonne)                                              223                    454                305                   290


Financial Markets (end of period, % unless otherwise indicated)
                                         09Q4            10Q1f         10Q2f     10Q3f    10Q4f    11Q1f         11Q2f    11Q3f
CANADA
 3-month T-bill                           0.31             0.30          0.75     1.05      1.75    2.10          2.30     2.25
 5-year Canada                            2.76             2.80          3.10     3.20      3.70    3.85          3.65     3.55
 10-year Canada                           3.61             3.65          3.85     4.10      4.50    4.80          4.60     4.55
UNITED STATES
 3-month T-bill (Yield)                   0.08             0.30          0.65     1.00      1.75    2.10          2.30     2.25
 5-year Treasury                          2.68             2.70          3.00     3.10      3.60    3.75          3.60     3.55
 10-year Treasury                         3.84             3.85          4.15     4.40      4.80    5.10          4.90     4.85
CANADIAN-US SPREADS
 3-month T-bill                            0.23            0.00          0.10     0.05      0.00     0.00         0.00     0.00
 5-year                                    0.08            0.10          0.10     0.10      0.10     0.10         0.05     0.00
 10-year                                  -0.23           -0.20         -0.30    -0.30     -0.30    -0.30        -0.30    -0.30
Canadian Dollar (USD/CAD)                 1.05             1.02          1.00     0.98      0.97    0.97          0.96     0.95
Canadian Dollar (CAD/USD)                 0.95             0.98          1.00     1.02      1.03    1.03          1.04     1.05
Yen (USD/JPY)                               93               90            88       87        87      89            90       91
Euro (EUR/USD)                            1.43             1.37          1.40     1.45      1.45    1.43          1.43     1.41
Sterling (GBP/USD)                        1.62             1.53          1.60     1.63      1.63    1.63          1.63     1.62
Mexican Peso (USD/MXN)                    13.1             13.1          13.4     13.7      13.8    14.0          13.9     13.9



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Global Economic Research                                                                                         March 12, 2010




 Canada

Adrienne Warren
(416) 866-4315
adrienne_warren@scotiacapital.com



A Strong Start To 2010
                                                                                 Review
A range of economic reports this week point to a solid pace of
                                                                                 Capacity Utilization —- Capacity use increased
economic recovery in the opening months of 2010. Employment
                                                                                 sharply during the final quarter of 2009, though it
increased by 20,900 in February, edging the unemployment rate down               remains at a relatively low level. Canadian industries
0.1 percentage point to a 10-month low of 8.2%. The latest rise brings           operated at 70.9% capacity in Q4, up from 68.7% in
the total number of new jobs created over the past seven months to               Q3. The increase was widespread across
158,500. This in turn replaces a little over a third of the jobs lost            manufacturing, construction, mining and utilities
                                                                                 industries.
during the recession.
                                                                                 Preview
      PRIVATE-PAID EMPLOYMENT   The details of the report were somewhat
75                                                                               Motor Vehicle Sales (03/15)
           (000S M/M, 3MMA)     mixed. All of the gains were full-time
50                              positions, but they were also concentrated       Wage Settlements (03/15)
                                in the public sector. Private sector             Manufacturing Shipments (03/16)
25
                                payrolls fell by 7,500 after a big gain in       Productivity (03/16)
 0                              January.
                                                                                 Wholesale Trade (03/17)
-25                      Several recent surveys point to further                 International Securities Transactions (03/18)
                         cautious hiring in the months ahead.
-50                                                                              CPI (03/19)
                         Manpower reported this week an increase
-75                      in second-quarter hiring intentions, led by
  Jan/08  Jan/09  Jan/10 the education and mining sectors. This
                         follows a similar outlook last week from
                         the Canadian Federation of Independent
Businesses’ monthly survey of small- and mid-sized firms.
Meanwhile, housing starts jumped to an annualized rate of 196,700            dollar, domestic exporters are benefitting from
units in February, the highest level in close to 1½ years. Builders are      higher commodity prices and the pickup in global
responding to limited supply in the resale market, which is pushing up       industrial activity.
prices of both new and resale homes. New home prices rose 0.4%
                                                                             The main disappointment of the week came from
m/m in January, moving back into positive y/y territory for the first
                                                                             major retailers, many of which reported weaker sales
time in over a year. With permit demand currently running around the
                                                                             in February. The falloff appears temporary,
220,000 mark, we anticipate a further pickup in construction in the
                                                                             however. Store traffic and sales slowed sharply in
months ahead.
                                                                             the latter part of the month, coinciding with the
Canada’s merchandise trade surplus widened to $799 million in                Winter Olympics. Aside from strong purchases of
January as exports edged up for a fifth consecutive month and                Games-related goods, the most notable drop was in
imports slipped back following a big gain in the prior month.                British Columbia. Elsewhere, retailers reported
Notwithstanding the competitive challenges of a strong Canadian              improving margins and lean inventories. ■



