February 2011 Canadian Economic Fundamentals

[Ally]

Major projects in Calgary spark boom in building permits





CALGARY - The Calgary International Airport's plans for expansion of a terminal have boosted the value of building permits in January in the city to a level more than triple what they were a year ago.




The estimated construction value of building permit applications for the month was $771.5 million compared with $225.6 million in January 2010, the City of Calgary reported on Friday.




It was more than double the five-year average of $356 million and tripled the 10-year average of $257 million for the month.




The improvement to a terminal at the airport had an estimated building permit value of $596.6 million.




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[Ally]

France, FAO warn high food prices pushing world to brink of crisis





ROME - G20-leader France and the U.N. food agency FAO warned on Friday about the risk of a new global food crisis and ensuing riots, calling for greater regulation to curb speculation on commodities markets.




The warning came a day after the Food and Agriculture Organisation said its global food price index had climbed to a record high in January, increasing for the seventh consecutive month.




FAO said prices were likely to rise even higher as supplies of grains and other main agricultural commodities were tight and bad weather in key producing countries threatened new crops.




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[Ally]

Why oil (not cars) drives the economy



Kriska Transportation president Mark Seymour knows exactly what happens when the price of oil pushes $100 (U.S.) a barrel. Trucking companies like his hike their fuel surcharges ` and Canadians pay more for all the things they buy.





`The bottom line is that it dramatically affects the price of goods to the consumer,` said Mr. Seymour, whose company runs 400 trucks from its headquarters in Prescott, Ont.





The oil price spike is producing a typical showdown between energy producers and consumers. But this isn`t a return to 1980, when Ottawa tried unsuccessfully to shift wealth from drillers to guzzlers via the National Energy Program, setting up a brawl between Alberta and the rest of Canada.





This time, the entire country has evolved into a petro-dollar economy. Canada's fortunes ` and its currency ` are now more closely tethered to oil than any other industry, including autos, forest products or agriculture.





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[Ally]

Building permits rebound in December




The value of building permits issued in December rose to $5.7-billion, breaking a two-month string of declines, Statistics Canada reported Monday.




The agency says the 2.4 per cent increase in December was mostly due to higher construction intentions for multi-family dwellings in Ontario.




In the residential sector, the value of permits rose 21.2 per cent to $3.8-billion.



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[Ally]

Canada punches below its weight





The cover of The Economist magazine's year-end issue, printed in December, features a cleverly designed mosaic of pictures from news-makers around the world.




Images of the U.S., the United Kingdom and China are prominent. There are photos of Nicolas Sarkozy, Hillary Clinton, Angela Merkel and Vladimir Putin. The president of Chile smiles on the cover.




There are pictures of wind turbines, a graphic of global population growth and an Olympic athlete. Australian Prime Minister Julia Gillard is featured, as is the New Zealand rugby team.




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[Ally]

Putting household debt in context




You`re not alone if you`re mystified by the headline number being used to repeatedly bludgeon Canadians about high debt levels.




The widely quoted debt-to-income ratio is vague enough to have prompted several readers of this column to ask what it means. Economist Benjamin Tal understands their bewilderment.



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[Ally]

Why a rate hike won't be a blow to most




Bank of Canada Governor Mark Carney and other policy makers have no doubt been scaring the pants off consumers who have loaded up on debt like there's no tomorrow. Well, there is a tomorrow, and that was their aim.




But while the risk of overweight debt levels is a "significant" one to the economy, the effects of the inevitable rise in interest rates should not be oeverestimated, National Bank Financial says in a new report.



Read the full article here.

 

[Ally]

TD Canada Trust raises mortgage rates





TD Canada Trust announced Monday that it was raising interest rates on it residential mortgages, the first bank to do so since mortgage changes were announced by the federal government last month.





The bank said that effective Feb. 8, the interest rate on its five-year closed fixed rate mortgage would increases 25 basis points to 5.44%.





The rate for TD`s five-year special closed fixed rate also increased by 25 basis points, and will now be 4.39%.





As of of the early afternoon, none of Canada`s other major banks had announced changes to their own mortgage rates, though given that many of the country`s banks change rates in tandem similar announcements will likely follow.




