July 2011 Canadian Economic Fundamentals

[Ally]

Canuck buck still strong




The loonie is staying ahead of the American greenback and was worth just under 106 cents US on Wednesday.




The Canadian dollar gained about 0.8 of a cent over the past week and closed at 105.39 cents US on Wednesday after peaking slightly higher on Tuesday.




The American dollar is losing ground against a number of international currencies.




Currencies in Australia, Singapore, and Switzerland all saw gains against the U.S. buck on Wednesday as Washington lawmakers remain at a standoff over the pending debt crisis.




If American legislators don't agree to extend the debt ceiling by the August 2 deadline, the country will likely begin to default on its debts and could lose its top credit rating.





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[Ally]

U.S. action could slow Canadian economy




MONTREAL - Canada likely faces slower economic growth even if the United States manages to avoid a default or credit rating downgrade, economists said Wednesday.




The U.S. government's need to cut spending by between US$2 trillion and US$4 trillion over a decade would delay its recovery and drag down Canada's rebound because the two economies are so closely linked.




The U.S. government has been grappling since May with more than $14 trillion in debt ` the borrowing ceiling set by Congress ` and may not be able to pay its bills after Aug. 2.





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[Ally]

Rate hikes will soon test our love affair with credit




Canada`s economy has nimbly surfed its way to among the most resilient performances in the developed world. Although this is deeply satisfying, it is not an excuse for complacency. Successful investing, after all, requires a continuous assessment of downside risks. Canada`s towering household debt burden arguably tops the charts, and constitutes a fascinating subject. 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 household debt loads prove too onerous to bear. The imminent arrival of higher interest rates will soon put debt affordability to the test.




On the surface, there is reason for concern. Canadians, seduced by easy access to low borrowing rates, have been having a love affair with credit. The stock of household credit has grown by more than one-third since the start of the credit crunch, with Canada`s household debt-to-income ratio having soared to a record 147 per cent ` exceeding the United States ` and continues to rise.




Yet household debt has been remarkably manageable, at least so far. The Canadian landscape is littered with unfulfilled prophecies of imminent housing collapse. Consumer bankruptcy and loan delinquency rates are near historical norms, and debt payments command no more of the average income than usual. It is no coincidence that the 30-year march of ever-lower interest rates has coincided with an equal but opposite rise in household debt and home prices. The former has enabled the latter, meaning the average Canadian struggles no more under the weight of financial obligations than did previous generations.





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[Ally]

Auto sector roaring back




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 America 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.





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[Ally]

Put a little green in your reno plans




Here`s the good news many homeowners have been waiting for: the popular federal ecoENERGY Retrofit Homes program has been renewed and homeowners that have done or are thinking about doing some energy-saving home renovations can again apply to the federal government for up to $5,000 to offset retrofit costs.




If you have been contemplating a lifestyle renovation such as updating your kitchen or ensuite, this is the perfect time to add a green dimension to your renovation by getting both projects done at once. Of course, once the upgrades are done, homeowners will enjoy lower energy costs and we will all enjoy the benefits of reduced greenhouse gas emissions thanks to lower energy consumption.




Eligible retrofits include heating systems, cooling systems, ventilation systems, domestic hot water equipment, insulation, air sealing, windows/doors/skylights and water conservation measures. There`s a chart on the Natural Resources Canada website ( www.nrcan.gc.ca) that sets out exactly how much you can get back for each specific retrofit measure. But as in the past, the retrofits you do have to be identified by a licensed energy evaluator in advance of the work, and verified afterwards as well, which is fair and reasonable considering the financial benefit.





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[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.`





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[Ally]

Economic growth will slow as U.S. cuts spending: Experts





MONTREAL ` Canada likely faces slower economic growth even if the United States manages to avoid default on its debt or a credit rating downgrade, economists said Wednesday.



The U.S. government's need to cut spending by between US$2 trillion and US$4 trillion over a decade would delay its recovery and drag down Canada's rebound because the two economies are so closely linked.




"The short-run effect of these changes is going to be to slow the recovery even further," says Christopher Ragan, an associate economics professor at McGill University.




"But at the same time they need to put themselves onto a fiscal track that is credible and show they are not going to be hitting the debt wall."





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