November 2010 Canadian Economic Fundamentals

[Ally]

Stimulus dollars unspent

More than 75 per cent of money earmarked for the largest federal infrastructure program was left untouched last year, a lag the Liberals say undermines the Harper government`s claim the stimulus spending spree is creating new jobs.

Of the $2 billion allotted for the flagship Infrastructure Stimulus Fund, only $493 million was spent, a departmental performance report shows.

The program, pegged at $4 billion over two years, is intended to help provinces and municipalities fund water, transit, sewers and road projects.

Other Infrastructure Canada programs fared even worse.

Of the $200 million allotted to the Green Infrastructure Fund, the government cut cheques for just $5.7 million.

The program is supposed to help pay for projects that reduce pollution and greenhouse gases and improve water quality.

Read the full article here.

 

[Ally]

Housing starts to decline in 2011: CMHC

OTTAWA — Home construction is expected to continue easing in the final quarter of this year before stabilizing in 2011, according to Canada Mortgage and Housing Corp.

The federal agency on Monday forecast housing starts to range between 176,700 and 194,700 units 2010, and between 148,000 to 202,300 units next year as the market returns to "levels consistent with demographic fundamentals."

"High employment levels and low mortgage rates will continue to support demand for new homes in 2011," said CMHC chief economist Bob Dugan. "Nevertheless, housing starts will decrease to levels are more in-line with long term demographic fundamentals next year."

Dugan said the existing market conditions will remain balanced over the next two years, with sales easing and inventory levels remaining high.

Existing home sales will be in the range of 423,800 to 455,900 units this year and then decline to between 390,600 to 483,700 units in 2011.

Read the full article here.

 

[Ally]

Brief oil demand burst to fade next year: IEA

Global oil demand growth will slow in 2011 after a brief, accelerated burst at the end of this year, the International Energy Agency said in its monthly report on Friday.

Rising consumption in developed industrial economies and rapid Chinese growth caused the IEA to lift its 2010 oil demand growth forecast by 190,000 barrels per day to 2.34 million bpd from its previous report.

But it trimmed slightly its 2011 forecast.

Overall, global oil demand will still be higher next year at 88.51 million bpd compared with 87.32 million bpd this year.

"Across the board in the OECD (Organization for Economic Co-operation and Development), we`ve seen stronger demand. The thing is, we think that these upwards revisions are transient," said David Fyfe, head of the IEA`s oil industry and markets division.

The report cited buying of heating oil stocks in Europe ahead of winter as a factor behind the demand growth hike and robust Chinese demand for distillates like diesel.

Read the full article here.

 

[Ally]

Natural gas prices likely to drop further

CALGARY - The price of North American natural gas has shown a bit of strength in the past week or so, at times almost surfacing back up to $4.00/MMBtu in U.S. markets. On a percentage basis, gas prices have perked up 15% to 20% off recent lows. While that sounds impressive, producers in pain know that neither three bucks nor four bucks is anything write to head office about, especially so close to winter when prices usually firm up with much more conviction.

Of course a large part of the recent rally has been due to the inevitable onset of colder weather, but I`ve heard from more than a few in the business who are suggesting that the worst is over for low gas prices, because the number of rigs drilling for shale gas has moderated. Thinking it through, less drilling should imply that runaway production growth will roll over and so gas prices should go even higher. Unfortunately, such wishful thinking is still too early and industry participants should be careful not to be caught in Desmosthenes` simple proverb, "What a man wishes he generally believes to be true."

Read the full article here.

 

[Ally]

Financial crisis puts pressure on aging workforce

BANFF - While the financial crisis has forced Canadians to come to grips with the idea that a pension may not be a promise, employee benefits are similarly in peril.

"I find it almost incomprehensible that Nortel LTD (long-term disability) claimants could lose their benefits, but this is possible; let alone losing their health care and a portion of their pensions," said Kevin Dougherty, president of Sun Life Financial Canada, speaking at the Canadian Pension and Benefits Institute conference.

"We saw how benefits and pensions can literally disappear in an instant."

Now people nearing retirement face a new twist.

"Millions of people asked the questions, what if I have to leave the workforce five or 10 years early, or what if I have to stay in the workforce five or 10 years more."

The leading edge of baby boomers will hit age 65 next year, when each day a thousand people in Canada will retire.

Read the full article here.

 

[Ally]

Canada`s housing market rebounds

After a roller coaster-style ride Canada`s housing market is showing signs of stabilizing, with resale home sales rising for the third time in as many months, according to a new report.

