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March 2011 Canadian Economic Fundamentals

Ally

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GDP gains yet to bite into jobless rate




Canadian consumers and U.S. importers are putting Canada`s economy on a footing solid enough to raise prospects of an early interest rate hike but likely not enough to quickly bring down the unemployment rate.




Gross domestic product grew at an annualized 3.3-per-cent rate in the fourth quarter of 2010, Statistics Canada said Monday, accelerating after a 1.8-per-cent expansion in the prior three months. Oil export volumes hit a record in the quarter and total sales abroad grew 4 per cent - the fastest pace since 2004 - while most other sectors also saw gains. Consumer spending showed little sign of slowing, rising 1.2 per cent or the fastest in three years.



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Canada 'in position to be listened to' in secretive world food-aid talks




For the first time in more than a decade, an elite compact of the world`s richest nations will begin redrawing the historic international agreement that governs food-aid commitments to hungry countries.




Canada, as chair of the talks, is uniquely poised to shape the secretive negotiations, which are held behind closed doors in London at quite a distance from the Rome-based nerve centre of global food politics.





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Why the loonie is soaring right now




The Canadian dollar hit its highest level since March 2008 on Monday, boosted by a combination of robust Canadian data and weak U.S. figures.




The currency jumped as high as US$1.0254, up from US$1.022 before the data was released.




Figures from Statistics Canada showed the Canadian economy grew an annualized 3.3% annualized in the final three months of 2010, above market expectations of a 3% annualized gain in the quarter. The Bank of Canada had forecast growth in the fourth quarter of 2.3%.



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Canada GDP: What the analysts say





TORONTO ` Canada`s economy roared back to life in the fourth quarter of 2010 after a disappointing third quarter, supporting expectations the Bank of Canada will resume interest rate hikes in the first half of this year.




Here's what the economists say:









DEREK HOLT, VICE PRESIDENT OF ECONOMICS AT SCOTIA CAPITAL





"It`s a solid all-around report, reflecting a fair amount of breadth in terms of the pace of expansion. I guess there are two factors that explain the upside compared to consensus. One would be that manufacturing actually contributed to growth, despite the fact that in their earlier report, manufacturing shipments in real terms had fallen, so if you go back to the earlier debate on which shipment was telling the truth ` manufacturing or exports ` this would suggest that the export numbers were closer to the mark and Stats Canada is likely to revise up its shipment numbers on the manufacturing side."




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After the crisis, a worldwide rise in unrest?




LONDON - With the Middle East in turmoil, authoritarian states jumpy and post-crisis economic pain prompting protest in western Europe and elsewhere, some suspect a systemic rise in worldwide unrest might just be beginning.





Instability in the already volatile oil-producing Middle East could produce a feedback loop where unrest pushes up energy prices, fuelling inflation and deepening discontent both in the region and around the world.





In most countries, the so-called "misery index" ` an aggregation of unemployment and inflation long seen as a warning of protest and instability ` is pushing higher.





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Plagued by politics









`THIS is the craziest thing we`re doing,` says Peter Brabeck, the chairman of NestlÃ. He is talking about government biofuels targets which require a certain proportion of national energy needs to be met from renewable fuels, most of them biofuels (ie, ethyl alcohol made from crops, usually maize or sugar).




The targets are ambitious. Brazil, Japan, Indonesia and the European Union all say biofuels must supply 10% of energy demand for transport by 2020. China`s target for that date is 5%. America aspires to meet 30% of such needs from biofuels by 2030.







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Pressure grows for rate hike




OTTAWA ` Pressure on the Bank of Canada to raise rates is likely to build after Statistics Canada reported Monday the economy ended 2010 with a bang as it grew 3.3% annualized in the fourth quarter ` a full percentage point above the central bank`s expectations.




Leading the way were exporters, which posted their best quarterly performance in eight years. The data suggested the economy roared in December as real GDP advanced 0.5% on a month-over-month basis. This, coupled with an upward revision in growth for previous months, meant Canada grew 3.1% in 2010, matching the best annual performance since 2000.