                                                                                                                                          3
Global Economic Research                                                                                                           March 12, 2010




 United States                                                                                    Review
                                                                                                  International Trade — The trade deficit narrowed
                                                                                                  unexpectedly in January. While exports and imports
Gorica Djeric                                                                                     both declined, the contraction in the latter was more
(416) 866-4214                                                                                    pronounced. In volume terms, exports of goods fell
                                                                                                  1.6% m/m, while imports decreased 3.1%. Even upon
gorica_djeric@scotiacapital.com
                                                                                                  excluding volatile petroleum products, the story
                                                                                                  remains intact. Component wise, declines were broad
                                                                                                  based, spread across the auto sector, capital goods
Shoppers Shake Off February Snow Storms                                                           and consumer products. Looking ahead, the trade gap
                                                                                                  is expected to widen in February and March. As a
Poor weather conditions in February did not stop American shoppers                                result, net export should contribute only modestly to the
from getting out of the house. Headline retail sales rose 0.3% m/m,                               GDP headline in the first quarter, adding 0.2
outperforming market expectations, which called for a 0.2% decline.                               percentage points. The same goes for the year as a
Underlying details were equally encouraging.                                                      whole, with the deficit forecast to narrow to US$335
                                                                                                  billion, from US$355 billion in the previous year.
108                                           February results marked the fourth                  Business Inventories — Total business inventories
         REAL CORE RETAIL SALES*
                                              straight monthly advance in retail sales.           remained unchanged in January. However, upon
106                                           Since bottoming in April of last year,              adjusting for inflation — using headline PPI as a proxy
                                              retail sales are up 5.1%.                           — it appears that the volume of inventories continued
104                                                                                               to decline. That said, the inventory restocking cycle
                             1991             The downward revisions to the previous              should begin shortly, which will support output and
102                                           month’s numbers provided some boost to              international trade.
                            2007              February’s results, both headline and core.         Preview
100
                                              However, the revisions to January core              Empire State Manufacturing Index, Foreign
 98 Y-axis - Index (100=Start of Recession)   sales were modest, and, as such, did not            Portfolio Flows, Industrial production (02/15)
    X-axis - quarters                         take away from the strength of the report.          Housing Starts & Building Permits, Trade Price
 96 * Input for real GDP                                                                          Indices, FOMC Meeting (02/16)
      1 2 3 4 5 6 7 8 9 10   The price effect is likely to have been
                             modest. While official numbers have yet                              Producer Price Index (02/17)
to be released by the St. Louis Federal Reserve, estimates suggest that                           Consumer Price Index, Current Account, Leading
most of the February increase was volume based.                                                   Indicators, Philadelphia Fed Index (02/18)

Even excluding motor vehicles and gasoline sales, considered volatile,
                                                                                            cautious, consumer sentiment is improving.
the report holds up well. Core retail sales rose 0.9% m/m, inking the
                                                                                            Household finances are stabilizing and buying
sixth straight monthly gain in the last seven months. Outside the
                                                                                            conditions are gradually recovering. The labour
current cycle — where certain periods were boosted by fiscal stimuli
                                                                                            market — the key driver of consumer behaviour —
— this has been the longest and the strongest string of increases since
                                                                                            too, is normalizing, with leading indicators pointing
early 2007.
                                                                                            to subdued, but nevertheless, further improvement.
Positive results were broad based, with only motor vehicle dealerships
                                                                                            As consumer confidence strengthens, private deposits
(-0.2% m/m) and health & personal care stores (-0.7%) experiencing
                                                                                            at commercial banks — 15% higher since the onset of
declines. Electronic & appliance merchants (3.7%), miscellaneous
                                                                                            the recession, the most on record — are being
retailers (2.5%) — which include gift stores, florists, and pet stores —
                                                                                            gradually redistributed toward spending and paying
and grocery & liquor stores (1.3%) led the gains. Discretionary
                                                                                            down debt. The first quarter is a candidate for the first
spending — which accounts for 70% of sales volume, but is generally
                                                                                            drawdown in cash deposits since 1994. That said,
hard-hit by economic downturns — continued to gain momentum.
                                                                                            although the savings rate may have a downward bias
Household spending is expected to add 1½-2 percentage points to the                         in the near term, it is likely to stay elevated — in the
first-quarter GDP headline. While American shoppers remain                                  4% range — over the medium term. ■


                                                                                                                                                              4
Global Economic Research                                                                                           March 12, 2010




 Mexico                                                                        Developing Americas

