May 2011 Canadian Economic Fundamentals

[Ally]

Rate hike holding likely to keep housing hot




With the Bank of Canada now widely expected to hold off on a rate hike at least until autumn, house prices in Canada are likely going to stay hot for a few months longer.





The central bank will again leave its benchmark lending rate unchanged at 1% at its regular policy announcement on Tuesday, according to the unanimous result of 22 economists surveyed by Bloomberg News.





With signs the U.S. and global economies have entered a soft patch and the European debt crisis continuing to roil, most economists do not expect the bank to raise its overnight target rate until at least September. That would mark a full year on hold for the bank, which last raised rates in September 2010.





Read the full article here.

 

[Ally]

Why is housing so hot in Canada?





This week on an abbreviated Big Picture podcast (co-host John Shmuel is off in parts unknown): If you`ve been in the market looking for a home the past few years, you`ve likely griped about how seemingly far out of whack prices have become. This is especially true if you happen to live ` or want to live ` in certain neighbourhoods in Vancouver that have suddenly shot out of your price range.



Phil Soper, chief executive with real estate firm Royal LePage, joins the podcast to explain why the West Coast is the best coast at more than just hockey at the moment (Go Canucks, for some of you out there) and imparts some sage advice to both buyers and sellers thinking about taking the plunge.





Read the full article here.

 

[Ally]

Mortgage rules to push housing lower: CMHC




Housing starts and sales will fall more into line with `demographic fundamentals` this year and next, according to the latest housing outlook from the Canadian Mortgage and Housing Corporation.







The crown agency said it expects housing starts will range between 166,600 to 192,200 units in 2011, with a point forecast of 179,500. That`s a slight dip from 2010 numbers, when Canada saw 189,930 housing starts.







"Modest economic growth, in conjunction with relatively low mortgage rates, will continue to support demand for new homes in 2011 and 2012,` Bob Dugan, chief economist for CMHC, said in a release. `Nonetheless, we are expecting new and existing housing markets to fall in line with demographic fundamentals, as changes to mortgage rules take hold.`





Read the full article here.

 

[Ally]

Canada economic growth speeds up in first quarter





Canada's economy gathered speed in the first quarter, expanding at its fastest pace in a year as businesses ramped up investment and rebuilt inventories, though economists warned the growth spurt would not last long.







The data, released by Statistics Canada on Monday, nudged the Canadian dollar lower. But it changes little for the Bank of Canada, which is widely expected to hold its benchmark interest rate at 1.0 percent on Tuesday and keep rates steady until the third quarter as growth slows.







"Heading into this, they were looking for growth of a little bit better than 4 percent in Q1, and 2 percent in Q2, and it looks like on both fronts things will be softer," said Doug Porter, deputy chief economist at BMO Capital Markets.







Read the full article here.

 

[Ally]

CMHC ups 2011 housing starts view




Canada Mortgage and Housing Corp (CMHC) slightly raised its forecast for 2011 housing starts on Monday, citing an improving economy and still-low interest rates.




In a second-quarter housing outlook, the federal housing agency also forecast higher existing home sales than industry group Canadian Real Estate Association (CREA).




It said it expected housing starts to total 179,500 units this year, then climb to 185,300 units in 2012.




In February, CMHC had said it expected 2011 housing starts of 177,600, rising to 183,800 in 2012.





Read the full article here.

 

[Ally]

Leading indicator of industry profability predicts recovery will continue






One year ago, The Conference Board of Canada introduced the Leading Indicator of Industry Profitability. Designed to predict turning points in corporate profitability three to six months hence, the indicator is performing this task well`it predicted both the weakening in profitability last summer and the subsequent recovery at the end of the year.




The good news for Canadians: the Leading Indicator of Industry Profitability Index has now risen for eight consecutive months. Most of the 49 industries covered`representing much of the private business activity taking place in Canada`have recorded gains during this period. The positive trend in the aggregate index and the breadth of the recovery across industries are signs that corporate profitability and the broader economy will improve over the course of 2011.





Read the full article here.

 

[Ally]

Beware a manufacturing slowdown




High input prices, supply chain disruptions from the tsunami disaster in Japan and slowing demand from China have combined to brake manufacturing momentum in Europe, the United States and Asia in recent months following a steady run of robust growth.





Just how sharp the slowdown is will become clearer this week with the release of data from factory purchasing managers in major economies across the globe.





In the euro zone, where divergence between core and peripheral countries has been the story for months, signs of more broad-based trouble emerged last week. A preliminary manufacturing index for May posted its biggest one-month fall since the collapse of Lehman Brothers in 2008.





Read the full article here.

 

[Ally]

Canada's economy grows at fastest pace in a year





Canada`s strong economic growth in the first quarter is likely a temporary blip that will give way to more moderate expansion during the rest of the year.







While most analysts agree that should keep interest rates on hold when the Bank of Canada announces it latest policy stance on Tuesday, a number of others are getting nervous about the central bank`s slow pace in normalizing monetary conditions, saying it increasingly runs the risk of fueling higher inflation and destabilizing the economy.







`In order to control prices and avoid wild swings in the economy, we are of the opinion that the Bank of Canada should be more aggressive in the normalization of its monetary policy than what the market expects,` Pierre Lapointe, a global macro strategist at Brockhouse Cooper, said in a note to clients on Monday.



Read the full article here.

 

[Ally]

Renting v. buying your home: An affordability check




What it means to be a renter was summed up by a carpet cleaner who came to our home several years ago. `Oh,` he said when my wife declined the deluxe treatment, `you must be renting.`




Renters are slackers, the conventional thinking goes. If they had any brains and ambition, they`d own a house.





Read the full article here.

 

[Ally]

Canada's GDP growth in first quarter 2010 outperformed U.S.




The annual rate of Canada`s real gross domestic product growth, increased to + 3.9% in the quarter ending March 31, 2011, up from 3.1% in the prior three months, according to Statistics Canada.




This was the fourth period in a row in which the rate of real output growth (i.e., adjusted for inflation) has moved higher. The increase in GDP at an annualized rate was +2.5% in Q3 09 and +2.3% in Q2 09.




Since the recession in Canada, which occurred from the final quarter of 2008 through the mid-point of 2009, the fastest quarterly rates of growth were recorded in Q4 09 (+5.0%) and Q1 10 (+5.6%).




While Canada`s recession may have been short, there was a moment when it was quite brutal.





Read the full article here.

 

[Ally]

Drop in mortgage rates likely to last for a while




Canada`s big banks have cut their residential mortgage rates, likely for the last time in the foreseeable future, economists say.




The bank cut rates by one-tenth of a percentage point on mortgages terms ranging from one to 10 years.




That puts the rate for a five-year closed mortgage at 5.49 per cent at each of Canada`s major banks.




The Bank of Montreal, Royal Bank of Canada, TD Canada Trust, and Scotiabank announced reductions last week.





Read the full article here.