July 2011 Canadian Economic Fundamentals

[Ally]

Study suggests Canada's oil more ethical for U.S.





The United States could be forced to buy oil from repressive governments that restrict civil, political and economic freedoms if attempts to limit imports of Canadian oil are successful, the Fraser Institute said in a report Tuesday.




"In recent years, Canada's oil exports have been assailed by groups trying to persuade American consumers and policy-makers that a reduction in Canadian oil imports would not have negative consequences for the United States," said Mark Milke, Fraser Institute director of Alberta policy and author of In America's National Interest - Canadian Oil.




"On the contrary, in the absence of Canadian oil, Americans would likely face increased costs for oil and possible supply limitations. Americans should also not overlook the critical issue of civil, political, and economic freedoms. Unlike Canada, most other sources of oil imports are from governments that any reasonable person would find objectionable."






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[Ally]

Want to buy a sweet house for under $200,000?




When Dave Snively began house-hunting about a year ago, he was looking for an updated home, a nice neighbourhood and plenty of outdoor activities nearby. But most importantly, he was looking for something inexpensive.




`I`m a commissioned salesperson, so some weeks I make a lot of money and some weeks I don`t. My wife`s at home with one child and another on the way, so there`s not a lot of money coming in,` he said. `It`s easier to save money when you spend less on a mortgage.`





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[Ally]

Bank of Canada sees tame inflation





The recent jump in Canada's inflation rate should be temporary and price levels will remain subdued even with a gradual reduction in monetary stimulus, the Bank of Canada said Wednesday.




Despite putting an interest rate hike firmly back on the table for the second half of the year on Tuesday, the bank suggested in its Monetary Policy Report (MPR) that rates would rise only gradually. The bank also sharply cut its second-quarter growth forecast to 1.5 per cent, annualized, from two per cent, but still sees the second-quarter coming on strong.




"(The) policy rate can deviate from its long-run level even if inflation is at target and output is at potential," the central bank said. "In the context of a projection for inflation, this implies that the policy rate can return to its long-run level after inflation is projected to reach the two per cent target and output is projected to reach its potential. This contrasts with the assumption that the policy rate should always be at its long-run level when inflation is at target and the output gap is closed."






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[Ally]

Bank of Canada sees economic growth at 1.5% in second quarter




OTTAWA - Bank of Canada governor Mark Carney painted a picture Wednesday of a strengthening Canadian economy, but warned it remained vulnerable to financial storms brewing in Europe.




The central bank's monetary policy report predicted the economy to bounce back in the last half of the year after a slower than expected second quarter even as risks from a sovereign debt crisis in Europe continue to fester.




"Widespread concerns over sovereign debt have increased risk aversion and volatility in financial markets," governor Mark Carney said Wednesday as the central bank released its July monetary policy report.




"Although the global outlook remains broadly unchanged, global risks have intensified, most notably in Europe."





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[Ally]

Too many condos? Not necessarily says RBC




Canadian condominium construction is strong, but not necessarily excessive, since new units are filling a gap by creating much needed rental stock, says a report by the Royal Bank of Canada.




`Concerns have been raised about the growing number of investors fuelling the growth in condo sales in recent years,` said Robert Hogue, a senior economist with RBC in a report Thursday. `We believe that this phenomenon must be looked at in the context of relatively tight rental market conditions in large Canadian cities, from which investors aim to benefit.`




He says condominium units fill a need in the rental market because few apartment buildings have been initiated in the last two decades.





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[Ally]

Premiers split over energy funding




VANCOUVER - An east-west energy battle is brewing among Canada's Premiers.




Ontario's Dalton McGuinty, in Vancouver for the provincial and territorial leaders' annual Council of the Federation conference, said he is tired of his province subsidizing Western Canada's oil and gas industry.




Hundreds of millions of federal tax dollars have gone to oil and gas projects in Alberta and Saskatchewan, and Mr. McGuinty said it's time Ottawa cough up cash for his province's clean-energy projects.





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[Ally]

Inflation slows more than forecast




OTTAWA ` Canada`s annual rate of inflation eased to 3.1% in June, down from 3.7% the previous month, as prices for vehicles and gasoline declined, Statistics Canada reported Friday.







