July 2010 Canadian Economic Fundamentals

[Amber]

New data hint U.S. economy on the ropes

WASHINGTON - Sales of previously owned U.S. homes hit a three-month low in June while new claims for jobless benefits surged last week, the latest indications that the economy is on the ropes.

Another report yesterday showed a gauge of the economy`s prospects fell last month, consistent with views the recovery was cooling and that the slowdown could persist through the end of the year.

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Provincial and city rates

The national inflation rate was 1.0 per cent in June, Statistics Canada says. Here`s what happened in the provinces and territories. (Previous month in brackets):

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Bank of Canada ratchets down growth forecast

The economy will grow slowly until well into next year as consumers and businesses spend less and the country`s trading partners struggle, the Bank of Canada said Thursday, while playing down the possibility of a "double-dip" recession and reminding borrowers that interest rates will continue to rise.

Growth from April to June slowed to almost half the pace of the previous quarter, the central bank said in its July Monetary Policy Report, kicking off four consecutive quarters in which economic expansion is expected be weaker than policy makers first predicted.

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The oil sands: A vital part of Canada`s future

The Gulf of Mexico oil spill has understandably led to more attention on the oil and gas industry. In Canada, the discussion gravitates to the oil sands , with our 178 billion barrels of reserves – the second-largest source of oil after Saudi Arabia.

Some supporters believe this method of oil recovery is inherently safer and more stable than deepwater drilling, attracting more interest and investment. Detractors see it as another example of why we need to end our dependence on oil more quickly.


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Toronto: The new Zurich?

There is huge global confidence in the Canadian economy and Canadian financial institutions, and the reason for that is simple. They stood rock solid in the debt crisis of 2008-09.

Confidence is a prerequisite for economic growth. People invest based on the belief that the instruments they are purchasing will increase in value. Canada isn`t issuing as much debt as most nations, and so people are confident their money will be there when it comes time to cash in.

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[Ally]

Slow growth predicted: Economic signs expected to stop short of double dip

Those looking for signs of a double-dip recession will likely have trouble finding them in the coming week, analysts say.

The main economic data on tap will focus on growth in Canada and the United States, with the release of reports Friday in both countries on gross domestic product.

While they are expected to show the North American economy cooling off , the reports are unlikely to hint at either country slipping into negative growth, said BMO Capital Markets economist Benjamin Reitzes.

"For Canada, we expect continued growth but ebbing momentum," said Reitzes, whose forecast calls for tepid 0.1 per cent monthly growth in the country`s economy in May, following stellar annualized growth of 4.9 per cent in the final quarter of last year and 6.1 per cent in 2010`s first quarter. The consensus among most economists is for an increase of between 0.1 and 0.2 per cent in May.

"That`s to be expected at this point. You get a big bounce off inventory rebuilding after the end of the recession and pent-up demand, but that fades and growth slows.

"In the U.S., it`s essentially the same story. We still expect growth in the second half."

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Canada bankruptcies fall 9.2% in May

OTTAWA - The number of Canadian personal and business insolvencies fell sharply in May.

The federal bankruptcy office in Ottawa says the total number of filings dropped to 11,526, down nearly 13 per cent from May 2009.

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[Amber]

The Economic Recovery Is Well Entrenched

The labour market continues to indicate that Canada`s economic recovery has firmly taken hold. In May, the economy churned out 24,700 new jobs—the fifth consecutive monthly increase. That brings total job gains for the year to 215,200. Full-time employment rose by 67,300 in May, while 42,500 part-time positions were eliminated. In fact, about three-quarters of the gains since the beginning of the year have been in full-time positions. Job creation in the private sector continued to lead the way in May with 43,400 new positions, bringing the sector`s total gains for the year so far to 240,500. Self-employment declined by 28,000 positions in May, which leaves that category with net losses of 71,200 since January. The overall employment gains in May came mostly from the service sector (+32,400), led by transportation and warehousing, finance insurance and real estate, health care and social assistance, and public administration. On the goods-producing side, manufacturing and agriculture added jobs. However, the gains there weren`t enough to offset losses elsewhere, and the sector finished the month with a net loss of 7,700 jobs. Despite the employment gains, the unemployment rate remained unchanged at 8.1 per cent, as more people returned to the labour force.

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[Amber]

Job postings continue their rise in June

Job postings rose in June, the ninth increase in the past 11 months, as the labour market continued to strengthen, according to findings of the Conference Board of Canada.

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Sask. June job postings experience biggest decline in Canada

REGINA — Saskatchewan job postings posted the biggest decline in the country in June on the Conference Board of Canada`s help-wanted index, indicating a slackening job market.

By contrast, online job postings across Canada rose in June, the ninth increase in the past 11 months, as the labour market continued to strengthen, according to the Ottawa-based.

The index was up 1.6 points during the month to 98.2 —up 14 percentage points from its July 2009 level.

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[Amber]

Consumer gloom spreads in both Canada, U.S. over economic slowdown

OTTAWA - Fears of an economic slowdown or worse are draining consumer confidence in both Canada and the United States, increasing the changes of a double-dip, two new surveys suggest.

Stock markets retreated in New York and Toronto after the release of the two reports, from Conference Boards in both countries, underlying the importance of consumers to the recovery.

