November 2010 Canadian Economic Fundamentals

[Ally]

Alberta being taken for granted

Agriculture gets a Saskatchewan minister, fisheries is represented by a Prince Edward Islander, the Halifax naval port gets a local MP for Defence Minister and Bay Street has national finances governed by a minister from a Toronto area riding.

Geography in government matters.

But consider the energy sector`s Central Canadian voices at the federal Cabinet table and you`d have to question what, if anything, this government will hear from an industry confined to the east coast and western sedimentary basin.

The oil patch used to have a powerful, plugged-in ally at the government`s epicentre but, with the resignation of Calgary MP Jim Prentice, the Environment portfolio has been temporarily picked up by overworked House Leader John Baird, an Ottawa MP.

With the end to a symmetrical relationship between Mr. Prentice, who was unofficial supervisor of pipeline and other oil patch issues, and Natural Resources Minister Christian Paradis, the energy file now sits with the lead minister of hydro-producing Quebec.

Read the full article here.

 

[Ally]

Canada`s inflation rate at highest level in 2 years

OTTAWA — Canadian inflation came alive last month. Consumer prices were up 2.4 per cent in October from a year earlier, Statistics Canada said Tuesday.

That marks the highest annual inflation rate since October 2008. It surpassed economists` expectations for 2.2 per cent inflation, which followed September`s price gains of 1.9 per cent.

It was the first time since November 2008 that year-to-year price gains have met or exceeded the Bank of Canada`s target rate of two per cent.

Seasonally adjusted, month-to-month inflation of 0.7 per cent in October was the most since January 2006, Statistics Canada said.

Even core inflation, which the central bank monitors for underlying trends, was well ahead of expectations last month. This annual rate, which strips out volatile items such as energy and certain foods, was 1.8 per cent. Economists expected 1.5 per cent, unchanged from September.

Read the full article here.

 

[Ally]

Relief could be on horizon for small gas producers

CALGARY - Junior natural gas producers smarting from low prices for their commodity might not have to wait too much longer for relief, a leading financial expert said in Calgary Monday.

Gas prices have bottomed and a meaningful recovery could become apparent as early as this winter, Josef Schachter, the president of Schachter Asset Management, told the Small Explorers and Producers Association of Canada`s (SEPAC) fall investment forum.

A combination of shorter and longer term structural shifts are taking place that will once again establish sustainable natural prices at a level that allows producers recover costs and even turn a profit - albeit at lower prices than two years ago.

"Natural gas prices have bottomed, the new cycle is starting so the commodity of choice right now is natural gas ... we`re bullish," Schachter said. "I think we all know the negatives of the supply, the shales and the rest of it. But we can see a lot of new things going on at the margin that give us comfort zone of a new cycle starting."Natural gas futures jumped almost 11 cents to $4.21 US per million British thermal units in New York on Monday on reports of colder winter weather in the big northeast consuming region. Likewise, gas for January delivery also rose 11 cents to $4.43.

Read the full article here.

 

[Ally]

Canadian boomers set to prove McCartney wrong when they turn 64: Survey

The Beatles song, When I`m Sixty-Four, doesn`t accurately reflect the retirement lifestyle Canadian baby boomers expect to be living, a new survey suggests.

Knitting by the fire and Sunday drives might have seemed like a reasonable way to spend one`s twilight years when Paul McCartney first sang about it more than 40 years go. However, survey results released Tuesday by the Investors Group suggest the boomer generation — the older ones of which are 64 right now — have bolder plans.

A clear majority, 59 per cent of boomers in this poll, conducted by Harris/Decima on behalf of Investors Group, said the song does not accurately portray their idea of retirement.

Instead, the poll found that 61 per cent of those between the ages of 45 and 64 view retirement as "an exciting new stage in life."

"They are gearing up, not shifting down, for what is around the corner," said Debbie Ammeter, vice-president of advanced financial planning for Investors Group. "This generation is defined by their youthfulness. They are upbeat and energetic in their approach to getting older."

Read the full article here.

 

[Ally]

Inflation jump no likely to move rates

OTTAWA — Canadian inflation came alive last month, but not enough to make the Bank of Canada resume raising interest rates just yet, analysts said.

Consumer prices rose to a two-year high of 2.4% in October from a year earlier while core inflation rose to 1.8% from 1.5% in September, Statistics Canada said Tuesday. Both readings were higher than market expectations while the headline reading marked the first time since November 2008 that year-to-year price gains have met or exceeded the Bank of Canada`s target rate of 2%.

