January 2011 Canadian Economic Fundamentals

[Ally]

Debt fears overblown, says mortgage industry





Faced with new rules from Ottawa, the Canadian mortgage industry has struck back with a report it says shows that Canadians continue to be "highly prudent" when it comes to their loans.




The Canadian Association of Accredited Mortgage Professionals said its data shows the vast majority of borrowers have left themselves plenty of room to absorb any interest rate shocks and it wondered about the need for new rules.




"While it will be useful to discuss the appropriateness of current lending criteria, the discussion should not be focused solely on whether to tighten; the possibility of moderating the criteria should also be on the table," the report stated.




For the second time in nine months, the federal government made it tougher for Canadians to borrow Monday. The latest changes lowered amortization lengths from 35 years to 30 years, reduced refinancing limits to 85% of a home's value from 90% and removed government insurance on home equity lines of credit.




Read the full article here.

 

[Ally]

As oil nears $100 mark, threat to nascent recovery grows




Rising oil costs are putting the squeeze on transportation companies and consumers, raising concerns that the fragile global recovery is in danger as prices veer toward $100 (U.S.) a barrel.




Airlines and trucking companies say they are absorbing higher costs that are difficult to pass on to consumers, even as households have to spend more of their disposable income on gasoline and home-heating fuel.



Read the full article here.

 

[Ally]

High loonie, low productivity hurting growth, central bank says






OTTAWA`Canada`s economy has begun paying a steep price for the relative strength of the dollar and the poor productivity of businesses, the Bank of Canada warns in its latest global and domestic economic outlook.




Thanks to new monetary and government stimulus, the U.S. economy will expand by an impressive 3.3 per cent this year ` a full point stronger than previously thought ` and 3.2 per cent next year, the bank says, but Canadian firms are in a poor position to take full advantage of that growth.




The bank has also upgraded global growth by about half-a-point to four per cent this year, led by China. But with the Canadian loonie trading at par with the U.S., and low productivity, there is only so much of that increased demand Canadian exporters can hope to fill, it warns.




`While near-term growth prospects in the United States and other foreign economies have significantly improved of late, competitiveness challenges are expected to leave the projected profile of Canadian export growth only slightly stronger than previously anticipated,` the bank said Wednesday.



Read the full article here.

 

[Ally]

Need to alter mortgage rules refuted





Faced with new rules from Ottawa, the Canadian mortgage industry has struck back with a report it says shows that Canadians continue to be "highly prudent" in their borrowing.




The Canadian Association of Accredited Mortgage Professionals said its data shows the vast majority of borrowers have left themselves plenty of room to absorb any interest-rate shocks and it questioned the need for new rules.




"While it will be useful to discuss the appropriateness of current lending criteria, the discussion should not be focused solely on whether to tighten; the possibility of moderating the criteria should also be on the table," the report states.




For the second time in nine months, the federal government on Monday made it tougher for Canadians to borrow. The latest changes lower amortization periods to 30 years from 35 years, reduce refinancing limits to 85% of a home's value from 90% and remove government insurance on home-equity lines of credit.




Read the full article here.

 

[Ally]

Canada won't reap rewards from U.S. rebound





Canada's failure to improve its competitiveness over the years won't allow the country to "fully benefit" from a much-improved outlook for the United States and the global economy, Bank of Canada governor Mark Carney said Wednesday.




His comments came after the Bank of Canada, in its latest quarterly economic outlook, sharply revised upward its forecast for U.S. growth in 2011, to 3.3 per cent, a full percentage point higher than what it expected in October. It also boosted its outlook for global growth to four per cent in 2011, from 3.5 per cent.




But the central bank governor said Canada is unlikely to "fully benefit" from the upgrade due to heightened "competitive challenges" the country faces. The bank only nudged upward the growth outlook for Canada to 2.4 per cent this year and 2.8 per cent in 2012 -- compared to previous expectations for growth of 2.3 per cent and 2.6 per cent, respectively.




"We have lost competitiveness over a number of years," Carney told reporters in Ottawa.




Read the full article here.

 

[Ally]

Debt fears overblown, says mortgage industry





Faced with new rules from Ottawa, the Canadian mortgage industry has struck back with a report it says shows that Canadians continue to be "highly prudent" when it comes to their loans.




The Canadian Association of Accredited Mortgage Professionals said its data shows the vast majority of borrowers have left themselves plenty of room to absorb any interest rate shocks and it wondered about the need for new rules.




