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March 2011 Canadian Economic Fundamentals

Ally

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Canada's household debt falls from record levels




OTTAWA ` Canada's net worth increased 0.3 per cent to $6.3 trillion in the fourth quarter while household debt fell from record levels, Statistics Canada said Monday.







It marked the slowest growth for the year in the country's net worth ` which worked out to $184,200 per person ` as gains in non-financial assets, mostly housing, were offset by a growing amount of foreign debt.







Increasing national debt levels were largely a result of foreign purchases of government and corporate bonds.







Looking strictly at households, Statistics Canada said household per capita net worth was up 2.2 per cent to $6.2 trillion in the fourth quarter, or $181,700 per person.





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Foes seek Libya-like uprising in Venezuela







CARACAS, Venezuela (AP) ` President Hugo Chavez accused his political opponents on Sunday of trying to divide the military as part of a broader plan aimed at spurring a Libya-like uprising in Venezuela following next year's presidential election.






Chavez said such a conflict would give Washington a justification to lead a military invasion of Venezuela.






"They want to divide the armed forces," said Chavez, referring to Venezuela's opposition. "The Yankee empire, the CIA and the State Department is behind them."






"The empire has a plan that has worked in Libya," he said during his weekly television and radio program. Chavez commonly refers to the United States as "the empire."






Venezuela's opposition leaders deny conspiring to topple Chavez by provoking a military coup attempt, saying they plan to unseat the former paratroop commander-turned-president at the ballot box in December 2012.



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Canadians' networth hits record level




OTTAWA ` Household debt as measured against disposable income nudged lower from a record high in late 2010, data suggested Monday, a sign that Canadians are beginning to curb their borrowing behaviour.




Still, analysts warned debt levels remain at such elevated levels that they would squeeze economic growth for years to come.




Statistics Canada reported that, as of the 2010 fourth quarter, household debt as a percentage of after-tax income dropped to 148.7% from 148.8%, as a 1.8% gain in disposable income outstripped growth in mortgages and other consumer loans.




Household liabilities in the quarter expanded 6.5% from year-ago levels, the slowest annualized growth rate experienced since the fourth quarter of 2002. Households cooled borrowing on all major types of credit, with growth in non-mortgage loans ` at 5.8% year-over-year ` representing the slowest advance since the mid-1990s.





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Nuclear troubles benefit gas industry



One industry's disaster is another's gift and nowhere is this more obvious than what has befallen the nuclear power world and how natural gas is perfectly poised to benefit.





Somewhere, in the last several years, nuclear power had morphed from being an anathema to gradually being viewed as a clean, viable option in the mix of electricity generation alternatives.





Increasingly, political leaders and electrical industry execs in North America had been including nuclear as being an important component in meeting long-term power needs. The rhetoric appeared to be shifting from the "build absolutely nothing anywhere near anyone" (banana) to some thing that was in the realm of possibility as long as all the concerns were fully addressed.



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Canadian provinces' budget gaps at 'tipping point'




OTTAWA ` Canadian legislators heard stern warnings Wednesday that public finances are in need of an overhaul, with small-business owners saying budget shortfalls are at a `tipping point` while a bond rater maintained its negative outlook for the provinces and mused policymakers may lack the will to implement spending cuts.




The federal government and some provinces are putting the final touches on their 2011 budgets, with Quebec set to deliver its fiscal and economic plan Thursday. But reports released Wednesday were clear that these much-awaited documents have to address how much politicians are prepared to pare back program spending ` which increased robustly before the recession, and is now at unsustainable levels as economic growth moderates and the labour force ages.




`The downturn simply made a bad situation even worse,` said the Canadian Federation of Independent Business in its overview of public finances. `Caught with their fiscal pants down, most provinces and the federal government are now swimming in more red ink than was otherwise necessary.`





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Canada's manufacturing steams ahead with jump in sales of 4.5%




OTTAWA ` Canadian manufacturing sales leaped by a much-greater-than-expected 4.5 per cent in January from December as auto plants recovered from bad weather and the aerospace industry posted big gains, Statistics Canada data indicated on Wednesday.




The increase dwarfed analysts` predictions of a one-per-cent increase. Sales in January hit $47.7 billion, the highest since October 2008.




The Canadian dollar rose to C$0.9833 to the U.S. dollar after the data was released.




Sales of motor vehicles jumped 26 per cent on large increases at a number of plants following seasonal slowdowns as well as production difficulties caused by severe winter weather in southern Ontario, home to much of Canada`s auto industry.



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Manufacturing sales at post-recession high




Manufacturing sales increased 4.5 per cent to $47.7 billion in January, the highest level since October 2008. While the gains were widespread through 17 of 21 industries, the increase was mostly concentrated in the transportation equipment sector.




Statistics Canada reports that, while the gains were widespread through 17 of 21 industries, the increase was mostly concentrated in the transportation equipment sector.




The total sales increase was the largest since July 2009, when they rose 5.3 per cent. Constant-dollar manufacturing sales rose 5.5 per cent in January.