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[Ally]

Bank of Canada underestimating near-term growth: Merrill



The Bank of Canada and investors are underestimating the prospects for the Canadian economy this year and interest rates are headed higher than expected, say economists at Merrill Lynch (Canada).





In a research note released Friday, Merrill says that `the relationship between Canada and U.S. GDP growth has returned to normal, suggesting that as the US.S.economy goes so too will the Canadian economy.`





If the United States manages more than 3% growth this year, as expected, Canada should too. Merrill notes this is `considerably higher than current consensus and Bank of Canada predictions.`





Currently, the central bank is forecasting GDP growth of just 2.4% for Canada in 2011, versus 3.3% for the U.S. `This is the widest spread between Canada and the U.S. of any private or public sector forecaster, suggesting the BoC is the most pessimistic on headwinds for Canada -- namely the strength of the Canadian dollar,` Merrill says. `We think the BoC is considerably underestimating the near-term growth prospects for Canada.`





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[Ally]

Oilsands pipeline project winning support in U.S., Liepert says





EDMONTON ` The Alberta government is `very encouraged` that it is getting its message out among Americans that TransCanada`s Keystone XL pipeline offers big benefits to the United States, the province`s energy minister said Tuesday.




In an interview from Minnesota Tuesday, Ron Liepert said two large U.S. labour organizations have agreed that the pipeline makes economic sense, adding their voice to other labour groups.




`We are very encouraged with the labour meetings we`ve had, and they end the conversation by asking `what can we do to help,` ` said Liepert on his trip as minister to the U.S.




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[Ally]

Dramatic housing gains of past decade unsustainable, analysts say





OTTAWA ` The dramatic, decade-long run-up in house prices reported Tuesday by Re/Max will become a distant memory in the years ahead, possibly even calling into question the postwar mantra that buying real estate is a surefire investment, analysts said Tuesday.







Realtor Re/Max issued a report Tuesday that showed house prices climbed an average of 6.82 per cent every year from January 2000 to December 2010, a pace of growth that BMO Capital Markets economist Robert Kavcic described as unsustainable.







"Over time, house prices tend to follow the rate of income growth, which is a little faster than inflation but certainly not seven per cent a year," Kavcic said.




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[Ally]

High-flying loonie threat to economy





Bank of Canada governor Mark Carney said that "persistent strength" in his country's dollar is a threat to economic growth, and the nation's exporters rely too much on the U.S. for sales.




"One of the risks to the Canadian economy is persistent strength in the Canadian dollar," Carney said in a Bloomberg Television interview at the World Economic Forum's annual meeting today in Davos, Switzerland. Exporters, which send 70 per cent of their sales to the U.S., need to "substantially" reduce that figure, he said.




The Canadian dollar has climbed more than five per cent against its U.S. counterpart since the start of last year, pushing above parity. That strength, as well as continued weaknesses in the global economy, is among the "serious headwinds" facing Canada, Carney said.




Read the full article here.

 

[Ally]

New home prices softer than expected





OTTAWA ` New home prices edged up 0.1% in December, according to Statistics Canada, with Winnipeg leading the gains.




Economists had expected the federal agency`s new home price index to rise 0.2% in December, following a 0.3% advance in the previous month.




The index showed a 1.1% gain in Winnipeg, as well as a 0.3% increase in Halifax and a 0.2% rise in Toronto and Oshawa.




The biggest decline was in Windsor, Ont., down 0.6%, followed by Montreal and Quebec, which both recorded a 0.3% drop.




The slower pace of price increases reflects a weakening in Canada`s housing market.




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[Ally]

China says $5.4 billion for B.C. gas play







PetroChina International Investment Co. Ltd. (PTR-N135.171.411.05%) has agreed to pay $5.4-billion in a natural gas investment with Encana Corp. (ECA-T30.85-0.18-0.58%) that promises to be the largest Chinese investment in Canadian energy assets.




The deal underscores the voracious appetite Asian firms have for North America`s vast deposits of oil and gas ` and speaks to the growing attraction of Canadian energy assets to overseas companies, which are increasingly looking at ways to buy western reserves that can some day be delivered to consumers in China and South Korea.



Read the full article here.

 

[Ally]

Era of housing price spikes may be over: Analysts





The dramatic, decade-long run-up in house prices reported Tuesday by Re/Max will become a distant memory in the years ahead, possibly even calling into question the postwar mantra that buying real estate is a surefire investment, analysts said Tuesday.




