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July 2010 Canadian Economic Fundamentals

Ally

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Canada`s Economy expands 0.1% in May

OTTAWA -- Canada`s economy grew 0.1 per cent in May, led by the oil and gas extraction sector, Statistics Canada said Friday.

Most economists had expected growth of between 0.1 and 0.2 per cent for the month.

"Goods-producing industries rose 0.6 per cent, led by oil and gas extraction," the federal agency said. "Construction and utilities fell back, while manufacturing activity edged up.

Retail activity rose 0.3 per cent in May, with increases at clothing and accessories outlets, as well as food and beverage stores.

"Decreases were recorded in building and outdoor home supplies stores, mirroring the weakness in construction, and by used car dealers," the agency said.

After posting annualized growth of 4.9 per cent in the final quarter of last year and 6.1 per cent in 2010s first quarter, the central bank now expects gross domestic product to expand just three per cent for the three-month period ended June 3.

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Weekly wages rise 3.7% in May from year earlier

OTTAWA -- Average weekly earnings of non-farm payroll employees were up 3.7 per cent in May from a year earlier, to $848.45, the biggest jump since February 2008, Statistics Canada reported Friday.

"In recent months, the pace of growth in earnings has increased. May marked the sixth consecutive month for which the year-over-year increase was at or above 2.3 per cent," the federal agency said.

In the previous eight months, year-over-year gains were below 1.8 per cent, it said.

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Ottawa on track for early surplus

As long as the Conservative government lives up to its promises on spending cuts, Ottawa should be able to return to a budget surplus a year ahead of schedule based on how the economy is unfolding, the Conference Board of Canada said yesterday.

"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.

However, the same can`t be said for Canada`s provinces, the Conference Board warned. Provincial premiers have difficult choices ahead to wrestle down their deficits, especially in the face of an aging population that will demand more health-care services.

The analysis from the Ottawa-based think-tank should come as a dose of much-needed good news for the federal Tory government, which has found itself mired in controversy this summer over a decision to eliminate the mandatory long-form census; complaints from RCMP officials about Commissioner William Elliott, a Tory appointee; and a move to forge ahead with a sole-sourced military aircraft contract worth up to $16-billion.

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Slower economic expansion upon us

OTTAWA — Slower economic expansion is upon us judging by data released Friday that indicated U.S. GDP posted its weakest pace of three-month growth in nearly a year, while Canada eked out a modest gain in May as oil and gas exploration offset a widespread slump in real estate.

The results indicate the strong gains witnessed during the early stages of the recovery are definitely behind us. The worry now is whether growth can continue as governments wind down their respective stimulus measures that helped power the recovery.

"Economic momentum is ebbing," said Benjamin Reitzes, economist at BMO Capital Markets, adding the soft Canadian data could prompt the Bank of Canada to rethink rate-hike plans for the rest of this year.

The Toronto stock market benchmark index and the Dow Jones industrial average shed roughly 100 points apiece shortly after opening on the weak economic data.

The U.S. economy expanded on an annualized basis in the second quarter by 2.4%, just short of market expectations. Much of the strength came from business investment in machinery and equipment, which surged 22% annualized, and a strong 28% gain in residential investment. This big gain was offset, however, by tepid 1.6% growth in personal consumption, which has been the main driver of the U.S economy.

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21 Reasons Why The So-Called Recovery Is A Joke For Most Americans

Yes, U.S. GDP is growing and corporate profits are beating expectations across the board. Companies are flush with cash, and banks are confident again. It`s surely a recovery... for them.

Yet many Americans are experiencing more hardship than they`ve ever known. In addition, some of America`s most severe long-term economic problems are getting worse.

That`s why for most Americans the rebound in GDP is meaningless and the economy isn`t recovering.

Click here to see why.
 

Ally

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Stark warning for U.S.

OTTAWA - A top U.S. Federal Reserve official warned yesterday the U.S. economy is close to sliding toward Japanese-style deflation, and the current policy of keeping interest rates at near-zero for an extended period might exacerbate matters.

James Bullard, president of the Federal Reserve Bank of St. Louis, said in a policy paper the best way to avoid such a dangerous outcome is for the U.S. central bank, despite its already bloated balance sheet, to buy up U.S. Treasury bonds.