Seasonally adjusted national home sales rose 4.6 per cent in October 2010, according to a report released Monday by the Canadian Real Estate Association. October`s increase followed similar activity in August and September, bringing current activity to 13.3 per cent above levels reported during the year`s low point in July.

Across the country sales activity for the month ran about halfway between the lows reached in December 2008 and record activity in late 2009, said Gregory Klump, the CREA`s chief economist, in a statement.

"This suggests that the Canadian housing market may be starting to normalize. After the wild rollercoaster ride that many housing markets have been on, normal and stable market conditions are something that many buyers and sellers will likely welcome," he said.

Read the full article here.

 

[Ally]

TD, RBC raise mortgage rates

If worries about the sickly U.S. economy and Ireland`s rocky financial situation seemed remote a few days ago, they shouldn`t anymore.

Those global concerns are pushing up Canadians` borrowing costs when it comes to buying a home.

TD Canada Trust and the Royal Bank of Canada said separately that they are increasing some of their fixed-term mortgage rates by as much as one-quarter of a percentage point, effective Wednesday.

At both banks, five-year mortgages, one of the most popular among Canadian homeowners, will rise by 0.25 of a percentage point to 5.44 per cent.

Read the full article here.

 

[Ally]

Canada home resales climb for third straight month

TORONTO, Nov 15 (Reuters) - Sales of existing homes in Canada rose in October from September, climbing for a third straight month, the Canadian Real Estate Association said on Monday.

The industry group said 35,714 homes changed hands in October, up 4.6 percent from September, as sales rose in three quarters of markets tracked by the association. However, sales are down 21.6 percent from a year ago.

CREA said sales activity in October stood halfway between the recessionary low reached in December 2008, and the record level activity posted in December 2009, suggesting further evidence that the market is returning to normal.

Read the full article here.

 

[Ally]

Housing starts to decline in 2011: CMHC

OTTAWA — Home construction is expected to continue easing in the final quarter of this year before stabilizing in 2011, according to Canada Mortgage and Housing Corp.

The federal agency on Monday forecast housing starts to range between 176,700 and 194,700 units 2010, and between 148,000 to 202,300 units next year as the market returns to "levels consistent with demographic fundamentals."

"High employment levels and low mortgage rates will continue to support demand for new homes in 2011," said CMHC chief economist Bob Dugan. "Nevertheless, housing starts will decrease to levels are more in-line with long term demographic fundamentals next year."

Dugan said the existing market conditions will remain balanced over the next two years, with sales easing and inventory levels remaining high.

Existing home sales will be in the range of 423,800 to 455,900 units this year and then decline to between 390,600 to 483,700 units in 2011.

Read the full article here.

 

[Ally]

Economic sluggishness to affect Central Canada most: Forecast

OTTAWA — The country`s slowing economic growth will be most evident in Central Canada next year as opposed to areas in the West, East and North that are supported by resource industries, says a report released Wednesday.

The Scotiabank forecast said areas that have strong commodity-based economies will see relatively stronger growth, as compared to places largely dependent on manufacturing.

"Meanwhile, resource-related activity is ramping up alongside strong emerging-market demand for key industrial products, which along with a weaker U.S. dollar, is boosting commodity prices," said Scotia Economics economist Alex Koustas.

Rising prices for things such as oil and metals will play a role in bolstering certain parts of the country, the report said.

However, the low U.S. dollar, which creates a higher loonie, will also hurt export-oriented factories, which have been key to helping the economy grow in provinces like Ontario and Quebec over the last year, Scotiabank said.

Read the full article here.

 

[Ally]

Canadian natural gas exports expected to fall

CALGARY - New pipelines west and shale gas in the east will challenge Canadian flows into the United States over the next five years, reducing exports of natural gas by a whooping 30 per cent, a research group said Thursday.

However, increased demand from oilsands projects and as a replacement fuel for coal-burning power plants could provide some support to natural gas demand in Canada, Bentek Energy LLC said in a report.

The Evergreen, Colorado-based group expects imports from Canada to drop two billion cubic feet per day by 2015 as plays in the U.S. Rockies open on new pipelines and new shale gas production floods northeastern states.

"Marcellus shale volumes are now pushing Canadian imports out of the Northeast, and this trend will accelerate as new pipeline expansions drive additional U.S. gas supplies into Ontario," said Russell Braziel Bentek, managing director of Bentek. "In the West, the new Ruby and Bison pipelines will increase deliverability of the more economical Rockies gas to Western markets and the Midwest, respectively, while displacing gas back into Canada."

Read the full article here.