Manufacturing sales of motor vehicles rose 26 per cent to $4.1 billion in January. Production in the aerospace product and parts industry was up 25.2 per cent to $1.3 billion.



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Despite stress, no crash seen in housing




The Canadian housing market is showing several serious signs of stress, but Bank of America Merrill Lynch says there`s no reason to believe values are set for a sharp dive.




`Valuation metrics are clearly stretched, but the usual symptoms of a tipping point are simply not there,` according to a report authored by economists Sheryl King and Ryan Bohren.





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China targets inflation as serious threat





China is making its fight against inflation a top priority this year, even if comes at the expense of economic growth.




Premier Wen Jiabao blamed `imported` pressures, including high oil and commodity prices, for an inflation rate now stuck at 4.9 per cent, and significantly above the government`s target of 4 per cent for this year, he said.





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How real estate agents sell their homes for more



With U.S. house prices dropping and the real estate market in disarray, real estate agents aren't the most popular professionals these days. As home prices in some markets continue to slump, many homeowners are loath to pay a real estate agent on a home sale that isn't likely to be profitable for them no matter what they do. Not to mention the fact that there's a lot of contention about how much value a real estate agent actually brings. (For background reading, see Do You Need A Real Estate Agent?)





Most people have heard of the well-publicized statistic that finds that when real estate agents sell their own homes, they tend to keep them on the market longer (about 10 days) and get a higher sale price (by about 3 per cent) than when they sell homes for their clients. This statistic comes from the wildly popular 2005 book Freakonomics by Steven D. Levitt & Stephen J. Dubner. The authors assume that this is because getting a few extra dollars for a seller doesn't have a sizable impact on the agent's commission.





Unfortunately, this well-promoted statistic offers no details about why this may be, and the authors appear to assume the worst. However, there are some less nefarious reasons why a real estate agent might be able to get a higher price for his or her own home. Here we'll take a look at the other side of the coin and what you can learn from it, whether you decide to hire an agent or sell your home yourself.





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Canada benefitting from stronger economic prospects abroad, but moderation in growth still in the cards





TORONTO, March 16 /CNW/ - TD Economics today announced that it is revising its growth forecast to 3.0% for 2011, up from 2.6%, previously announced in its December TD Quarterly Economic Forecast. The upward revision reflects a brighter U.S. outlook, as well as an increased global appetite for Canadian commodities.




"Canada's economy has entered 2011 on a stronger footing than was envisioned at the time of our last quarterly forecast in December," said Craig Alexander Chief Economist for TD Bank Group. "Beyond the near term, however, our view has not materially changed. Over the next 12-18 months, the overall pace of the Canadian economic expansion is likely to moderate, as interest rates rise and domestic spending cools." While the tragedy in Japan is still unfolding and creating untold human hardship, TD Economics does not expect it to have a meaningful impact on the Canadian economy.






Solid momentum heading into the New Year





The recent release of fourth-quarter data revealed that Canada's economy finished 2010 on a surprisingly strong note, with an advance in real GDP of 3.3% (annualized) following an upwardly-revised 1.8% expansion in the prior period. While consumers turned in another formidable showing in the final quarter, much of the strength was attributable to net exports, which alone contributed a stunning 4.5 percentage points to economic growth - the largest contribution from net trade since the early 2000s. At the same time, business inventories were drawn down in the quarter, suggesting the surge in demand from the U.S. and Canadian consumers was largely unanticipated.



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The sky-high cost of taxes





This page hardly ever recommends violence as a means to better economic policy, but if a special forces team were to kidnap the country`s finance ministers, lock them up in a mountain hideaway and not let them out again until they proved by written or oral examination that they understood the message of a new C.D. Howe Institute study on the economic costs of current Canadian levels of taxation, the country would be a lot better off.



Perhaps you read Profs. Bev Dahlby and Ergete Ferede`s summary of their study here Thursday. One problem with academics is that they sometimes hide even astonishing results under bushel baskets of dispassionate, unassuming prose. Let me say what their modesty wouldn`t allow them to: Prof. Dahlby is one of the world`s leading experts on the economic costs of taxation. He has a 2008 book on the subject from the MIT Press, which is top of the pops for economics. And his and Prof. Ferede`s findings are nothing short of stunning.




You remember the Laffer curve. Two rates of taxation are guaranteed to produce no revenue: zero and 100%. At some rate in between, revenues peak and then start declining. Now you may think governments generally need more revenues or your political philosophy may say they should get by on less. But nobody wants to get onto the wrong side of the Laffer curve, for if you do, any further increase in tax rates actually reduces tax revenues. It`s one of the few situations in economics where there really is a free lunch: You cut tax rates, which makes you everyone`s friend, and you get more tax revenue as a result.



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Worries rise on Japan impact




HONG KONG`Even as Japan appeared to turn a corner in its battle to contain damage to nuclear facilities, concerns are mounting about the economic fallout.