"While it will be useful to discuss the appropriateness of current lending criteria, the discussion should not be focused solely on whether to tighten; the possibility of moderating the criteria should also be on the table," the report stated.




For the second time in nine months, the federal government made it tougher for Canadians to borrow Monday. The latest changes lowered amortization lengths from 35 years to 30 years, reduced refinancing limits to 85% of a home's value from 90% and removed government insurance on home equity lines of credit.




Read the full article here.

 

[Ally]

Canadian mortgages linked to strong economy






CALGARY - Residential mortgage credit has expanded very rapidly in Canada during the past decade, at an average of about 10 per cent per year, raising fears about the level of risk in the mortgage market and possible consequences for the broader economy, says a new report.




The report - Revisiting the Canadian Mortgage Market-The Risk is Minimal - says the United States experience has provided a "sobering illustration of the possible repercussions of mortgage risk run amok."




But the rapid growth in Canadian mortgage debt is related to a very strong economy.




And the report says the vast majority of borrowers holding highest risk mortgages have considerable room to absorb interest rate increases.




"The essential finding of this research report is that Canadians - lenders and borrowers - have been highly prudent in the mortgage market," says the report by Will Dunning, chief economist for the Canadian Association of Accredited Mortgage Professionals.




Read the full article here.

 

[Ally]

Canada's wholesale sales in surprise jump





OTTAWA ` Wholesale sales in Canada rose more than expected in November, led by the machinery and equipment sectors, Statistics Canada said Thursday.




Wholesale sales were up 1.2% to $45.7 billion for the month, the federal agency said. November marked the fourth consecutive monthly increase in sales.




`This increase in sales is explained in large part by higher sales in the machinery, equipment and supplies subsector, the miscellaneous subsector, and the food, beverage and tobacco subsector,` the agency said.




Economists had expected wholesale trade to rise by around 0.2% in November.




Read the full article here.

 

[Ally]

In defence of much-maligned home equity credit line




Now, can we adults in the room have a conversation about debt? We`re the people who recognize that well-managed borrowing is part of everyday life, and thus have set up a home equity line of credit.




Home equity credit lines are the smartest, cheapest way to borrow money, and you should definitely have one in your back pocket if you have the discipline to manage it.





Read the full article here.

 

[Ally]

Markets brace for China's bid to rein in hot economy




As Chinese workers demand higher wages to offset ever-higher prices, the rest of the world is hoping the country`s increasingly urgent attempts to curb inflation won`t threaten the nascent economic revival elsewhere.




China`s rip-roaring economic growth accelerated in the fourth quarter of 2010 despite such recent measures as domestic interest rate hikes, increased bank reserves and price controls on staple goods.



Read the full article here.

 

[Ally]

Will Canada play energy card in a U.S.-China world?




In Washington, Barack Obama`s lavish summit with Hu Jintao marks China`s arrival as a global force. In Canada, it raises a new wrinkle in the old struggle to attract superpower attention. A big question now is whether Canada will try to use energy and pipelines to expand its influence.




The talk from both presidents about the need to avoid rivalry underlined the critical unanswered question about what kind of superpower China will be, and how a new world order dominated by a U.S.-China `G2` will work.



Read the full article here.

 

[Ally]

Tighter mortgage rules may yet save us from ourselves





People who remember the days when there was only one type of mortgage -- with interest fixed at five per cent annually for the entire 25 years -- will also remember the cartoon character Pogo saying: "I have met the enemy, and he is us."




Indeed, there are times when we need to be saved from ourselves.




Two years ago, when Trevor Hamon was branch manager with Dundee Private Investors, he warned of serious peril by banks offering home-equity lines of credit and by people taking debt into retirement. I've since seen people go $100,000 into their HELOC, lose it investing on penny stocks and essentially wind up paying for their home twice.




In fact, Canadians currently owe $1.48 for every dollar of their disposable income, which is more household debt per capita than in the United States. And the argument that household debt is immaterial as long as the value of the house increases is no longer comforting. TD Economics expects existing home sales in Canada to drop about eight per cent in 2011 and prices to slip one per cent.




Read the full article here.

 

[Ally]

Canadians sunnier about economy




Canadians are more optimistic about the economy, though squeezed personal finances are keeping them away from plans to buy big-ticket items.




A monthly TNS survey of consumer confidence rose to its highest level since June as Canadians grew more upbeat about the present economic situation as well as prospects over the next six months.




Record debt levels and a post-holiday spending hangover may be curbing plans to go shopping. The survey also showed plans to buy pricier items like furniture and appliances has fallen. Worries about their wallet also caused them to spend less over this holiday season, with consumers reporting they spent an average of $1,008 compared to last year`s average or $1,024.