Oscar Sánchez
                                                                                 Colombian Peso Tops The Charts Again
(416) 862-3174
                                                                                 As is the case for other regional currencies, the
oscar_sanchez@scotiacapital.com
                                                                                 Colombian peso (COP) has regained its strengthening
                                                                                 bias during 2010. Trading at 1892 pesos per dollar,
                                                                                 the currency is now at a higher level than that
Peso To Remain Strong But Unlikely To Outperform                                 observed right before September 2008; a distinction
                                                                                 only shared with the relatively stable Peruvian nuevo-
The Mexican central bank decided last month to re-adopt a
                                                                                 sol.
mechanism designed to replenish its international reserve stock. The
                                                                                 The COP has appreciated by about 7% so far this
monetary institution is aiming to take advantage of improved global
                                                                                 year, outpacing other regional currencies. The
economic conditions that would lead to substantial inflows of capital            Mexican peso has appreciated by about 4%; while the
to countries that will continue to offer high-yielding assets relative to        Brazilian real has also strengthened recently, but is
advanced economies. Moreover, the inflow of portfolio capital is                 still below the level at the end of 2009, as is the
bound to be supported by a recovery of foreign direct investment as              Chilean peso. Favourable conditions for commodity
                                                                                 price gains have improved the performance of regional
the Mexican economic rebound outperforms the U.S. Finally, higher
                                                                                 currencies and are likely to continue to do so in the
oil prices on average will also continue to support overall Mexican              coming months.
export performance in coming months.
                                                                                 An additional element that has enhanced the
                              The mechanism for the accumulation of
   MXN & INTERNATIONAL RESERVES                                                  prospects for Latin American assets has been an
10.5                            45                                               improved perception by foreign investors towards the
     USDMXN                   international reserves is designed to
                        USD bns
                                                                                 region, based on the relatively favourable economic
10.0             MXN, LHS
                           40
                              acquire U.S. dollars when there is “over-          performance during the global recession. Solid fiscal
                              supply” in the local market, and is                accounts have also helped. Although Colombia did not
 9.5
                           35 intended to send no signal as to an implicit       enjoy ample manoeuvring room on the fiscal side as
 9.0                          target for the exchange rate. The main             public finances were already in deficit in 2008, there is
                           30                                                    no sense of imminent risk that can be equated to
 8.5
                              details of the scheme are as follows:
                                                                                 investor perceptions towards other latitudes; namely,
                           25 options to sell U.S. dollars to the central        the countries in the Mediterranean region. We
 8.0
                              bank are auctioned at the end of each              therefore continue to believe that the COP is likely to
 7.5                       20 month, which can be executed whenever              retain a strengthening bias as the economy recovers.
             RESERVES, RHS
                              the current level of the Mexican peso
 7.0                       15
     96 97 98 99 00 01
                              (MXN) is higher than the average of the
                              previous 20 days. Therefore, the central
bank will acquire U.S. dollars from market participants only when the
                                                                             significant reserves accumulation, however, the
MXN has been appreciating in a persistent manner.
                                                                             currency weakened by 10% (October 1996 to April
This “market friendly” mechanism has been used in the past; namely,          1998) and strengthened by 2% (October 2000 to
during the period from August 1996 to June 2001. As can be                   October 2001). It is thus hard not to recognize that the
observed in the adjacent chart, the scheme resulted in an international      scheme as implemented in the past prevented the
reserve accumulation of about US$25 billion during the five years of         MXN from appreciating significantly.
its implementation. However, the majority of the U.S. dollar
                                                                             We believe that although the options mechanism
acquisitions by the central bank occurred during the periods between
                                                                             does its best not to signal any intention on the part of
October 1996 to April 1998 (about US$15 billion), and October 2000
                                                                             the central bank to target a level for the exchange
and June 2001 (about US$10 billion).
                                                                             rate, it will likely prevent the MXN from
During the time of application of the options mechanism, the MXN             appreciating in any significant manner during the
weakened by about 20% versus the U.S. dollar. In the periods of most         next twelve months. ■

                                                                                                                                             5
Global Economic Research                                                                                                 March 12, 2010




 Europe & Asia / Oceania                                                              Erik Nilsson (416) 866-4205
                                                                                      erik_nilsson@scotiacapital.com

