December 2010 Canadian Economic Fundamentals

[Ally]

Global house price recovery slowing

The global house price recovery is losing traction with more than half the countries seeing negative growth in the third quarter, according to a report.

"There is growing evidence that the global housing market recovery may just be beginning to run out of steam," said Liam Bailey, head of research for London-based Knight Frank in a report released Monday.

After several quarters of rising prices globally, home appreciation has slipped considerably, especially in Europe where there are fears that some countries may default on their debt.

Ireland was in last place on the list at number 48, down by 1.3 per cent in the third quarter, or minus 14.8 per cent cent year over year.

The country was in danger of imminent default but recently received a controversial 85 billion euro bailout. Eurozone ministers were meeting in Brussels Monday to decide how to prop up the region`s weaker countries including Italy and Greece and Spain as the debt crisis is having a severe impact on the euro.

Italy was in 37th place with minus 2.5per cent growth, Greece was in 38th place showing minus 3.1 per cent growth, and Spain was in 41st place, showing minus 3.7 per cent year over year growth.

Read the full article here.

 

[Ally]

History of unemployment rates in Canada

Check 20 years of jobless rates by region and city. Click here.

 

[Ally]

CREA developing new measure of real estate`s health

The Canadian Real Estate Association is developing a new way to measure the health of the country`s housing market as it seeks to replace its decades-old method of reporting average sale prices with something that more accurately reflects market conditions.

While the average sale price is a good way to see what`s happening in the national market, it can be skewed by high prices in Vancouver and Toronto. The industry association wants to create an index that adjusts for that bias, is more reflective of the overall market and is less prone to short-term fluctuations.

Read the full article here.

 

[Ally]

Western Canada shines for hiring plans

Canadian employers have modest hiring plans for the start of next year, with the outlook brightest in the West and dimmer in Central Canada.

Almost three-quarters, or 72 per cent, of firms don`t plan to change their head count, sixteen per cent plan to expand and 11 per cent see cutbacks, Manpower Canada`s employment outlook survey, to be released Tuesday, shows.

Canada`s labour market hasn`t created many jobs for the past five months, as employers hold back on hiring, waiting for signs of a more sustainable pickup in demand. That said, the environment has improved from last year among virtually all regions and sectors.

"The good news is employers are expecting positive hiring activity through to March, 2011. But they`re being cautious as they go," said Lori Procher, vice-president and general manager for the staffing firm.

Read the full article here.

 

[Ally]

Housing market to see `greater stability`

Not a single Canadian city will see house prices fall in 2011, according to a market forecast by Re/Max, as low inventories prop up prices.

The residential real estate brokerage said there will be "greater stability" in the market in 2011, with the national average price forecast to rise by 3 per cent to $350,000. It expects sales to stall, however, with about five per cent fewer transactions in 2011.

Read the full article here.

 

[Ally]

Carney holds rates, cites export slowdown

Threats to the global recovery have increased, the Bank of Canada said Tuesday, causing headaches for exporters and boosting the chances that Governor Mark Carney will keep borrowing costs steady through the middle of next year.

Mr. Carney, who left his benchmark interest rate at 1 per cent Tuesday for the second time since a string of three increases this summer, has said for months that he`s counting on sales abroad to propel the rebound as consumers retrench and the jolt from housing-related incentives and billions in government stimulus money fades to black.

It now seems clear it will take longer than anticipated before demand from the United States and the rest of the world picks up enough for that to happen.

Sovereign-debt problems in several European countries "could trigger renewed strains" in global markets, the central bank warned Tuesday, adding another layer of uncertainty for exporters, on top of persistent worries that private demand in the United States is "picking up slowly" and growth in emerging markets has started to cool to a more sustainable pace.

Read the full article here.

 

[Ally]

The next discussion we need to have: the future of jobs
We asked, you voted: what are the next eight discussions Canada needs to have?

Join us for a live discussion Wednesday at 12 p.m. ET on one of your top choices: the future of jobs.

Judith Maxwell will take your questions and respond to comments on the future of jobs in Canada. What will the employment landscape look like? Between Canadians choosing to retire much later in life, outsourcing work to other countries and the popularity of professional degrees, how will one navigate the job market in the future?

Read the full article here.

 

[Ally]

Reading Bank of Canada`s tea leaves

Today`s big measure is a mix of sentiment and performance, Statistics Canada`s report on building permit applications for October.