The core inflation rate ` which strips out volatile items such as food and energy ` also eased in June, falling to 1.3% from a pace of 1.8% in May.







Economists had expected overall inflation of 3.6% in June and a core rate of 1.9%.





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[Ally]

Loonie's ascent not over yet




The Canadian dollar looks set to take a run at its record high of US$1.10 after breaking through to a fresh 3Â-year peak Thursday, but it would likely take renewed sizzle in commodity markets to get there, analysts said.




The currency surged to a high of US$1.0620, putting its record high of US$1.1030 hit on Nov. 7, 2007 firmly on the radar screen.




"It could easily move there. However, it's unlikely to be sustainable there for a significantly long period," said Camilla Sutton, chief currency strategist at Scotia Capital, adding that recent weak economic news out of China may put a damper on such a scenario.





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[Ally]

Mark Carney's prudence on interest rates is welcome




Canadian interest rates will rise, but not as much, or as soon, as borrowers may fear and lenders may hope ` or so suggested Mark Carney, the Governor of the Bank of Canada, in the cryptic style of central bankers, at a press conference after the release on Wednesday of the bank`s quarterly Monetary Policy Report.





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[Ally]

Home ownership trumps renting in personal finance stakes




The Bank of Canada gave its clearest signal so far this week that interest rates are set to rise, while a growing number of real estate watchers and some economists are forecasting property prices will decline.




Given such a scenario, some first-time buyers may be tempted to hold off on what's likely to be one of the biggest purchases of their lives, though that may be a mistake.




Judith Cane, president of Antara Financial Group, said she has just advised a first-time buyer to get into the market.





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[Ally]

Transit-oriented development trumps dump concerns




Future tenants of a proposed apartment building near the Shady Grove Metro station may have to tolerate unpleasant odors in exchange for an easier commute.




Against recommendations made by the Montgomery County Council Planning, Housing, and Economic Development committee and the Montgomery County Planning Board, the County Council voted 6 to 3 on Tuesday to allow Rockville, as part of an annexation, to rezone a 4.37-acre property at the intersection of Route 355 and King Farm Boulevard. The property abuts the Shady Grove [waste] Processing Facility and Transfer Station, a concern among dissenters.




But the property is also less than half a mile from the Shady Grove Metrorail Station and, keeping in line with smart growth principles, the county has been looking to encourage residential development near transit centers.





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[Ally]

Safey first: Foreign investors bond with Canada




Canadian investors have long been accused of being homers. As the rest of the world has been telling us lately, that might not be such a bad thing.




Despite the elimination of foreign-content restrictions on registered retirement savings plans six years ago, most Canadians still keep the vast bulk of their investments in domestic securities. A recent study showed that even the country`s wealthiest investors ` those with more than $250,000 to invest ` average only 15 per cent of their portfolios in overseas holdings.





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[Ally]

Ottawa to strip 1,800 of citizenship





OTTAWA . The federal government believes some 1,800 people have obtained their Canadian citizenship through fraudulent means and it intends to revoke their status, Postmedia News has learned.




After a lengthy investigation by police and the department of Citizenship and Immigration, letters have been issued to hundreds of Canadians telling them the federal government intends to revoke their citizenship.




Individuals can challenge the decision in Federal Court but if they don't, Cabinet will move to void their passports and strip them of their citizenship.




Some of the people targeted are believed to have used dishonest consultants who submitted fraudulent applications on behalf of people who didn't meet the qualifications for citizenship - such as residency requirements.






Read the full article here.

 

[Ally]

New real estate companies challenge old guard




Al Kula wants to sell his home. Not now, mind you, but in another two years.




He`s hoping to sell privately and would rather not pay real estate commission fees. So he listed his north Toronto home with forfuturesale.com, a website launched in May that allows vendors to place their properties up for future sale.