Erik Nilsson                                   Tuuli McCully                          Switzerland On A Moderate, Sustainable
(416) 866-4205                                 (416) 863-2859                         Growth Path; Interest Rates On Hold
erik_nilsson@scotiacapital.com                 tuuli_mccully@scotiacapital.com        With inflationary pressures largely absent and the Swiss
                                                                                      National Bank (SNB) committed to “act decisively to
                                                                                      prevent an excessive appreciation of the Swiss franc
                                                                                      against the euro” — the exchange rate has been hovering
Interest Rates On Hold In Korea, Thailand & New Zealand
                                                                                      near 1.46 per euro (1.459 at the time of writing) compared
In the final policy meeting chaired by outgoing Bank of Korea (BoK)                   with a 2009 average of 1.510 — Swiss interest rates
Governor Lee Seong Tae, the board opted to leave the benchmark                        remain on hold. The SNB’s policy committee opted to
                                                                                      leave the benchmark interest rate target at 0.25% following
interest rate unchanged at 2.0%; it has been held at that level since                 its quarterly meeting on March 11th. We do not anticipate a
February 2009. Further delays are likely in view of the impending                     rate change until September, with some possibility that the
changeover in the BoK’s leadership and (possible) reluctance to take                  adjustment might be delayed to December despite the
action in the immediate run-up to mid-year regional elections. While                  steady stream of positive news that is setting the stage for
                                                                                      economic growth of 1.5% in 2010, according to SNB
price pressures are building, inflation remains moderate by historic
                                                                                      projections. Retail sales volumes (excluding fuel) rose
standards; the headline consumer price index has increased by 2.9%                    0.7% m/m in January following a 2.6% advance the
y/y through the first two months of the year, the midpoint of the                     previous month. However, we expect overall consumer
                                  BoK’s inflation target range of 3% ±1%.             spending growth to moderate, constrained by relatively soft
        INTEREST RATES ON HOLD
 6        IN KOREA, THAILAND &
                                  Moreover, private sector credit growth              employment conditions; the jobless rate was unchanged at
                                                                                      4.1% in February; it has been stuck at or above 4.0% since
              NEW ZEALAND         remains subdued; lending to both
                                                                                      August 2009. Moreover, while inflation remains very
 5                  (%)
                                  businesses and households has increased             subdued — the 0.1% m/m rise in the CPI in February
                                  by just 0.5% over the past six months. The          (0.9% y/y) followed two consecutive monthly declines —
 4
                                  government has been applying heavy                  the SNB anticipates that it will approach 3% by end-2012,

 3                                pressure on the central bank to maintain an         in the event that the benchmark interest rate is left
                   NEW ZEALAND                                                        unchanged.
                                  accommodative monetary policy stance
 2
                  SOUTH KOREA
                                  and the delay in appointing a successor to
                                  Lee, who retires in less than three weeks,
 1                    THAILAND                                                   The Reserve Bank of New Zealand (RBNZ) is
                                  may reflect the administration’s
                                                                                 adhering to its previously announced plan of moving
 0                                determination to find a sufficiently
                                                                                 to a less accommodative monetary policy stance
 Jan-09       Jul-09       Jan-10 compliant candidate.
                                                                                 around the middle of 2010, according to Governor
Thai monetary conditions remain unchanged for now, while                         Alan Bollard. While anticipating a temporary pickup
authorities begin to prepare markets for an approaching tightening               in the consumer price inflation rate due to several
cycle. Following the Monetary Policy Committee’s (MPC) meeting                   specific government measures, the monetary
on March 10th, the policy interest rate was maintained at 1.25% where            authorities remain hopeful that inflation will remain
it has been since April 2009. In its official statement, the MPC                 within the official medium term target of 1-3%.
assesses that domestic risk factors (i.e. political uncertainty) and the         Though optimistic about economic prospects — the
fragile global recovery may adversely impact consumer and business               RBNZ expects growth to exceed 4% in 2011 —
confidence; as such, maintaining the key rate at exceptionally low               Bollard also noted that “business spending is weak”,
levels is justified. Nevertheless, the policymakers noted that the need          while home sales and household borrowing are still
for an accommodative policy stance has decreased “significantly” on              “subdued”, dampening the need for early preemptive
the back of a faster-than-expected domestic economic recovery, and               action by the central bank. Data showing house prices
that they “will consider adjusting the policy interest rate to more              holding steady in recent months will reinforce the
normal levels in the periods ahead”. The next MPC meeting is                     RBNZ’s confidence in its policy stance. The Official
scheduled for April 21st.                                                        Cash Rate has been held at 2.5% since April 2009. ■


                                                                                                                                                     6
Global Economic Research                                                                                          March 12, 2010




 Industry & Commodity

Alex Koustas
(416) 866-4212
alex_koustas@scotiacapital.com


                                                                                 Carlos Gomes (416) 866-4735
Regional Employment Trends                                                       carlos_gomes@scotiacapital.com
With this week’s employment numbers lending further support to a
sustained recovery in the labour market, Canadians have reason for               Full Speed Ahead In Emerging Nations
optimism. However, the outlook on a regional basis illustrates the               China and other emerging markets continue to fuel
disparity in employment growth in Canada’s provinces over the past               double-digit gains in the global auto market. Global
decade, which is set to widen further.                                           purchases have posted consecutive double-digit
                                                                                 advances since October 2009, led by gains in excess
     EMPLOYMENT BY REGION   Central Canada was the hardest-hit region            40% y/y in China, India and Brazil. This trend remained
4       (Y/Y % CHANGE)
                            in 2009, trailing its western counterparts for       intact in February, led by a 40% y/y surge in China. We
                                                                                 estimate that car sales in China soared above an
 3     CENTRAL         WEST the sixth straight year with an average
                                                                                 annualized 10 million units for the second consecutive
 2                          employment decline of 1.9%. While                    month, up from a full-year 2009 total of 7.30 million
                            Quebec has traditionally hovered slightly            units. The strength reflects robust economic growth and
 1
                            below the national average for employment            the extension of government subsidies to rural car
 0
       ATLANTIC
                            growth, Ontario’s steep decline can be               buyers who trade in their older vehicles for new
                                                                                 models.
                            traced back to 2003 when the province’s
-1
                            manufacturing sector started to contract —           General Motors, the market leader in China, led the
                                                                                 way last month, with its volumes climbing 51% y/y. GM
-2
                forecast    dampening healthy gains made in the
                                                                                 sold more 174,000 units in China in February,
-3                          service sector. Quebec’s manufacturing               outpacing the 142,000 cars & light trucks that it sold in
   2000 2003 2006 2009      sector experienced a more protracted                 the United States. So far this year, GM has sold nearly
                            decline in the 1990s, with many of its               400,000 vehicles in China compared with less than
exposed industries slowly shrinking, and has underperformed since.               290,000 in its home market.