Consumers represent two-thirds of the American economy and as the Bank of Canada has noted, consumers were the linchpin in Canada`s relatively strong performance both during the global recession and current recovery.

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New US home sales in June tick up slightly, but sales still low as demand slumps

WASHINGTON - Sales of new U.S. homes jumped last month, but it was the second-weakest month on record. The lacklustre economy has made potential buyers skittish about shopping for homes.

New home sales rose nearly 24 per cent in June from a month earlier to a seasonally adjusted annual sales pace of 330,000. May`s number was revised downward to a rate of 267,000, the slowest pace on records dating back to 1963. Sales for April and March were also revised downward.

High unemployment, low job growth, and tight credit have kept people from buying homes. The industry received a boost this spring when the government offered tax credits to homebuyers. But since they expired in April, the number of people looking to buy has dropped, even with the lowest mortgage rates in decades available.

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[Amber]

High Job Growth Numbers Uneven Across Canada in June 2010

Canada unexpectedly delivered surprising job growth numbers exceeding analysts expectations by six times the expected 15,000 or fewer jobs forecast.

According to a July 9, 2010 report from Statistics Canada, June 2010 figures showed an overall increase of 93,000 jobs in Canada, pushing the unemployment rate down 0.2% to 7.9%. This marks the first time that the rate was below 8%, since January 2009.

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[Amber]

Metro Vancouver, Kelowna small business owners happiest in Canada

TD index shows upbeat mood of B.C. entrepreneurs

VANCOUVER - Desiree Dupuis is typical of small business owners in Metro Vancouver.

Happy, confident and a slave to no one, the 31-year-old Port Moody resident is not at all surprised by a TD Small Business Happiness Index that found people in Vancouver and Kelowna are happier than their counterparts in other Canadian cities when it comes to owning and running their own businesses rather than being an employee.

"There`s endless opportunity [in owning a small business] and the harder you work, the more you`re rewarded," says Dupuis, co-owner of Three Sixty Financial Group. "As the owner, everything goes in your pocket, as opposed to your efforts going into the pocket of someone else. There`s a lot of freedom and flexibility."

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[Amber]

`Almost inevitable` interest rates will rise: Bank of Canada deputy governor

The pace of Bank of Canada rate moves remains uncertain, but it is "almost inevitable" that interest rates will rise over time, outgoing Deputy Governor Pierre Duguay, right, said yesterday.

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[Amber]

Oil sands emissions dwarfed by coal

U.S. Ambassador David Jacobson has suggested repeatedly that Canada needs to "do more" to reduce the carbon footprint from the oilsands, most recently in a Calgary speech July 19. Perhaps the ambassador should look more closely into his own mirror because, in point of fact, this would appear to be a case of "Old King coal calling the oil sands black" (or blacker). A few pertinent facts are worth noting:

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[Amber]

Will the recovering economy restore consumer demand for Canadian resort property?

As Fortress Investment Group LLC struggled to keep control of its Whistler Blackcomb Ski Resort during the Winter Olympics, Rick Jensen managed to steal a small jewel from the resort operator`s crown.

The former three-term mayor of Cranbrook, B.C., gathered a group of friends and persuaded them to bid for Panorama Mountain Village, a fully developed ski hill with underdeveloped real estate potential just outside Invermere, B.C., a 3 and 1/2-hour drive from Calgary. Late last winter, Mr. Jensen`s group took ownership of the resort for a reported $27-million.

Their bold gamble will provide one of the first tests of whether a recovering economy will restore consumer demand for Canadian resort property, a market that was hammered by the recession.


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[Amber]

Consumer confidence drops in July

Fears of an economic slowdown or worse are draining consumer confidence in both Canada and the United States, two new surveys suggest.

The Conference Board of Canada said Tuesday that its survey of consumers showed Canadians becoming less bullish about their prospects, with confidence dropping for the second straight month in July.


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[Amber]

Double-Dip Recession Unlikely: CIBC report

Economy Will Slow but not Fall Back Into Negative Territory, Economist Says

While the economy is not entirely out of the woods, the odds of a double-dip back into recession are slim, according to a report from the Canadian Imperial Bank of Commerce.

However, the pace of growth in the U.S. and Canadian economies will slow over the next six months, the latest edition of the CIBC`s Recession Probability Index shows.

The index examines trends in leading indicators such as credit spreads, interest rates, and U.S. unemployment benefit claims.

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[Ally]

Federal deficit to be eliminated a year ahead of schedule: Conference Board

OTTAWA — So long as the federal government keeps its pledge on curbing program spending, Ottawa should return to a surplus position one year ahead of schedule based on how the economy is unfolding, the Conference Board of Canada said Thursday.

"A more positive fiscal outcome now appears to be unfolding" for the federal government, according to a commentary co-authored by the board`s chief economist, Glen Hodgson.

The same can`t be said for Canada`s provinces, the piece said, and they have difficult choices ahead in the coming years due to mounting health care costs.

In a commentary published on its board`s website, Hodgson and senior economist Matthew Stewart said they anticipate that nominal GDP — which is growth unadjusted for inflation and represents the base from which government collects taxes — will surge 7.2 per cent this year, compared with the 4.9 per cent expectation in budget 2010.

"This is a very strong first step on the path to restoring fiscal balance at the federal level."

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