"While inflation came in above consensus in October, the result does not indicate that an inflation problem is in the cards," Craig Alexander, chief economist at Toronto-Dominion Bank, said in a note. "It also does not alter our perspective that the Bank of Canada is on hold until next July."

Looking ahead, the pace of inflation should moderate, Mr. Alexander said. Given the slowing in global economic growth, energy prices are not expected to continue climbing in the near term. Meanwhile, prices on discretionary consumer goods (i.e. furniture, appliances, recreation equipment, clothing and footware) should also come under pressure as consumer spending growth remains modest and competition remains fierce, he said. The upward pressure on auto prices should also moderate, as much of the recent increase has come from discounting and auto sales are not expected to be strong.

Read the full article here.

 

[Ally]

Canadian oil and gas industry generates about $100B a year in revenue

CALGARY - The holiday season is rapidly approaching and all the ingredients for festivity in Calgary are coming into order: snow, the early appearance of Christmas lights and welcoming invitations to parties. Before the first rum and eggnog goes down, it`s wise to have some handy chitchat material lest you get caught in the usual idle nattering about the cold weather. However, if you are cornered into complaining about -20C temperatures, you could use it as an opportunity to segue into, "Yes, I`m glad the furnace is on and my car started, but hey, speaking of energy, [pour eggnog here] do you really know the size of Canada`s oil and gas industry?"

Instead of using the dry language of barrels and cubic feet, it`s more appropriate to banter in the universal language of dollars, especially if you don`t know who you`re talking to, so you could say, "The Canadian oil and gas industry generates about $100 billion a year in revenue from the sale of hydrocarbons."

Unless you`re talking to a billionaire that impressive-sounding statistic is difficult to comprehend. Even a trite description such as, "Did you know that a hundred billion dollars of stacked pennies would extend to the moon 40 times over," is unlikely to impress and apt to attract a response like, "Excuse me, I`m going to mingle for a bit."

Read the full article here.

 

[Ally]

Canadian consumer confidence rises for second straight month

OTTAWA — The mood of consumers rose in November for a second straight month as Canadians appeared more hopeful of better economic times ahead, according to a national survey released Wednesday.

The Conference Board of Canada said its consumer confidence index rose 3.9 points to 83.6 this month.

"It was the second consecutive monthly increase, and together they were sufficient to cancel out the declines recorded between July and September," the Ottawa-based think-tank said. "November`s gains were led by a more hopeful outlook for future finances and the anticipation of increased job creation going forward."

However, it added that confidence levels are still below where they were early in 2010.

Read the full article here.

 

[Ally]

Flaherty won`t extend infrastructure deadline

OTTAWA—The federal government has no intention of reversing its plan to cut off funding next spring for urban renewal projects that aren`t close to completion, Finance Minister Jim Flaherty confirmed.

"We expect there are some situations in Canada where projects have barely started or where they are nowhere near completion" and federal support for these initiatives will end, Flaherty told the Commons finance committee.

"Obviously, if a project is well near completion, then there would be no reason not to continue the funding," Flaherty said.

He was responding to a question arising from Ontario Premier Dalton McGuinty`s request that Ottawa extend the deadline for federal funding for road, bridge, sewer and other infrastructure projects.

The Harper government`s two-year economic bailout program earmarked billions of dollars for infrastructure but the Conservatives want to end funding for projects not completed by March 31.

Read the full article here.

 

[Ally]

Home prices in Canada decline in September, ending 16-month run

OTTAWA — Canadian home prices declined in September, ending a string of 16 consecutive increases in the Teranet-National Bank House Price Index.

Housing prices dropped 1.1 per cent in September, which also marked the first time since February 2009 that prices declined in all of the metropolitan areas covered by the index.

The index tracks repeat sales of houses in six metropolitan areas using information from public land registries.

Year-over-year price growth also slowed to 7.9 per cent in September, the third consecutive month of deceleration, the report notes, "leaving the 12-month rise the smallest since last January," the Wednesday report said.

However, home prices are still 5.5 per cent higher than their pre-recession peak, says National Bank senior economist Marc Pinsonneault, a far cry from the situation south of the border, where prices are still 28 per cent from their peak.

"September`s drop notwithstanding, we do not think that a significant price correction looms in housing," says Pinsonneault, pointing to a balanced new-listings-to-sales ratio and the continuing health of the Canadian economy.

Read the full article here.

 

[Ally]

Energy sector bolsters `solid` Alberta GDP forecast

OTTAWA - A rebounding energy sector will deliver solid — but slower — economic growth in Alberta next year, the Conference Board of Canada said Tuesday.

The provincial real GDP is forecast to expand by a "solid" 2.8 per cent, down modestly from the rate of growth in 2010.