Permits tell the story of contractors` immediate intentions to start construction on building contracts, and at the national level the story is a bit lacklustre: values were down by 6.5 per cent from September, a total of $6.2 billion due to a significant drop in the value of residential permits.

British Columbia`s picture is much brighter with a total of almost $1.2 billion in permits issued in October, which was almost eight per cent higher than September and a whopping 73 per cent above the value of building permits taken out in October of 2009.

And B.C. saw a surge in residential permits, again in opposition to the national trend. Builders took out almost $800 million worth of permits for new homes, which reflects a bounce back from the pull back in building that happened in 2009.

Things are better, but still by no means booming.

And it is the national picture that will have more influence on the Bank of Canada`s moves to guide Canadian monetary policy. The central bank is expected to leave its key overnight lending rate at one per cent when it releases its latest rate-setting decision tomorrow.

Read the full article here.

 

[Ally]

Home Construction rises in November

OTTAWA — Housing starts rose more than expected to 187,200 in November, led higher by multiple-unit construction in Ontario, according to Canada Mortgage and Housing Corp.

That compares to a seasonally adjusted annual rate of 167,800 units in the previous month, and surpassed the 170,000-unit forecast by many analysts for November.

CMHC said urban starts rose 14.6 per cent to 163,100 units in November. Multiple units were up 20.9 per cent to 101,800 units, while single urban starts increased 5.5 per cent to 61,300 units.

November multiple-unit construction increased by 29,900 units in Ontario, while activity was stable in the Prairies and starts declined in other regions of the country.

"The increase in housing starts in Ontario in November was more than enough to offset declines in all other regions of the country," said CMHC chief economist Bob Dugan.

Read the full article here.

 

[Ally]

Flaherty warns of cuts to balance budget

OTTAWA - Saying he`s no Santa Claus ready to fulfill Canadians` "every wish," Federal Finance Minister Jim Flaherty on Wednesday signalled that next year`s budget will contain "necessary" measures to get the country`s finances back on track.

Emerging from a meeting of the Conservative caucus, Mr. Flaherty told reporters the government has not yet decided on a date for the budget, which many expect will be delivered in February or in March.

But he said the Tories are determined to set "priorities" and to slash the federal deficit.

"We have to stay on track to balance the budget in the medium term. And that requires some decisions. I`m consulting with my colleagues here and discouraging new spending."

Asked if that means Canadians had better prepare themselves to make some sacrifices in the wake of the budget, Mr. Flaherty mixed humour with his overriding message.

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[Ally]

Apartment-building construction stalls

Vacancy rates in apartment buildings across the country are at near-record lows, but expensive land and high construction costs are keeping developers from building new inventory.

New buildings would likely fill quickly, but developers have opted to put up condos instead because they provide a better short-term return. Further deterring development are interest rates so low that it is cheaper to buy an existing building with CMHC insurance than to arrange financing to build a new one.

"Building an apartment building is a very niche thing," said Ugo Bizzarri, vice-president of acquisitions at Timbercreek Asset Management Inc. "There`s certainly a need. But until it`s cheaper to build them than to buy them, construction just doesn`t make a lot of sense."

Canada Mortgage and Housing Corp. said yesterday in its rental market survey that the national vacancy rate decreased to 2.6 per cent in October from 2.8 per cent a year ago. CMHC cited immigration and improving economic conditions for the lower vacancy rate, saying household formation improves when the economy gets better.

In Winnipeg, the rate was a mere 0.8 per cent as immigrants searched for housing. Statistics Canada`s most recent population estimate said Manitoba underwent its highest rate of immigration since 1971.

Read the full article here.

 

[Ally]

Canada an `emerging energy super power`: Flaherty

NEW YORK – Canadian Finance Minister Jim Flaherty swooped into the Big Apple on Thursday to promote "Canada Inc."

Speaking to a hotel ballroom cramped with investors eager to invest in Canada, Min. Flaherty highlighted the country`s fiscal prudence, low corporate tax rates and stable oil supply.

"At a time when a solid and sustained global recovery remains just a goal, Canada will continue to respond to the aftermath of the crisis the same way it did when it first appeared on the horizon — from a position of strength," he told investors at the Canadian Debt Capital Markets Investor Forum hosted by Euromoney.

Mr. Flaherty told the American audience that Canada is an "emerging energy superpower" ready to supply the world with a safe supply of resources, including those from the controversial oil sands.

"We are a world leader on the commodities front — an emerging energy superpower, as we like to say. In good times or bad, Canada is — and will remain — a safe, reliable source of the resources the world demands."