                                                                                 Purchases also remain in the fast lane in India,
Western Canada has been the strongest-performing region over the                 climbing 34% y/y last month, but the gain moderated to
past decade, with natural resources and construction boosting                    a 9% y/y increase in Brazil. Despite last month’s
employment at a torrid pace in British Columbia and Alberta, with                slowing, Brazil remains the world’s fifth largest auto
Saskatchewan now joining the mix. However, 2009 proved to be a                   market, behind China, the United States, Japan and
                                                                                 Germany. General Motors is also well positioned in
difficult year for the region, as a sudden halt from full speed led to a
                                                                                 Brazil, with its volumes jumping by 32% so far this year,
large number of jobs in tight “boom” industries being shed — overall             outpacing the 24% jump at Fiat, the market leader.
employment declined 1.3%.
                                                                             although Newfoundland will outperform. This
Atlantic Canada managed to avoid the worst of the recession, with
                                                                             represents somewhat of a challenge given Canada’s
most sectors faring fairly well — with the exception of energy and
                                                                             population distribution. Central Canada still ranks as
manufacturing. However, last year’s outperformance was a rare
                                                                             the leading point of entry for new Canadians, and
occurrence, as the region has generally lagged national employment
                                                                             population growth is expected to continue at around
growth over the past decade.
                                                                             1.0% per year. While growth is expected to be
Going forward, the trends exhibited in the “aughts” are likely to            greater in the west at 1.3%, an imbalance between
continue. Western Canada will once again lead growth, distancing             employment growth and labour force expansion in a
itself from Central Canada, with the Atlantic region trailing behind —       number of regions is a distinct possibility. ■


                                                                                                                                             7
 Global Economic Research                                                                                                    March 12, 2010




  Market Metrics                                                                   Highlights
                                                                                   Markets & Monetary Policy — Recent strength of
                                                                                   macro data releases around the world has raised
 Gorica Djeric                                 Mary Webb                           questions over the timing of exit strategies. In Asia/
 (416) 866-4214                                (416) 866-4202                      Pacific — where many of the local economies (China,
                                                                                   India, Australia) are leading the global recovery —
 gorica_djeric@scotiacapital.com               mary_webb@scotiacapital.com
                                                                                   some central banks are starting to tighten, while others
                                                                                   still chose to remain on hold.

                                                          EURO                     Alongside Australia, policymakers in Malaysia and
             CANADIAN DOLLAR                1.65
 1.10                                                   (EUR/USD)                  Vietnam have started raising interest rates. On the other
                (CAD/USD)
                                            1.60                                   hand, the Reserve Bank of New Zealand (RBNZ), the
 1.05
                                            1.55                                   Bank of Korea (BoK) and the Bangko Sentral ng Pilipinas
 1.00                                       1.50                                   (BSP) all kept policy rates unchanged. However, most
                                            1.45                                   central banks have begun withdrawing emergency
 0.95                                                                              liquidity measures. For example, the BSP decided this
                                            1.40
 0.90
                                                                                   week to start phasing out its so-called ‘peso-
                                            1.35
                                                                                   rediscounting’ facility — an emergency lending measure
 0.85                                       1.30
                                                                                   implemented in 2008 — by lowering the amount of money
                                            1.25                                   available for loans to lenders, effective March 15, 2010.
 0.80
                                            1.20
                                                                                   Sovereign credit risk remains an ongoing issue. In light of
 0.75                                       1.15                                   concerns over Greece’s public finances, the possibility of
   3/14/08        3/13/09       3/12/10       3/14/08     3/13/09       3/12/10
                                                                                   creating an IMF-like monetary fund is being floated in the
                                                                                   euro zone, with the goal of reinforcing cooperation,
         CANADIAN INTEREST
                                                                                   surveillance and financial stability in the region. The
                                                    U.S. INTEREST RATES
  6.0                                        6.0                                   Greek Prime Minister continues to build support. After
               RATES                                         (%)
                (%)                                                                going to France and Germany last week, he met with the
  5.0                                        5.0                                   U.S. President this week. An interesting op-ed piece
                                                                       10-YEAR
                             10-YEAR                                               appeared in the Financial Times on Friday, written by
  4.0                                        4.0                       T-BOND
                               GOC                                                 German Finance Minister. He writes: “should a eurozone
                                                                                   member ultimately find itself unable to consolidate its
  3.0                                        3.0
                                                                                   budgets or restore its competitiveness, this country
                                                                                   should, as a last resort, exit the monetary union while
  2.0                                        2.0
                                                                                   being able to remain a member of the EU.”
                                                                    3-MONTH
  1.0                       3-MONTH          1.0                      LIBOR        On the weekend, the Governor of the People’s Bank of
                               BA
                                                                                   China said that the yuan's peg to the U.S. dollar is a
  0.0                                        0.0                                   “special [temporary, anti-crisis] measure,” and that the
   3/14/08         3/13/09        3/12/10     3/14/08     3/13/09        3/12/10   country will move away from its current foreign
                                                                                   exchange policy “sooner or later”.
                 S&P/TSX                                  S&P500                   Note: Latest observation taken at time of writing.
16000            (INDEX)                    1500          (INDEX)
15000                                       1400