"Bolstered by a swift rebound in oil drilling and a turnaround in the domestic economy, Alberta`s real GDP is expected to grow by 3.6 per cent in 2010," the board said.

Next year, "the energy industry will keep the goods-producing sector growing at a quick enough pace to offset another year of modest performance among services industries."

Nationally, ebbing strength in Canada`s domestic economy will curb growth in all but Saskatchewan and Manitoba in 2011, the board warned.

Read the full article here.

 

[Ally]

Key tax deadline dates coming up, BMO warns

OTTAWA — The deadline for filing personal income-tax returns is still months away, but at least one investment group is reminding Canadians that many of the deadlines that can affect what you pay or get back are coming up soon.

Among the key dates highlighted by BMO Nesbitt Burns is Dec. 24. This is the final day to sell an investment that has depreciated over the year and use that loss to offset capital-gains taxes on other holdings that have risen in value.

Also, Dec. 31 is the deadline for making charitable contributions that can be applied against your 2010 income taxes. BMO Nesbitt Burns suggested, in its report released Friday, donating publicly traded shares that have appreciated over the year instead of cash. Not only would the contributor receive the tax benefit of the charitable donation, they would avoid paying capital-gains taxes on that stock.

The end of the calender year is also the deadline for making payments on things such as child care, medical tuition and alimony in order to reduce income taxes for the current year, BMO pointed out.

Read the full article here.

 

[Ally]

Commodity currencies - like the Canadian dollar - ripe for selloff by year-end

LONDON – Commodity-linked currencies will be vulnerable to a sell-off as concerns about a slowdown in emerging Asia encourage investors to pare their exposure to risk and cut overextended long positions before year-end.

The growth-linked Australian, Canadian and New Zealand dollars, which earlier this month began to fall from recent highs, are particularly sensitive to concerns China may slow as a result of policy measures aimed at curbing inflation.

Risk aversion is also negative for the three currencies, although the main trigger for their latest move downward was a jump in Chinese inflation, which fuelled speculation of further tightening, rather than the knock to sentiment from euro zone debt problems.

But barring a shock from China, yield-hungry investors may return in the new year to buy commodity currencies, including against the euro, because of the dollar bloc`s robust economic fundamentals and higher interest rates.

Read the full article here.

 

[Ally]

Risk to the Canadian economy mountin: IMF

TORONTO — The Canadian government and the Bank of Canada should be ready to provide more stimulus to the economy if the downside risks it now faces come to pass, the International Monetary Fund said on Thursday.

The multinational agency said authorities were taking the right steps by winding down Canada`s fiscal stimulus plan and halting an interest rate hike campaign started in June.

But the IMF warned risks to the economic outlook have increased — including the high debt of Canadian households and the impact of housing market weakness in the United States.

"Macroeconomic policy settings are appropriate for what we`re seeing now, (but) there are a lot of risks out there and there a lot of risks to the downside," Charles Kramer, the IMF`s mission chief for Canada, told a media briefing in Toronto.

Read the full article here.

 

[Ally]

Turning to parents for new-home advice not always smart

Looking for your first home? Then do your homework before hitting the open houses.

"A first-time homebuyer can save a lot of time by knowing in advance how much they would qualify for and what they can afford," says Marcia Moffat, RBC`s VP, Home Equity Financing, Canadian Banking.

RBC recently surveyed 1,050 Canadians, half who bought their first home in the past two years and half who intend to do so within the next two years. While two-thirds of future buyers said they hoped to purchase a single detached home, those who had already bought ended up in a townhouse or a condominium. The difference, suggests Ms. Moffat, comes down to dollars and sense.

"Affordability isn`t just the house price -- it`s thinking about maintenance of the home, taxes, legal feels on top of it and, if it`s a young family, factoring in childcare costs," she says. "Sometimes when someone is in the market of intending to buy, they haven`t thought through all those elements. Then, when they actually come down to buying, it`s part of the whole approval process. Yet if they get pre-approval, it strengthens their credibility with the realtor and means they`re not spending all of their time looking at homes that they can`t reasonably afford."

Read the full article here.

 

[Ally]

Using your RRSP for your own Mortgage

The 5-per-cent return on safe investments is back.

It happened last week when major banks increased their posted mortgage rates. If you were lending money out for mortgages like a bank, you could get the same return.

Here`s how: Just use the money in your registered retirement savings plan to finance your mortgage.