 

[Ally]

Housing starts decline in 2011: CMHC

OTTAWA — Home construction is expected to continue easing in the final quarter of this year before stabilizing in 2011, according to Canada Mortgage and Housing Corp.

The federal agency on Monday forecast housing starts to range between 176,700 and 194,700 units 2010, and between 148,000 to 202,300 units next year as the market returns to "levels consistent with demographic fundamentals."

"High employment levels and low mortgage rates will continue to support demand for new homes in 2011," said CMHC chief economist Bob Dugan. "Nevertheless, housing starts will decrease to levels are more in-line with long term demographic fundamentals next year."

Dugan said the existing market conditions will remain balanced over the next two years, with sales easing and inventory levels remaining high.

Existing home sales will be in the range of 423,800 to 455,900 units this year and then decline to between 390,600 to 483,700 units in 2011.

Read the full article here.

 

[Ally]

What`s the bigger worry? Inflation or deflation?

One the big debates this year has been whether the future holds inflation or deflation. In the U.S., the Federal Reserve is buying bonds which is essentially printing money to push interest rates down and help stimulate spending and growth, leading to worries about inflation down the road. In some European countries, prices are falling despite record low rates, leading some to predict a period of falling prices.

The question we`re all asking, is which is better and what can we do about it.

Deflation is one of those things that sounds good, but as you dig deeper has downsides, particularly for retirees.

I visited Japan last year where deflation has been part of their economic equation for nearly a decade. In each of the last 10 years, average prices have fallen. In Canada the Consumer Price Index (CPI) has increased by a total 17 per cent in the last eight years since the CPI was rebased. Can you imagine declining prices for goods and services every single year for the last decade? You probably don`t need to save as much for retirement, no?

Read the full article here.

 

[Ally]

Why we won`t see a housing collapse

The state of our housing market has been the focus of numerous economic reports and speeches over the last few months. Another voice was added to the debate this week.

On Wednesday, Dean Baker, one of the first economists to predict the U.S. housing crisis, said that Canada`s market is due for major U.S. style correction soon. If interest rates rise by 2 per cent, he says, housing prices would fall by about 30 per cent.

While some share his view — The Economist magazine recently said that our market is overvalued by 24 per cent — Baker`s opinion is contrary to what many Canadians think.

Ian Lee, a professor at Carleton`s Sprott School of Business and former mortgage manager with BMO, says our market may stall, but it`s not going to burst. Here`s why:

Different regulations


American housing prices collapsed because of poor government policy, says Lee. U.S. mortgage lenders gave out mortgages to people for no money down and often didn`t check credit history.

That`s not what happens here. "It`s illegal to have a zero down payment in Canada," Lee explains. According to the CMHC, monthly housing costs can`t exceed 32 per cent of gross household income, while the entire monthly debt load shouldn`t be more than 40%

Read the full article here.

 

[Ally]

Boomers not opting for condos when they downsize

Home-owning Canadian baby boomers are among the most fortunate people in the world.

This isn`t to say, of course, that the economic sailing has been easy all the way since the end of the Second World War. There was the oil crisis of the early 1970s, the dot-com stock market correction of the late 1990s, and, most recently, the short, sharp recession of 2008 and the aftershocks that continue to shake the ground under our feet down to the present day.

But generally speaking, the last several decades have been good to real-estate owners, with house values rising, in some places exponentially, while inflation in most other areas of the economy (except for energy) remained moderate. It`s hardly surprising that Canadian boomers decided to enjoy their equity during the high-rolling 2000s, when they were also earning top dollar in their careers. They went heavily into debt to invest in the stock market and other ventures, and to finance luxurious lifestyles – so much so, in fact, that many are facing their retirement years with large mortgages. Though the great majority of boomers thinks that being debt-free upon retirement is the best way to go, less than half of those now retiring have paid off their home loans. And a quarter of the number hitting retirement age with a mortgage still owe 75 per cent or more (60 per cent in Ontario) on the balance.

Read the full article here.

 

[Ally]

Canadian Real Estate Association introduces hand-held house-hunting with new mobile application

OTTAWA, Nov. 12 /CNW/ - The Canadian Real Estate Association (CREA) unveiled its latest home buying and selling innovation, a new mobile application of REALTOR.ca for Windows® Phone 7. REALTOR.ca is operated by CREA, and is the most visited real estate website in Canada, with about 350 000 property listings available at any one time.

"Allowing people to check out houses whenever they want, wherever they want, will make the home and property hunt that much easier," said CREA President Georges Pahud. "Today`s consumers want portable, on-the-go information and REALTORS® across Canada are happy to be able to meet this need with the new REALTOR.ca app."