14000                                       1300                                   Highlights
13000                                       1200                                   Fiscal Policy — Alberta announced significant
12000                                       1100                                   changes to its royalty framework, including reducing the
                                                                                   current maximum royalty rate of 50% to 40% for
11000                                       1000
                                                                                   conventional oil and 36% for natural gas and making
10000                                       900                                    permanent the temporary incentive of a maximum 5%
9000                                        800                                    front-end royalty rate for the first year of production.
8000                                        700                                    The government’s efforts to bolster Alberta’s
                                                                                   competitiveness will extend to simplifying regulation
7000                                        600
                                                                                   and shifting it to an outcomes-based approach.
   3/14/08       3/13/09       3/12/10        3/14/08     3/13/09       3/12/10




                                                                                                                                                 8
Global Economic Research                                                                                                     March 12, 2010




  Economic Tables
Canada                          2009     09Q3 09Q4 Latest                United States                    2009    09Q3     09Q4 Latest
 Real GDP (annual rates)         -2.6      0.9   5.0                      Real GDP (annual rates)          -2.4      2.2     5.9
 Current Acc. Bal. (C$B, ar)    -41.3    -55.2 -39.1                      Current Acc. Bal. (US$B, ar)             -432
 Merch. Trade Bal. (C$B, ar)     -4.5    -16.6   2.2  9.6 (Jan)           Merch. Trade Bal. (US$B, ar)    -517     -528    -582    -592    (Jan)
 Industrial Production          -10.0    -12.5  -7.7 -5.0 (Dec)           Industrial Production            -9.8     -9.2    -4.7     1.0   (Jan)
 Housing Starts (000s)            149      156   180 197 (Feb)            Housing Starts (millions)       0.55     0.59    0.56    0.59    (Jan)
 Employment                      -1.6     -1.9  -1.4  0.6 (Feb)           Employment                       -4.3     -4.9    -4.0    -2.5   (Feb)
 Unemployment Rate (%)            8.3      8.5   8.4  8.2 (Feb)           Unemployment Rate (%)             9.3      9.6   10.0      9.7   (Feb)
 Retail Sales                    -3.0     -3.7   2.1  6.7 (Dec)           Retail Sales                     -6.8     -7.4     2.2     4.1   (Feb)
 Auto Sales (000s)              1461     1538 1513 1519 (Dec)             Auto Sales (millions)           10.3     11.5    10.8    10.3    (Feb)
 CPI                              0.3     -0.9   0.8  1.9 (Jan)           CPI                              -0.4     -1.6     1.4     2.6   (Jan)
 IPPI                            -3.4     -6.7  -3.4 -0.3 (Jan)           PPI                              -2.6     -5.4     1.6     4.6   (Jan)
 Pre-tax Corp. Profits          -33.2    -39.9 -14.8                      Pre-tax Corp. Profits                     -5.2

Mexico                                                                   Brazil
 Real GDP                         -6.5    -6.1   -2.3                     Real GDP                         -0.1     -1.1     3.9
 Current Acc. Bal. (US$B, ar)     -5.2   -14.8   -2.8                     Current Acc. Bal. (US$B, ar)    -24.3    -19.7   -48.9
 Merch. Trade Bal. (US$B, ar)     -4.7   -12.6   -1.4    -4.0 (Jan)       Merch. Trade Bal. (US$B, ar)     25.4     29.3    16.5    4.7 (Feb)
 Industrial Production            -7.3    -6.3   -1.9     3.6 (Jan)       Industrial Production            -7.2     -8.6     5.9   16.3 (Jan)
 CPI                               5.3     5.1    4.0     4.8 (Feb)       CPI                               5.2      4.7     3.9    3.8 (Feb)