Investing your RRSP dollars in your mortgage is a fringe strategy – let`s get that straight. Several financial institutions offer it, but not with much enthusiasm. It`s costly and time consuming to set up, and it locks you into returns that could be lower than what a diversified investment portfolio could earn over the long term. If your entire RRSP is invested in your mortgage, then there`s also a lack of diversification to worry about

Read the full article here.

 

[Ally]

Canada`s shifting job market: The rise of contract work

In the shifting sands of Canada`s labour market, a clear trend is emerging: the rise of contract work.

Contract jobs have surged since 1997 and increased between 2005 and 2009 despite the downturn, a Statistics Canada paper released Friday shows. Last year, nearly 1 million Canadian workers held this type of job.

Most people in these fixed-term jobs are professionals with an educated workforce, it found. They tend to work in cities, and earn on average about 12-to-14 per cent less than permanent employees - $19.61 an hour last year, on average, as opposed to $22.71 an hour among permanent workers.

As of last year, half of all temporary jobs were contract positions, and since 1997 "contract employment has been the main source of growth in temporary work," said the report`s author, Diane Galarneau.

Read the full article here.

 

[Ally]

Is now a good time to buy a home?

If you`re tired of renting and have always wanted a home you could call your own, but thought the opportunity was just beyond your reach because of economic factors, here are some things to consider if you are thinking about taking the home ownership plunge.

In a recent report put out by the British Columbia Real Estate Association (BCREA) it was suggested that perhaps Home Buyer`s were in the driver`s seat.

Cameron Muir, BCREA Chief Economist said, "A relatively large number of homes for sale have created the most favourable supply conditions for home buyers in more than a year".

The silver-lining in the lacklustre economic outlook is that the normalization of both short-term and long-term interest rates will be deferred. BC households with variable rate mortgages will therefore be facing lower payments than we would have originally predicted at the beginning of the year.

Moreover, new homebuyers or homeowners set to renew their mortgages will be offered a second chance at securing rates at levels last seen at the depths of the financial crisis.

Read the full article here.

 

[Ally]

Newest wave of immigrants hurling in from the Emerald Isle

Oddly, it went unmentioned in the local sports media that this September, the Vancouver Harps won the 2010 Junior A Hurling Championships in Chicago, Ill. Somehow, we missed it. The Harps beat the San Francisco Naomh Padraig in the finals.

Hurling -- the sport, not the morning-after ritual -- is a cross between field hockey, lacrosse and Whac-a-Mole. After despising the English, it is the Irish national pastime. They play it so they may legally hit each other with big wooden sticks.

This was the first time the Harps had ever competed in the championships, mainly because they had never had enough people to form a team before. But lately, Vancouver has experienced such an influx of Irish immigrants that, suddenly, the team was awash with players. They had come looking for work.

When the Irish economy began to implode a couple of years ago, the emigration figures out of Ireland skyrocketed. Last year, with the economy shrinking by more than seven per cent, and with an unemployment rate of 33 per cent for those under 25, almost 65,000 people left the country. Estimates for this year are as high as 120,000.

Read the full article here.

 

[Ally]

Ireland`s debt crisis: A tale of two countries

DUBLIN - Country A is drowning. A catastrophic recession has thrown a tenth of its workforce out of jobs in just two years. Firms are shutting, banks are barely solvent and the IMF has been called in to bail out the government from crushing debt. The standard of living is eroding, taxes are being hiked, state spending is being slashed, and the deeply unpopular government is being forced into an election it is certain to lose.

Country B has a huge and growing trade surplus. It is attracting a flood of international investment from global firms, building thriving hi-tech export industries. Exports grew this year by 6% and now amount to more than $50,000 per person. Taxes are low and staying low, and the English-speaking population is highly skilled.

Both countries are Ireland. And therein lies a tale, or rather two tales: of a domestic economy that is in tatters, side by side with a global export economy in the rudest of health.

In some respects, the success of Ireland`s export economy obscures just how thoroughly ruined its domestic economy has been by the bursting of its property bubble in 2008.

Read the full article here.

 

[Ally]

Contract work on rise in Canada

In the Canadian job market, contract work has outpaced all other forms of temporary employment over the past decade, surging against rising unemployment during the 2008 financial crisis and resulting recession.

In 2009 52% of all temporary jobs were contract positions, accounting for almost one million workers, Diane Galarneau with Statistics Canada said in a report Friday.

"Since 1997, contract employment has been the main source of growth in temporary work," she said.

Professionals make up a large percentage of contract employees, and tend to be concentrated in the health, education and public administration fields. Contract workers also tend to be more educated and slightly younger than permanent workers.

However, contract workers tend to be paid about 14% less each hour than their permanent counterparts, while managing with less job security and little to no benefits.

Read the full article here.