`This upbeat report begins to tip the balance back in favour of earlier rate hikes,` said Douglas Porter, deputy chief economist at BMO Capital Markets.





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Carney may keep 1% Canada lending rate, 'carefully consider' future moves




The Bank of Canada will probably keep its benchmark interest rate at 1 percent for a fourth consecutive meeting today, and reiterate that any future increases will be `carefully considered.`




The target rate for overnight loans between commercial banks has been unchanged since September, and all 29 economists surveyed by Bloomberg News predict no change today.




The recovery in the world`s 10th-largest economy was bolstered by the biggest jump in exports since 2004 during the fourth quarter and job creation in January that quadrupled forecasts. Central bank Governor Mark Carney has said the inflation will stay under control because the economy will have `slack` until the end of 2012, suggesting no interest-rate increase until May, said Royal Bank of Canada chief economist Craig Wright.



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Scotiabank forum discusses the year ahead for the Canadian real estate market




TORONTO, March 1 /CNW/ -
In a presentation earlier today moderated by Scotiabank's Managing Director of Real Estate Secured Lending, David Stafford, Scotiabank's Chief Economist Warren Jestin and Senior Economist and real estate specialist Adrienne Warren were joined by Phil Soper President & CEO of Brookfield Real Estate Services to share their views on what 2011 has in store for the Canadian economy and the Canadian real estate market.





During the forum, held in Toronto, keynote speaker Mr. Soper discussed the potential impact of such variables as immigration and the availability of mortgage insurance on house values. Mr. Soper also explored some of the questions about the future of housing currently being debated across the country and across North America, including his thoughts on the age-old rent versus buy debate.




"As the United States struggles through the longest and deepest housing market downturn in decades, policy makers and social strategists are beginning to debate the value to society of home ownership itself," said Mr. Soper. "Few advanced countries weathered the global economic crisis as well as Canada. As real estate markets in many countries collapsed, Canadian homeowners emerged relatively unscathed. This does not mean our housing industry has escaped scrutiny. Regulators and public policy commentators are rightfully asking what if anything needs to be done to ensure the continued vitality of this critical sector."



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Selling a house? Beware the costs




If you're thinking of selling your house to make a little money before rising interest rates squeeze the real estate market, there's good news and bad news.




The good news is you're almost certainly making money because home prices in Canada have been rising for the past few decades, particularly in the greater Vancouver area, as shown in the chart below, which is from a BMO Capital Markets report published this week.



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Soft landing for Canadian real estate market, but Vancouver could outperform: Report





VANCOUVER - Low interest rates and steady employment growth are underpinning Canadian housing demand, but the market will soften later this year and into 2012, according to Scotiabank Group.




Scotiabank expects sales volumes to edge down modestly in 2011, which places sales 15 per cent below the 2007 peak but in line with the 10-year average.




B.C. housing starts have picked up compared to 2009, but are projected to be flat through 2012, at levels below those of 2006 to 2008. Housing starts are projected to number 28,200 units this year, compared to 39,200 units in 2007.




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Canadian home prices to rise modestly: Scotiabank







TORONTO (Reuters) - A modest rise in Canadian home prices is likely this year as the market is tilting mildly in favor of sellers, Bank of Nova Scotia said on Tuesday.





Market watchers should expect a 2 percent decline in sales of existing homes in 2011, and a 2 percent uptick in prices, Adrienne Warren, Scotiabank's senior economist, said at a bank-sponsored forum on the Canadian real estate market's outlook and trends.





For 2012, a lack of pent-up demand and further tightening of mortgage rules, announced in mid-January, will probably dampen sales further. As well, Canadian interest rates are expected to rise by next year and increase mortgage carrying costs, and that should also pressure the market, she said.





Looking at the long-term trend in house prices relative to income, Warren estimates the current average home is about 10 percent overvalued. But she is quick to point out that this is "fairly typical" toward the end of an expansionary phase.





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Credit Suisse's fabulous presentation on what China will look like in 2015





The China story continues to be the most exciting for global investors, undeterred by its inflation problems and the threat of a hard landing from government tightening measures.