Argentina                                                                Italy
 Real GDP                                 -0.3                            Real GDP                         -5.1     -4.8    -3.0
 Current Acc. Bal. (US$B, ar)              4.5                            Current Acc. Bal. (US$B, ar)    -0.07    -0.04   -0.07   -0.07   (Dec)
 Merch. Trade Bal. (US$B, ar)    17.0     13.6   14.9    14.6 (Jan)       Merch. Trade Bal. (US$B, ar)     -5.6     10.0   -10.5    -2.2   (Dec)
 Industrial Production            0.0     -1.4    5.3     5.2 (Jan)       Industrial Production           -17.5    -15.7    -8.9    -0.2   (Jan)
 CPI                            -26.9    -34.3   -9.4     8.2 (Jan)       CPI                               0.8      0.2     0.8     1.5   (Jan)

Germany                                                                  France
 Real GDP                        -4.9  -4.8  -2.4                         Real GDP                         -2.3     -2.4    -0.2
 Current Acc. Bal. (US$B, ar)   168.2 147.4 280.1        61.0    (Jan)    Current Acc. Bal. (US$B, ar)    -57.3    -26.2   -91.4    -0.7   (Jan)
 Merch. Trade Bal. (US$B, ar)   190.0 188.3 273.1       149.2    (Jan)    Merch. Trade Bal. (US$B, ar)    -30.9    -20.4   -35.2   -31.0   (Jan)
 Industrial Production          -16.0 -15.5  -8.6         2.1    (Jan)    Industrial Production           -12.9    -11.8    -4.3     4.4   (Jan)
 Unemployment Rate (%)            8.1   8.2   8.1         8.2    (Feb)    Unemployment Rate (%)             9.4      9.6    10.0   10.1    (Jan)
 CPI                              0.3  -0.2   0.4         0.6    (Feb)    CPI                               0.1     -0.4     0.4     1.1   (Jan)

Euro Zone                                                                United Kingdom
 Real GDP                        -4.0     -4.1  -2.1                      Real GDP                         -5.0     -5.3   -3.3
 Current Acc. Bal. (US$B, ar)   -79.9      -15    29     165     (Dec)    Current Acc. Bal. (US$B, ar)             -24.4
 Merch. Trade Bal. (US$B, ar)    50.2     75.8 103.3     93.0    (Dec)    Merch. Trade Bal. (US$B, ar)   -127.8   -130.0 -137.5 -154.9 (Jan)
 Industrial Production          -14.7    -14.6  -7.5      0.8    (Jan)    Industrial Production           -10.2    -10.7   -5.9   -1.6 (Jan)
 Unemployment Rate (%)            9.4      9.6   9.8      9.9    (Jan)    Unemployment Rate (%)                      7.9           7.8 (Nov)
 CPI                              0.3     -0.4   0.4      1.0    (Jan)    CPI                               2.2      1.5    2.1    3.4 (Jan)

Japan                                                                    Australia
 Real GDP                        -5.2  -4.9  -1.4                         Real GDP                          1.3      0.9     2.7
 Current Acc. Bal. (US$B, ar)   141.6 175.3 151.4       118.5    (Jan)    Current Acc. Bal. (US$B, ar)    -40.7    -54.2   -67.2
 Merch. Trade Bal. (US$B, ar)    30.2  43.2 80.6          95.9   (Jan)    Merch. Trade Bal. (US$B, ar)     -3.4    -11.6   -23.4   -10.6 (Jan)
 Industrial Production          -22.3 -19.7  -5.3        20.1    (Jan)    Industrial Production            -2.7     -4.3     0.9
 Unemployment Rate (%)            5.1   5.4   5.2         4.9    (Jan)    Unemployment Rate (%)             5.6      5.8     5.6    5.3 (Feb)
 CPI                             -1.4  -2.2  -2.0        -1.3    (Jan)    CPI                               1.8      1.3     2.1

China                                                                    South Korea
 Real GDP                         8.7     9.1    10.7                     Real GDP                         0.2      0.9     6.0
 Current Acc. Bal. (US$B, ar)                                             Current Acc. Bal. (US$B, ar)    42.7     41.6    42.2    -5.4    (Jan)
 Merch. Trade Bal. (US$B, ar)   195.8 154.0 244.8        91.4 (Feb)       Merch. Trade Bal. (US$B, ar)    42.3     42.5    46.0    27.9    (Feb)
 Industrial Production           18.5  13.9 18.5         12.8 (Feb)       Industrial Production           -1.3      2.2    17.9    31.0    (Jan)
 CPI                              1.9  -0.8   1.9         2.7 (Feb)       CPI                              2.8      2.0     2.4     2.7    (Feb)

All data expressed as year-over-year % change unless otherwise noted.