The drop in plans on future spending `at least shows that some Canadian consumers are heeding the message to watch their debt,` said Norman Baillie-David, vice president of TNS Canada who oversees the survey. `We`ll see in February whether or not that message sticks.`



Read the full article here.

 

[Ally]

Retail sales increase in November




Most sectors were up as retail sales increased 1.3 per cent to $37.3-billion in November.




Statistics Canada reports it was the sixth straight monthly rise in sales and the largest since March 2010.




Sales in volume terms also rose 1.3 per cent.




Gains were reported in eight of 11 subsectors, representing roughly 90 per cent of total sales.



Read the full article here.

 

[Ally]

Quebec, meet Denmark. If the provinces were countries




A fun version of the map of Canada shows Quebec's economy is comparable to Denmark, while Saskatchewan's gross domestic product is roughly the equivalent of Oman's.




The map, which adapts the idea from portrait of the United States, was produced by the Bank of Montreal.




It shows the three northern territories ` Yukon, Nunavut and the Northwest Territories, had a similar nominal GDP as the Bahamas, with both adding about $7-billion (U.S.) in goods and services last year.




British Columbia and the Czech Republic produced about $195-billion while Prince Edward Island is similar to Krygyzstan.





Read the full article here.

 

[Ally]

The smartest banks and the dumbest borrowers?





Stephen Harper had inspiring words for conservatives the other day. Announcing the "Red Tape Reduction Commission," which is to seek ways to reduce the costs of regulation for Canadian business -- though I hope not by requiring small businesses to fill out forms suggesting how -- he told a Toronto audience that red tape "is a hidden tax and a silent killer of jobs. Unlike some, Conservatives don't believe that government is always the answer. In fact, sometimes we believe the best thing that government can do is simply get out of the way." Friedrich Hayek couldn't have said it better.




Well, actually, Friedrich Hayek might have said, "Almost all the time," rather than "sometimes." Still, the idea of government getting out of the way is red meat for conservatives.




But then, strangely enough, in the very same news cycle came a story about how Harper's Department of Finance was considering changes to mortgage rules that would require 100 per cent of condo fees, rather than just 50 per cent as is now the case, to be counted when determining whether a condo-buyer's income is big enough to carry the loan his or her purchase would require.




Read the full article here.

 

[Ally]

Video: Freezing bed bugs a chemical-free remedy





Pest control experts held a special seminar in Vancouver Friday with tips for building owners on how to fight back. As the CBC's Tim Weekes reports, they now have a new freeze gun in their arsenal.




Read the full article here.

 

[Ally]

Video: Bedbugs growing resistant to pesticides





According to bedbugregistry.com, there are 1,944 reported cases of bedbug infestation in Vancouver alone, mostly in the West End and the Downtown Eastside. Many locations have had to have exterminators back more than once, because the bugs are getting tougher, as the CBC's Lisa Johnson reports.




Read the full article here.

 

[Ally]

Mortgage rules will sideline some buyers




Throwing a bucket of cold water on an already-cooling housing sector is not a step any government takes lightly.




This week, Finance Minister Jim Flaherty did just that. As of March 18, the government will no longer insure mortgages with amortization periods of more than 30 years. That will keep some potential home buyers out of the market, and in theory, help stop already debt-burdened households from going even deeper. Ottawa will also make home refinancing rules tighter, among other moves.




The consumer debt habit is widely viewed as a risk to the economy, and the move to curb its growth seen as necessary. But when it comes to the housing market, Ottawa has waded into muddy waters.




While the effective elimination of the 35-year mortgage could diminish housing prices, economists say it's not possible to calculate the degree of dampening with any certainty.



Read the full article here.

 

[Ally]

Use of loan key to tax deduction




Monday's announcement by Finance Minister Jim Flaherty that, come April, the government will stop offering mortgage insurance on home-equity lines of credit (HELOCs) has exposed what many in the industry have known for years -- that HELOCs were seldom used to finance the equity in your home but rather to fund a variety of other things, including "boats and cars and big-screen TVs."




Tax planners are often besieged with questions from clients who have taken out a HELOC or a mortgage and are wondering whether, given their own set of circumstances, some or all of their interest expense is tax-deductible.




The ability to write off interest paid on a loan has its origins in the Income Tax Act, which states that if funds are borrowed for the purpose of earning business or investment income, the interest paid on such funds is tax-deductible.



Read the full article here.