Realtor Re/Max issued a report Tuesday that showed house prices climbed an average of 6.82 per cent every year from January 2000 to December 2010, a pace of growth that BMO Capital Markets economist Robert Kavcic described as unsustainable.




"Over time, house prices tend to follow the rate of income growth, which is a little faster than inflation, but certainly not seven per cent a year," Kavcic said.




Read the full article here.

 

[Ally]

Exports leap most in 30 years





OTTAWA ` Canada`s international trade balance swung to a surprise surplus in December, as energy-driven exports grew at pace not seen in 29 years.




Statistics Canada said Friday that exports rose 9.7% ` the largest percentage gain in 29 years `to $37.8-billion during the month, while imports edged up 0.7% to $34.8-billion.




That resulted in a trade surplus of $3-billion ` the highest level since October 2008, just ahead of the recession `and a dramatic turnaround after nine months of deficits.




Economists had forecast a deficit of between $250-million to $400-million for December, following a revised deficit of $115-million in the previous month.




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[Ally]

Oil pushes Canadian exports to trade surplus charge





Soaring exports of crude oil and other energy products unexpectedly tipped Canada's trade balance into surplus in December after nine months of deficits, fueling hopes the much-coveted export recovery is gaining traction.




The trade surplus of $3.0 billion was the biggest since October 2008, Statistics Canada said on Friday. Analysts surveyed by Reuters had forecast the deficit would grow slightly in December to $350 million from $115 million in November, revised from $81 million previously.




The surplus with the United States -- by far Canada's biggest trading partner -- was also the biggest since October 2008, jumping to $5.1 billion from $3 billion in November as exports surged to their highest value in over two years.




Read the full article here.

 

[Ally]

3 ways to deal with rising mortgage rates




Here we go, again. The economy is generating more jobs, a handful of banks raise mortgage rates and all of a sudden you`re being advised to lock-in your mortgage before the bank doors slam shut. In fact, some say you`d better hurry-up and buy a house now before mortgage rates go so high you`re locked-out of the housing market for ever.




This is not the first time that mortgage rates are on the brink of blooming only to fade a few months later. This has happened more than a handful of times in the last decade. The headlines are often the same. A month or two of increasing mortgage rates, the public is urged to act now, and then a few months later something unforeseen appears on the horizon.




The last occasion was just over a year ago. The posted 5-year mortgage rate in March, 2010 went from 4.7 per cent to 5.15 per cent in April, and then to 5.3 per cent by May. The recommendations were clear: lock-in. But then, by October they were back to 4.5 per cent. The economy sputtered, Greece and Spain hit the headlines and the rest was history.



Read the full article here.

 

[Ally]

Canadian commercial real estate reborn in 2010




The commercial real estate market saw an unprecedented recovery last year, with investment growing 48 per cent as the economy improved and investors returned to the market.




Canadian commercial real estate volume reached $18.9-billion in 2010, according to CB Richard Ellis, from $12.7-billion in 2009. That`s close to the pre-recession peak of $19.8-billion in 2005.




`Once we were a few weeks into 2010, we could feel momentum picking up so that by the year-end, we were about where we expected it to be,` said John O`Bryan, CBRE`s vice-chairman. `It was really a coast-to-coast recovery ` something we haven`t seen before.`





Read the full article here.

 

[Ally]

Canada's growth rate raised





Canada's economic growth rate will accelerate after the biggest jump in exports in almost three decades, which will support the country's dollar and increase pressure on the central bank to increase borrowing costs, analysts said.




Charles St-Arnaud at Nomura Securities International increased his estimate of fourth-quarter growth to a 3.9% annualized pace from 2.2% Monday, citing the trade report. Benjamin Reitzes at BMO Capital Markets raised his estimate to 3% from 2.3% and Mark Chandler at RBC Capital Markets boosted his outlook to 2.8% from 2.3%.




Canada reports fourth-quarter growth Feb. 28, and the Feb. 11 report suggests trade may support a quickening of growth after six months when trade subtracted from growth. The Bank of Canada has kept its key lending rate unchanged at 1% since September and said Jan. 18 it would be cautious about future moves in part because currency strength threatens growth.




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