"The U.S. is closer to a Japanese-style outcome today than at any time in recent history," Mr. Bullard said.

The promise to keep the key policy interest at near-zero for an extended period, as the U.S. Federal Reserve has been wont to do, is a "double-edged sword," he said, because it could reinforce expectations that inflation will fall further.

"A better policy response to a negative shock," he said, "is to expand the quantitative easing program through the purchase of Treasury securities."

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Home Staging isn`t all for nothing

Savvy home sellers know that cracking their wallets for a few cans of paint, accessories and other small upgrades can pay huge dividends on their final sales price. But what if you weren`t allowed to invest a cent in prepping your home for the market?

That`s the premise for All For Nothing, a new show premiering this fall on the W Network.

The real estate/home makeover hybrid pits homeowner against homeowner in a two-week race to ready their properties for sale, without investing a single cent.

But homeowners will hopefully get creative, with a little guidance from the show`s designer, to max out their makeover mileage, says Tim Alp, executive producer at Mountain Road Productions, which is producing the series.

All the upgrades don`t need to be free, he adds. "They can beg, borrow, barter, steal and sell things they have already to get their budget."

Following the whirlwind makeover, the homeowner who has best improved their home`s value also wins a commission-free listing from show host and Ottawa real estate agent Paul Rushforth.

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Brookfield reorganizes real estate holdings

The Brookfield group is reorganizing its real-estate holdings around the world, with 16 major office properties in Australia being transferred from the Canadian parent company to one of its U.S. subsidiaries in a $1.4-billion (U.S.) transaction.

Brookfield Properties Corp. (BPO-T16.110.070.44%), a New York-based company that`s 51 per cent owned by Brookfield Asset Management (BAM.A-T26.020.140.54%) of Toronto, says it`s being positioned as a pure-play office-property business with a global reach.

"Given its rich resource base and strong trading relationship with the world`s fastest growing economies, investment in Australia should put Brookfield Properties in a strong position to experience meaningful growth as the global economies emerge from the economic downturn," BPO president and CEO Ric Clark said in a statement from New York.

"Following these transactions, Brookfield Properties will have leading office portfolios in each of the United States, Canada and Australia, as well as a modest but growing interest in the United Kingdom, transforming Brookfield Properties into the global security for investors looking for ownership in premier office assets."

Brookfield Properties will add office properties in Sydney, Melbourne and Perth to its current portfolio, which includes major properties such as Brookfield Place in Toronto, Bankers Hall in Calgary and the World Financial Center in Manhattan, near the ill-fated World Trade Centre that was attacked by terrorists.

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How can Canada cash in on the U.S. economic malaise

Canada has the opportunity of a lifetime waiting to be seized.

Non-financial institutions in the United States have almost $2 trillion US in cash on their balance sheets but have no desire to invest there. Luring some of that money to Canada will help further modernize our economy, create jobs, generate more tax revenue and raise our standard of living.

This window of opportunity won`t be open for long, so Ottawa and the provinces should launch a major marketing effort now to turn American apprehension into economic gain for Canada.

What does Canada have to sell to those holding the $2-trillion US purse strings? A comparative advertising strategy would focus the minds of American investors on the advantages Canada offers, including some of the following:

- Lower corporate income tax rates. The U.S. statutory federal corporate income tax rate is 35 per cent, a number that is more likely to go up than down given the country`s debt burden. Canada`s is 18 per cent, down from 19 per cent in 2009. Scheduled tax cuts will bring Canada`s rate to 16.5 per cent in 2011 and to 15 per cent in 2012, giving Canada the lowest statutory tax rate in the G7.

- Competitive personal income tax rates. It may comes as surprise for Americans to learn that Canada`s federal personal income tax rates are lower than those in the U.S. The U.S. rate on income between $34,000 US and $82,400, US for example is 25 per cent. In Canada the rate on income between $40,970 and $81,941 is 22 per cent. On income from $171,850 US to $373,650 US the U.S. rate is 33 per cent. Canada`s rate reaches a maximum of 29 per cent for all income over $127,021.

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