Read the full article here.

 

[Ally]

Canada as the `emerging energy superpower`: Testing the Case

Read the full report here.

 

[Ally]

TD Report: Canadian Housing Landing Safely

While much more stable than its U.S. counterpart, the Canadian existing home market has nonetheless gone through a wild ride over the last three years. Sidestepping both worst-case scenarios of a bubble and crash, the resale market appears to have landed safely, and somewhat earlier than we anticipated three months ago. This begs the question of where the market is headed from here. Looking out over the next two years, this piece updates our housing market forecast from the one last published in our September Quarterly Economic Forecast. The current year appears likely to turn in a performance near what we predicted in September, with annual national sales down slightly from last year. Meanwhile, with listings having seen less upside than anticipated, the annual average home price is set to gain around 7% in 2010.

The most important development since our September forecast is that increases in borrowing rates foreseen three months ago by TD Economics and most forecasters have been delayed, as uncertainty lingers and the U.S. Federal Reserve is engaging in a second round of quantitative easing. This translates into an improved home sales and average price forecast for next year. We have upgraded our national home sales forecast for 2011, though annual sales should still end up lower than in 2010. On the price front, in line with higher sales and a consequent but more modest uptick in listings, things look markedly better. We now forecast the annual average price for 2011 to remain essentially unchanged, slipping by less than 1%.

On the flipside, however, higher borrowing rates remain on the horizon, with the consequence that 2012 sales now look weaker than they did in September. In essence, with limited pent-up demand, higher sales activity in the near-term will likely rob from sales thereafter. In this context, the annual average price is likely to drop a bit further, by 1-2%. Rising interest rates will be the main headwind, but will occur against the backdrop of an improving economy. Along with contained increases in supply, continued but modest gains in income and employment should limit the extent to which homes depreciate.

Read the full report here.

 

[Ally]

Canadian Household Networth Rose to New Record High

Canadian household net worth increased by 2.7% ($162 billion) in the third quarter of 2010 to $6.1 trillion. The increase pushes Canadians` net worth above the pre-recession high seen in the second quarter of 2008, indicating that households have now fully recovered the cumulative $552 billion of net worth that they lost during the economic downturn.

The improvement in household balance sheets reflected strength in equity markets that pushed the S&P/TSX composite index up 9.5% in the third quarter and led the market value of household financial assets (which include equities, mutual funds and pension assets) to surge by 3.7% ($149 billion). The Canadian housing market remained strong in the third quarter as well, pushing the value of non-financial assets (of which real estate holdings make up 87%) up 1.1% ($38 billion) compared to the previous quarter.

Household liabilities grew 1.7% ($25 billion) from the second quarter to $1.5 trillion, led by a $17 billion increase in mortgage debt therein reflecting the continued activity in the real estate market. The growth in liabilities was less than that of both assets and net worth, pushing the household debt-to-asset and debt-to-net worth ratios down from the all-time highs seen in the previous quarter (19.9% and 24.9%, respectively) to 19.7% and 24.6%, respectively. The household debt-to-personal disposable income (PDI) ratio, however, rose to a new record high of 149.9% in the third quarter from 145.2% in the second quarter, although the jump mainly reflected a 1.5% decline in PDI from the tax refund-boosted levels seen in the second quarter.

Read the full article here.

 

[Ally]

Probes of tax scams prompt revamp of charitable receipts

OTTAWA—The Canada Revenue Agency is considering big changes to the way charities issue donation receipts after internal probes found widespread scamming, newly disclosed documents show.

Standard paper receipts now issued by charities are too easily faked, forged or finessed to cheat the federal treasury out of millions in taxes.

So some agency officials are proposing tougher rules requiring charities to electronically track and account for their receipts, to help the taxman flush out fraudsters.

"Electronic filing of data — as opposed to filing relevant information on paper — is the most flexible environment in which to deal with. . . fraudulent tax receipting," says an internal paper.

The agency`s review of the current receipt system follows two internal probes that since 2006 have uncovered widespread fraud, especially among small tax-preparation firms that offer clients fake donation receipts as an extra service.

Read the full article here.

 

[Ally]

Trade numbers point to healing global economy

The global scourge of trade imbalances that have hampered economic recovery are finally starting to move in the right direction.

International trade deficits in the United States and Canada narrowed by more than expected in October, and China managed to decrease its massive trade surplus to $22.9-billion (U.S.) in November from $27.15-billion in October amid evidence its roaring economy remains strong.