                                                                                                                                                   9
Global Economic Research                                                                                                       March 12, 2010




  Financial Tables
Interest Rates (%, end of period)

Canada                                 09Q3        09Q4       Mar/05   Mar/12*   United States               09Q3      09Q4      Mar/05   Mar/12*
BoC Overnight Rate                      0.25        0.25        0.25      0.25    Fed Funds Target Rate       0.25      0.25       0.25      0.25
 3-mo. T-bill                           0.31        0.34        0.19      0.22    3-mo. T-bill                0.11      0.05       0.14      0.15
 10-yr Gov’t Bond                       3.31        3.61        3.47      3.52    10-yr Gov’t Bond            3.31      3.84       3.68      3.69
 30-yr Gov’t Bond                       3.84        4.08        4.06      4.08    30-yr Gov’t Bond            4.05      4.64       4.64      4.62
 Prime                                  2.25        2.25        2.25      2.25    Prime                       3.25      3.25       3.25      3.25
 FX Reserves (US$B)                     58.1        54.2        56.9     (Jan)    FX Reserves (US$B)         123.3     119.7      118.4     (Jan)

Germany                                                                          France
 3-mo. Interbank                        0.65           0.60     0.50      0.50    3-mo. T-bill                0.36      0.36       0.30      0.28
 10-yr Gov’t Bond                       3.22           3.39     3.16      3.16    10-yr Gov’t Bond            3.54      3.59       3.45      3.46
 FX Reserves (US$B)                     61.3           60.4     60.6     (Jan)    FX Reserves (US$B)          45.2      46.6       44.1     (Jan)

Euro-Zone                                                                        United Kingdom
 Refinancing Rate                       1.00        1.00        1.00      1.00    Repo Rate                   0.50      0.50       0.50      0.50
 Overnight Rate                         0.53        0.41        0.32      0.34    3-mo. T-bill                4.85      4.85       4.85      4.85
 FX Reserves (US$B)                    285.2       283.6       280.1     (Jan)    10-yr Gov’t Bond            3.59      4.02       4.06      4.09
                                                                                  FX Reserves (US$B)          57.5      55.7       54.5     (Jan)
Japan                                                                            Australia
 Discount Rate                         0.30        0.30         0.30      0.30    Cash Rate                   3.00      3.75       3.75      4.00
 3-mo. Libor                           0.29        0.22         0.19      0.19    10-yr Gov’t Bond            5.36      5.64       5.47      5.68
 10-yr Gov’t Bond                      1.30        1.30         1.32      1.35    FX Reserves (US$B)          40.5      39.0       38.4     (Jan)
 FX Reserves (US$B)                  1030.8      1024.9       1029.1     (Jan)

Exchange Rates (end of period)


USD/CAD                                93.50      95.04        97.13     98.24    ¥/US$                      89.69     93.01      90.28     90.48
CAD/USD                                 1.07       1.05         1.03      1.02    US¢/Australian$            88.28     89.74      90.78     91.52
GBP/USD                                1.598      1.617        1.514     1.517    Chinese Yuan/US$            6.83      6.83       6.83       6.83
EUR/USD                                1.464      1.433        1.362     1.375    South Korean Won/US$        1176      1158       1137      1126
JPY/EUR                                 0.76       0.75         0.81      0.80    Mexican Peso/US$          13.502    13.090     12.630    12.553
CHF/USD                                 1.04       1.04         1.07      1.06    Brazilian Real/US$         1.766     1.745      1.778     1.764

Equity Markets (index, end of period)


 United States (DJIA)                  9712       10428       10566     10604     U.K. (FT100)               5134      5413        5600     5626
 United States (S&P500)                1057        1115        1139      1148     Germany (Dax)              5675      5957        5877     5945
 Canada (S&P/TSX)                     11395       11746       11975     11969     France (CAC40)             3795      3936        3910     3927
 Mexico (Bolsa)                       29232       32120       32437     32625     Japan (Nikkei)            10133     10546       10369    10751
 Brazil (Bovespa)                     61518       68588       68847     69670     Hong Kong (Hang Seng)     20955     21873       20788    21210
 Italy (BCI)                           1144        1138        1099      1124     South Korea (Composite)    1673      1683        1635     1663

Commodity Prices (end of period)


 Pulp (US$/tonne)                        770         830         880       880    Copper (US$/lb)             2.78      3.33       3.39      3.39
 Newsprint (US$/tonne)                   445         530         550       550    Zinc (US$/lb)               0.87      1.17       1.02      1.06
 Lumber (US$/mfbm)                       188         203         270       275    Gold (US$/oz)             995.75   1087.50    1135.00   1106.25
 WTI Oil (US$/bbl)                     70.61       79.36       81.50     80.89    Silver (US$/oz)            16.45     16.99      17.25     17.31
 Natural Gas (US$/mmbtu)                4.84        5.57        4.59      4.43    CRB (index)               259.39    283.38     276.93    272.32
* Note: Latest observation taken at time of writing.



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