Asian markets reacted positively Monday to news that power had been restored over the weekend to some of the Fukushima Daiichi power plant. Trading in Japan was closed for a holiday, but Hong Kong's Hang Seng Index rose 1.7% and benchmark indexes in South Korea and Singapore gained more than 1%. Markets were also up across Europe in early trading.




The burden of a too-strong yen on Japan's export-dependent manufacturers`already battered by earthquake and tsunami`is lifting as well, after a rare group intervention by the Group of Seven leading economies last week to weaken the currency. The dollar was up against the yen in a thin holiday market Monday, at Â81.20 in morning European trading from Â80.60 late Friday in New York.


"We're less worried today than we were a week ago," said Frederic Neumann, co-head of Asian economics research at HSBC Holdings PLC. "Last week there was fear of a much more severe nuclear fallout. With the reconnecting of partial power supply that fear has receded."





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Canada must become world energy superpower: Shell Canada president





Growing world demand for sustainable energy puts a stable producer of oil and gas like Canada in an ideal position to become a global energy superpower ` if the country can embrace the right national strategy to make it happen, according to the head of Shell Canada.




Developing such a strategy starts with a cross-Canada dialogue on energy involving Canadians from all walks of life, said Shell Canada president and country chair Lorraine Mitchelmore in an interview with Postmedia News.




Sitting on the second largest oil reserves in the world all the while being `an open market with a deep commitment to environmental stewardship,` Canada has `all the ingredients to be an energy superpower, but it requires a focused effort and a focused plan if we are to realize that,` said Mitchelmore, whose company celebrates its centennial of doing business in Canada Monday.




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Bank of Canada rate hike pushed back: Citi




Canada`s February CPI reading that came in below expectations for both headline and overall inflation was somewhat of a game-changer, according to Greg Anderson, foreign exchange strategist at Citigroup.




Combine that result with a strong Canadian dollar, which continues to be a point of emphasis for the Bank of Canada, and he believes the case for an interest rate hike is now much less compelling.




As a result, Citigroup economist have push back their forecast for the resumption of rate hikes from the April 12 meeting to the July 19 meeting. This two-meeting delay equates to 14 weeks.



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The days of $100 oil may be here to stay




Libya may soon cease to be a player in the oil (CL-FT102.020.950.94%) markets, and that`s bad news for anyone who fears that rising oil prices will stall the global oil markets.




Two factors are at play in Libya. The first is the United Nations' vote to authorize `all necessary measures` to protect Libyan civilians as Moammar Gadhafi ramps up his war against the rebels. That not only means a non-fly zone (complete with six CF-18 fighter-bombers from the Canadian air force, by the way), but also, presumably, air strikes on Col. Gadhafi`s ground forces and military installations. In other words, the civil war could morph into international war very quickly, and that would not be good for Libya`s oil infrastructure.





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Canadian data points to strong January growth







OTTAWA (Reuters) - Canada's January wholesale trade grew at more than twice the pace expected, Statistics Canada said on Thursday, in the latest sign the economy got off to a strong start in 2011.





In a second upbeat report, Statscan said foreign investors remained enthusiastic buyers of Canadian bonds in the first month of the year, with foreign net investment in Canadian securities the strongest since last September.





Wholesale trade jumped 1.5 percent in the month, more than doubling the market forecast of a 0.6 percent gain, as sales in the auto sector soared to a three-year high. Wholesale trade rose 5.2 percent on the year.



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Latest figures who Canadian real estate market is stable




The real estate market in Canada is steady with the latest figures from the Canadian Real Estate Association showing that national resale activity was average in February.




Actual, not seasonally adjusted, national sales activity via the Multiple Listing Service of Canadian real estate boards came in 5.9% below levels reported last February. This marks the smallest year over year decline in nine months, and the fourth consecutive month in which sales activity was on par with the five-year average for that month, CREA said.




Seasonally adjusted home sales activity edged down 1.6% in February 2011 compared to the previous month on a national basis. While sales activity eased in almost two thirds of all local markets from the previous month, offsetting monthly increases in activity among other markets including Vancouver and Calgary.





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Customer fee to pay out mortgage doubles




A Vancouver man is speaking out about how Scotiabank charged him $25,000 to pay out his mortgage early ` nine months after telling him the fee would be half that much.




"It totally doesn't make sense to me," said Mohsen Movahed. "I learned that dealing with banks in Canada it could be very dangerous. Everything is against the customers. You should have a huge knowledge."




Movahed is an engineer who moved to Canada from Iran in 2006 and landed a job at BC Hydro. The following year, he and his wife bought a condo in North Vancouver with a mortgage of well over $400,000.



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Commodities boom here to stay: Carney





The worldwide commodity boom is here to stay, so countries had better be prepared to adjust their economic policies to deal with it over the long term, Bank of Canada Governor Mark Carney said Saturday.




In a speech at the annual meeting of the Inter-American Development Bank in Calgary, Mr. Carney told delegates that commodity price fluctuations driven by `supply shocks` or speculation are often short lived, but the one currently occurring is the result of a large, sustained boost in demand from developing countries, particularly in Asia. And that`s a trend that will continue.





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