The prevailing theme is one of a global economy that is beginning to rely less on the struggling U.S. consumer and more on fast-growing emerging markets, particularly China.

U.S. exports rose to their highest level in two years, as American businesses sold more to developing economies, shrinking the U.S. trade deficit by 13.2 per cent to $38.7-billion (U.S.), while China purchased a record amount of U.S. goods.

A weaker U.S. dollar "should remain a supportive influence on U.S. exports in the fourth quarter, along with ongoing demand from the global economy, particularly emerging markets," Christos Shiamptanis of TD Economics said in a report.

Read the full article here.

 

[Ally]

How Canada avoided housing `bubble and crash`

The Canadian housing market has managed a rare feat, TD Bank says, avoiding both a "bubble and a crash" over the last three years as the sector gyrated wildly.

In a report from its economics department Thursday, the bank said that the Canadian housing market has pulled off a soft landing and likely hit bottom in July. And having pulled off that rarest of feats, the bank now expects "modest price softness for the next year."

"A more modest reaction on the supply (listings) side of the market and an improving economy will provide some partial offset to higher borrowing rates," the report stated. "Markets should remain fairly balanced, limiting the extent to which home prices will move. After turning in another solid gain this year, we predict a bout of modest price softness over the next two years."

While sales have picked up since July`s trough, the bank said that likely will only last until the middle of next year, when interest rates begin to move higher.

"As sales flatten out and start to slow over the course of 2011, and with listings expected to stay contained, we expect prices to find a near-term ceiling over the next few quarters," the report stated. "Subsequently, a softer market balance will likely result in a modest price drop of 3-5 per cent (peak-to-trough) in late 2011 and early 2012 before prices stabilize later in the year."

Read the full article here.

 

[Ally]

Commodity Calculus: What`s in store for vital resources?
OIL

Consensus outlook:

Demand will strengthen, and prices will be bolstered by OPEC`s plan to retain the production limits imposed since 2008. The key factors that could affect oil in 2011 include a slowly strengthening U.S. economy and the likelihood of a weaker U.S. dollar stemming from looser U.S. monetary policy. OPEC officials are betting the recovery in key developed markets will be strong enough to cope with higher prices, while demand in China and other growing Asian markets continues to climb.

Contrarian outlook:

Unlike the great commodity bubble of 2008, there is no shortage of supply, which means there is no compelling short-term economic case for higher prices. Investors are bound to tire of the continuing volatility in the market, which typically tracks the ups and downs of the equity market. Oil is likely to stay in a trading range between $80 (U.S) and $100, at most, with little chance of breaking out under current conditions.

Read the full article here.

 

[Ally]

A stark warning on the economy from Britain`s former PM

Unseasonably heavy snowfall has shut down the roads and airports and trains from Scotland for nearly a week, leaving the windswept county of Fife, across the Firth of Forth from Edinburgh, more or less isolated from the world. This means Gordon Brown, the county`s elected representative, has been trapped in London all week, unable to see his wife and children.

So it is perhaps not surprising that, as Mr. Brown steps into his City of London office to give one of his first interviews since his defeat as Prime Minister in May, he has returned to the tightly wound, somewhat taciturn temperament that dogged him through that lachrymose campaign. Back then, British voters, hobbled by three years of economic shocks, came to see him as the awkward plodder against the bubbly freshness of Tory David Cameron and Liberal Democrat Nick Clegg, who now run the British government together on a cost-cutting mission that led them into their own riot-torn crises this week.

But it is also likely, you realize, that repeated incidents of such geographical and climatic isolation have had an effect on the psyche of this 59-year-old Scotsman, much as they once did on that other economic thinker from Fife, Adam Smith. For Gordon Brown has ended his eight-month exile from the media in order to issue a stark and explicit warning to the world. It is a warning, published in a 315-page manifesto titled Beyond The Crash: Overcoming the First Crisis of Globalization, that has almost everything to do with the former prime minister`s deep and nagging fear that the countries of the world are falling victim to isolation – economic, monetary, fiscal, trade, political and institutional isolation – that will end the startling project of unity he attempted in 2008 and plunge us into trouble.

"Let me just say," he says, before my bottom has touched the seat in his 32nd-floor office, "it looks to me, as someone who can see the trends and the forces at work, that some of the policies we`re applying are very similar to the 1930s. And we`re in danger of making the mistakes of the 1930s."

Read the full article here.