Those short term worries shouldn't matter if you're a long-term China investor, and the opportunities are broad, according to Credit Suisse's report on China in 2015.




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No hint of rate-hike timing from central bank




The Bank of Canada said Tuesday the economy is growing at a "slightly" faster pace than expected as signs emerge of a recovery in exports, but gave no hint it was ready to resume hiking interest rates.




As expected, the central bank kept its benchmark rate unchanged at one per cent. And in a five-paragraph statement, it struck what analysts deemed a cautious tone in an effort to dampen enthusiasm after Statistics Canada reported the economy grew at a 3.3-per-cent annualized clip in the fourth quarter -a full percentage point above the central bank's forecast. This prompted yields to climb and the loonie to head upward in anticipation of an earlierthan-expected rate increase.




The dollar lost ground after the rate announcement, trading in the $1.0268 US range, down from as high of $1.0309 US on Tuesday.





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Alberta ranked as world's top mining jurisdiction






TORONTO (Reuters) - Canadian provinces still dominate a list of the world's most attractive mining jurisdictions, with Alberta claiming the top spot, according to a Fraser Institute survey released on Thursday.





The survey, based on views of about 500 mining companies, measures the attractiveness of the mining policies implemented by governments across the globe.





Though a surge in metal prices has made miners more optimistic, many respondents said a growing trend of resource nationalism and new mining taxes are a cause for concern.





"I think for virtually every jurisdiction there is a feeling that things are getting worse, as opposed to better," said Fred McMahon, co-author of the report.





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Ally

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Alberta ranked as world's top mining jurisdiction







TORONTO (Reuters) - Canadian provinces still dominate a list of the world's most attractive mining jurisdictions, with Alberta claiming the top spot, according to a Fraser Institute survey released on Thursday.





The survey, based on views of about 500 mining companies, measures the attractiveness of the mining policies implemented by governments across the globe.





Though a surge in metal prices has made miners more optimistic, many respondents said a growing trend of resource nationalism and new mining taxes are a cause for concern.





"I think for virtually every jurisdiction there is a feeling that things are getting worse, as opposed to better," said Fred McMahon, co-author of the report.





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World food prices hit another record, high oil adds to fears



Global food prices continue to hit record highs, and elevated oil prices (CL-FT104.870.450.43%) so crucial to farmers and shippers are adding to the concern.





Food prices rose in February for the eighth month in a row, up another 2.2 per cent, the Food and Agricultural Organization of the United Nations said in a report today. Prices rose in all the commodity groups measured, but for sugar.





This comes amid a feared tightening of the world`s cereal supply. There are also concerns that high oil prices could prompt farmers to plant more corn, which can be converted into ethanol, taking away the incentive for more needed crops.





`Unexpected oil price spikes could further exacerbate an already precarious situation in food markets,` David Hallam, director of the agency`s trade and market division, said in a statement.





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Canadian banks rock again





Long-term investors vindicated with strong quarterly earnings




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World food prices hit 20-year high




ROME - Global food prices have reached their highest point in 20 years and could increase further because of rising oil prices stemming from the unrest in Libya and the Mideast, a U.N. agency warned Thursday.







Skyrocketing food prices have been among the triggers for protests in Egypt, Tunisia and elsewhere, and raised fears of a repeat of the food price crises in 2007 and 2008.







Some experts point to key differences compared to those years: for one, the price of rice, an important food security commodity, is much lower today. Still, Oxfam called the hike "deeply worrying."





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Number of job postings up in January: Conference Board






CALGARY - The Conference Board of Canada's Help-Wanted Index posted a strong gain in January.




With an increase of 8.1 points, it brought the index at the national level to 107.7 - the highest it has been since the recession struck in late 2008.




"The Canadian economy generated healthy employment gains in December and January - and the latest increase in the index suggests that employment should post at least moderate gains in the near term," said the Conference Board in releasing its index on Thursday.




All provinces registered gains in January. Prince Edward Island led the way with a huge gain of 31.9 percentage points. It was the first gain in four months for the province, said the report.




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