BMO Financial Group - Outlook 2005(1.1Mb pdf File) - Boardwalk REIT

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© Bank of Montreal, 2004 This document is based on economic information available as of October 8, 2004. The information in this publication is drawn from sources believed to be reliable; however, the Bank cannot guarantee its accuracy and thus does not assume any responsibility or liability for it.
3 United States Outlook Economy gains traction in 2004 So far, the recovery train remains on track towards its destination – full employment – despite losing some steam amid rising energy costs. After expanding an outsized 4.4% in 2003, on a fourth quarter-over-fourth quarter basis, the economy appears to be chugging along at a 3.9% clip in 2004. Though moderating from last year’s rapid pace, growth has been high enough to gradually reduce the jobless rate even in the face of phenomenal productivity gains. Businesses have ramped up spending… Fueled by surging profits and still-low financing costs, businesses have surpassed their customers as the driving force behind the expansion. Led by soaring demand for productivity-enhancing information processing equipment, business spending on equipment and software soared 14.2% annualized in the second quarter following an 8.1% spurt in the first quarter. Recent rapid growth in shipments of non-defense capital goods points to capital spending increasing a further 10% in the third quarter. As well, investment in new buildings jumped in the second quarter, suggesting that managers have gained confidence in the recovery’s durability. …while consumers have held their own The economic powerhorse of the last three years – the American consumer –downshifted only slightly in 2004. In fact, the estimated average pace of consumer spending in the first three quarters of the year (3.1%) is largely similar to that of the past three years. Flush with larger tax refunds and spurred on by low interest rates, personal consumption expenditure advanced 4.1% annualized in the first quarter. These two supportive factors likely advanced purchases from later quarters and, together with sharply higher energy costs, slowed the pace of spending to 1.6% in the second quarter. However, notwithstanding a further run-up in oil prices, recent retail and 2003 2004 2005 Annual Average Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2003 2004 2005 2006 GDP (q/q % change ann.) 4.2 4.5 3.3 3.8 4.0 3.7 3.6 3.5 3.6 GDP (y/y % change) 4.4 5.0 4.8 3.9 3.9 3.7 3.8 3.7 3.6 3.0 4.4 3.7 3.6 CPI (y/y % change) 1.9 1.8 2.8 2.8 3.1 2.6 1.9 1.5 1.4 2.3 2.6 1.9 1.8 CPI core (y/y % change) 1.2 1.3 1.8 1.8 1.9 1.9 1.7 1.8 1.8 1.4 1.7 1.8 1.9 Unemployment rate 5.9 5.6 5.6 5.4 5.4 5.3 5.2 5.1 5.1 6.0 5.5 5.2 5.0 Fed funds 1.00 1.00 1.00 1.41 1.95 2.55 2.75 2.75 3.10 1.12 1.34 2.79 4.10 3-month Libor 1.13 1.07 1.25 1.73 2.15 2.75 2.90 2.95 3.30 1.17 1.55 2.98 4.29 3-month T-bill 0.92 0.92 1.08 1.49 2.00 2.60 2.75 2.75 3.10 1.01 1.37 2.80 4.10 Prime rate 4.00 4.00 4.00 4.41 4.95 5.55 5.75 5.75 6.10 4.12 4.34 5.79 7.10 2-year Treasury 1.86 1.69 2.45 2.56 2.90 3.50 4.20 4.60 5.00 1.66 2.40 4.33 5.33 10-year Treasury 4.29 4.02 4.60 4.30 4.70 5.00 5.20 5.40 5.50 4.02 4.41 5.28 5.73 30-year Treasury 5.22 4.98 5.40 5.15 5.20 5.30 5.40 5.60 5.70 4.95 5.18 5.50 5.93 30-year mortgage 5.93 5.62 6.11 5.90 6.10 6.50 6.70 6.90 7.10 5.82 5.93 6.80 7.33 10-year less 3-month T-bill 3.37 3.10 3.52 2.81 2.70 2.40 2.45 2.65 2.40 3.01 3.03 2.48 1.63 ¥/US$ 108.8 107.2 109.6 109.9 109.0 108.0 105.0 103.0 102.0 115.9 108.9 104.5 99.5 US$/€ 1.191 1.250 1.205 1.222 1.240 1.250 1.270 1.290 1.300 1.132 1.229 1.278 1.323 US$/£ 1.710 1.840 1.810 1.820 1.800 1.810 1.820 1.830 1.830 1.635 1.818 1.823 1.833 Historical data Forecast data
Page 3: OUTLOOK 2005 United States Outlook
Page 7 and 8: 5 Rising interest rates... 10-year
Page 9 and 10: 7 Tame inflation will allow the Fed
Page 11 and 12: 9 Canada Outlook Canada hit by nume
Page 13 and 14: 11 In 2005, the high C$ will restra
Page 15 and 16: 13 Though rates will rise in both C
Page 17 and 18: 15 Canada’s Regional Outlook Afte
Page 19 and 20: 17 have been trending downward sinc
Page 21 and 22: 19 fees and fines. Despite rising t
Page 23 and 24: 21 non-residential investment, and
Page 25 and 26: 23 The mining and oil and gas secto
Page 27 and 28: 25 average, with growth of 3.1% in
Page 29 and 30: 27 While interest rates are still l
Page 31 and 32: 29 moderate to 6.7% next year after
Page 33 and 34: 31 Global oil supply outpacing dema
Page 35 and 36: 33 This year's surge in oil prices

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