The REALTOR.ca app provides house hunters with the functionality of REALTOR.ca while taking advantage of Windows Phone 7 device features such as GPS. The app allows users to search for houses and properties across Canada and to connect with REALTORS® to view, buy or sell a property. Photos, newly listed properties and open house information are all available.

Using the handheld`s GPS technology, and the REALTOR.ca search function, users can search for properties near their location and get driving directions too. Interactive BING mapping is embedded to allow consumers to focus on specific neighbourhoods.

"Buying a home is often the biggest financial transaction of one`s lifetime. Easily accessible, detailed information about homes and neighbourhoods, as well as fingertip access to the expertise of REALTORS®, helps people make well-informed decisions" said Pahud.

Read the full article here.

 

[Ally]

Condo coverage has some special wrinkles

So you`ve bought a condo and are just about to move in. Being a responsible new homeowner, you know you need insurance. Unlike owning a detached or semi-detached house you know you will not need to worry about insuring the structure; the condo corporation will take care of that, right?

Your share of those premiums will come out of your monthly maintenance charges.

What you need is a policy that covers just the suite: insurance against fire, theft, damage from the usual perils plus a chunk of liability coverage. Much like a renter`s insurance policy.

Your agent sells you a policy, you write a cheque and sleep like a baby.

A word of warning! That sound sleep could be jarringly shattered in a variety of ways, says a leading expert on home insurance.

"Condo insurance is very different from single family residences," says Irene Bianchi, vice-president claims and corporate services at RSA Canada, a leading property insurer. "It is vitally important for any condo owner to know exactly what is covered and the extent of their own liability.

Read the full article here.

 

[Ally]

Tough decisions ahead to avoid fiscal trouble: Flaherty

OTTAWA — The country`s top financial policymakers warned Canadians on Sunday to brace for tough decisions and "very big challenges" ahead as Canada tries to secure its recovery in an ever-changing global economic landscape.

Finance Minister Jim Flaherty — set to deliver a key speech on federal economic policy in Oakville, Ont., on Monday — said the Conservative government is determined to cap program spending so Canada can return to a balanced budget position and avoid the turmoil Europe is undergoing.

He acknowledges this won`t be a popular decision, with certain segments of the population and his political opponents.

"We have to make sure we protect the country going forward," he said in a TV interview. "Look at what`s happening elsewhere … like the issues they are dealing with over the weekend in Ireland. We don`t want to get into any fiscal trouble in Canada.

Read the full article here.

 

[Ally]

Canada`s GDP expected to grow by 3%

OTTAWA — The economic recovery in Canada has "slowed sharply" but is expected to advance moderately over the next two years barring a sharp advance by the Canadian dollar that could further weaken export sales, says the latest outlook from the Organization for Economic Co-operation and Development.

Canada`s unemployment rate is expected to remain steady, in the high 7% range, through 2011, while the large amount of slack in the economy should keep inflation subdued, according to the Paris think-tank`s forecast, released Thursday morning.

It said the Bank of Canada should keep its key benchmark rate as is through early 2011, and barring a "further deterioration" in the labour market, Ottawa proceed as planned with its deficit-cutting program.

The outlook highlights some of the "significant" risks the global economy faces, from debt woes in Europe to further weakness in housing activity in both the United States and Britain. Other areas of downside risk cited relate to: an upward revision in inflation expectations; lingering uncertainties about banks and the availability of credit; large capital inflows into many emerging economies, prompted by the Federal Reserve`s asset purchases that could lead to tighter credit conditions; and tensions created by widespread currency interventions.

Read the full article here.

 

[Ally]

Week Ahead: Inflation `could raise eyebrows`

OTTAWA — Two pieces of economic data to be released next week will provide a snapshot of the state of the Canadian economy as the end of the year approaches.

Statistics Canada releases both the consumer price index for October and the retail sales figures for September on Tuesday.

"Spending trends are a big part of the economy and economic growth in Canada, so any indicators on that front are clearly important to see how the economy`s growing, and the health of the consumer and the health of the economy," said BMO Capital Markets economist Benjamin Reitzes.

Retail sales have been improving for the most part over the course of 2010, despite a pullback in the between April and July after the home renovation tax credit ended and the harmonized sales tax was introduced in Ontario and British Columbia and increased in Nova Scotia. The numbers were better in August, "and we`re thinking decent numbers again for September," said Mr. Reitzes.

The consensus is for retail sales to grow by 0.7% for September.

Read the full article here.