`I plan to retire in another couple of years and I thought it was a great idea,` said Kula, 66, a pharmacist. `I like to plan ahead.`




In the wake of a move by the Competition Bureau to open up the real estate market to more competition, a wave of new, innovative companies have launched. The entrants can be as esoteric as forfuturesale.com, as cutting edge as a company that matches consumers to agents for lower fees, to more traditional flat fee services where consumers can list on the MLS for a cheaper price.





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[Ally]

Home prices expected to stay flat in 2012: RBC




TORONTO`The Canadian housing market is making a transition to a much slower pace growth compared to the surge seen in the past decade, according to a Royal Bank (TSX: RY) housing market outlook.




The report released Thursday said home resales are expected to grow by 0.9 per cent this year and remain unchanged in 2012, while home prices will increase by 4.4 per cent this year and 0.4 per cent in 2012.




`Such results would mark a significant slowing relative to the performance during the 2002-2008 period,` senior economist Robert Hogue wrote in the report.





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[Ally]

Soaring dollar lures investors




The Canadian dollar, which shot to a 3Â-year high Tuesday, is attracting safe-haven investors and reflects the country's fiscal and economic health, Finance Minister Jim Flaherty said.




"Canada is a fiscally responsible country. Our currency value to some extent represents the stability of our country," Flaherty said in Burlington, where he hosted a meeting of smallbusiness people Tuesday.




"There are investors, obviously, around the world ... looking for safe havens and the Canadian dollar offers some attraction."




Flaherty also said he is "relatively confident" the U.S. will reach a debtceiling agreement within days.





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[Ally]

Homeowners face rate hit





The very thing that lifted the economy from the depths of the recession - Canadians' passion for owning a home - could also be its undoing, warns the chief economist for RBC Global Asset Management.




Central to Eric Lascelles's concern is that the availability of cheap credit has driven household debt levels to record highs and soon-to-berising interest rates will bear a "palpable" impact on individuals as well as the broader economy.




"The very source of Canada's relative success during the worst of the credit crunch - a banking sector that kept on lending and households that kept on buying - could yet spell its undoing if newly enlarged household debt loads prove too onerous to bear," Lascelles said in a report issued Tuesday.




Read the full article here.

 

[Ally]

Record household debt could spell Canada's undoing: Economist





The very thing that lifted the economy from the depths of the recession - Canadians' passion for owning a home - could also be its undoing, warns the chief economist for RBC Global Asset Management.




Central to Eric Lascelles' concern is that the availability of cheap credit has driven household debt levels to record highs and soon-to-be-rising interest rates will bear a "palpable" effect on individuals as well as the broader economy.




"The very source of Canada's relative success during the worst of the credit crunch - a banking sector that kept on lending and households that kept on buying - could yet spell its undoing if newly enlarged household debt loads prove too onerous to bear," Lascelles says in a report issued Tuesday.






Read the full article here.

 

[Ally]

How to protect yourself from interest rate hikes




It`s the bogeyman under the bed ` rising interest rates. So far, rates are still in hiding but be prepared. They may be breaking out soon and we need to be ready for it.




The problem is debt. Our disposable incomes have grown by four per cent annually while our debt has leapt ahead by over eight per cent, and a good amount of that increase is because of the rapid increase in house prices nationally.




RBC Global Asset Management is so excited about our debt load that a recent report refers to Canada`s `torrid love affair with credit.` The author continues, `This enthusiastic borrowing has served to pickle Canadians ever more deeply in a brine of debt.`





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[Ally]

Auto manufacturing jobs jump after six-year slump




TORONTO ` Canada`s auto sector added more than 15,000 jobs in the first half of the year as many manufacturers bounced back from the deep recession, industry statistics show.




Vehicle and parts manufacturers, a key cog in the Canadian economy, jacked up employment levels by 13.3 per cent or 15,300 jobs to a workforce of 130,100 because of growing North American demand for vehicles in the first six months from the same period last year, according to figures from Statistics Canada and DesRosiers Automotive Consultants.




The hiring increase breaks a six-year decline in employment levels for the industry that included its worst downturn since the Great Depression.




Parts producers, which took a huge financial hit during the recession, accounted for most of the job gains. Hirings and layoff recalls shot up 21.3 per cent, or 13,700 jobs, to 78,400, the statistics showed.





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