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November 2011 Canadian Economic Fundamentals

Ally

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Keystone decision a setback for Canada-U.S. relations




The Obama administration's move to sideline the Keystone XL pipeline is a major setback for relations between the world's two largest trading partners, and threatens Canada's role as the leading energy supplier to the United States.




The U.S. State Department's decision to force TransCanada Corp. to explore alternative pipeline routes in Nebraska pushes out a final ruling until at least 2013, well after next year's U.S. presidential and congressional elections.




The delay puts at risk a vital piece of the historic economic relationship that binds the world's largest oil market and its largest supplier.





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New home starts to rise in 2012



To the end of October, new home builders in the Calgary CMA have started 18% fewer new homes than to the end of October last year and while they are expected to close the year-over-year gap, they`re not likely to exceed last year`s totals.





In the Canada Mortgage and Housing Corp.`s Housing Market Outlook for the balance of the year, senior market analyst Richard Cho says builders should end this year with about 8,500 new home starts, an 8% decrease from the 9,262 starts in 2010.





But, look for a rebound in 2012, says Cho.





`After a lower level of activity this year, new construction in 2012 is anticipated to rise as job creation, stronger net migration and low mortgage rates support the housing market,` says Cho.





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Canadian consumers remain bullish on real estate market




The Canadian housing market continues to defy those who have long predicted its collapse.




It was just another set of numbers, but if anything the market seemed to pick up steam with October sales across the country the best they have been since January.




The upward push caused the Canadian Real Estate Association to slightly revise its predictions for 2011. The group now says sales will be up 1.4 per cent from a year ago, instead of 0.9 per cent.





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Canada making up for lost time with Asia ties, Johnston says





SINGAPORE ` Canada is making up lost ground in its political and trade ties with Asia after emerging relatively healthily from the global economic downturn, Gov. Gen. David Johnston said on Monday.







Johnston said Canada's skill as a middle-sized diplomatic power would now boost its prominence in Asian forums after being criticized for lack of engagement, particularly by China.







"Yes, I would say that looking over quite a lengthy period of time, we would have been wiser to be more active in Asia," Johnston said in an interview during a visit to Singapore.






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It's 'legitimate' for Canada to feel snubbed by U.S. moves: McCain




OTTAWA ` U.S. Senator John McCain said he understands if Canadians feel their American counterparts have turned their back on them, pointing to U.S. officials` decision to delay the $7-billion TransCanada Keystone XL pipeline as a prime example.




When asked if he agreed that Canadians have been snubbed by their neighbours in an interview on Global TV`s The West Block, McCain said that viewpoint was "legitimate."




"When we do things that seem to take our Canadian friends for granted and take your allegiance and friendship for granted, there`s an understandable reaction in Canada," he said while at the Halifax International Security Forum, where more than 300 politicians, academics and policy-makers from 39 countries met.





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Canada's growth outlook is optimistic




Knock on wood, but the North American economy seems to be holding up in the face of Europe`s worsening debt crisis ` for now.




Capital Economics, a London-based firm that is one of the more bearish forecasters out there, recently lifted its outlook for Canadian growth in the third quarter to an annual rate of 3 per cent, a full percentage point higher than the Bank of Canada`s latest estimate.





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Jean Chretien recalls how Canada almost became Greece





As Canada's former prime minister puts it in an interview with Reuters, "there would have been a day when we would have been the Greece today."



The news agency takes an in-depth look today at how Canada attacked its own debt troubles in the mid-1990s, with interviews with officials of the day, eventually bringing its debt-to-GDP ratio to 29 per cent by 2008-2009 from its high of 68 per cent in the 1990s.





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Canada in midst of 'infrastructure super-cycle'




Fears that Canadian infrastructure spending is about to be massively curtailed are widely exaggerated.




That`s the view of CIBC World Markets analyst Paul Lechem, who has a new report that explains how and why Canada is `in the midst of an infrastructure super-cycle.` His thesis: public infrastructure spending is bound to be cut back as governments slash their deficits, but private and P3 spending will only keep growing.





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Inflation to drift higher, but no panic at Bank of Canada




The highlighted elements of first reports on today`s Consumer Price Index release are the reductions in year-over-year headline and core inflation. But the underlying trends suggest that core inflation -- to which the Bank of Canada pays special attention -- may well drift further above the 2 per cent target in the near term.



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Tighter rules doing their job




Over the last three years, the federal government has tightened mortgage qualification regulations in an effort to keep risky mortgages off the market and avoid a U.S.-style housing market meltdown.




The regulations, coupled with warnings about rising household debt levels, have had their desired effect, according to a mortgage industry association report.




`Overall, (our report) paints a picture of Canadians, generally, and homeowners in particular, as very focused on their finances. They are planning ahead, aggressively paying down their mortgage in advance of any further economic jolt,` says Jim Murphy, AMP, president and CEO of the Canadian Association of Accredited Mortgage Professionals (CAAMP).





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Go West young person: The nation's immigrants set their eyes on western Canada




The booming economies of the West are drawing more immigrants than the traditional landing spot of Eastern Canada, reports the CBC.




Experts are saying that only a decade ago, Ontario took in the lion's share of Canada's immigrants, with half going to Toronto and 60 per cent to Ontario as a whole.




But only 42 per cent of all immigrants went to Ontario last year, statistics show.




At the same time, immigration to Western Canada has surged, especially in Alberta, Saskatchewan and Manitoba.



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Beware the upbeat economic news




Everybody's eager for some good news on the economy, and lately we've been getting some.




After a summer swoon that included an epic display of ineptitude in Washington, the first-ever downgrade of the U.S. credit rating, a stock-market plunge and a sharp decline in consumer confidence, the numbers have been looking rosier lately. Consumer spending is up, suggesting that ordinary folks aren't as glum as they say they are in confidence surveys. Jobless numbers have been gradually improving. There are signs of optimism in the beleaguered housing industry. And the index of leading indicators, which hints at the future direction of the economy, recently recorded a sharp increase.





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Housing sales, prices to increase, experts say





Dismissing a recent spike in national unemployment as "temporary," the chief economist of the Canada Mortgage and Housing Corp. said national economic fundamentals would remain positive in 2012, supporting a modest growth in home resales and prices nationally.




"We think it (the rise in unemployment) is a temporary factor and the trend will be of employment continuing to rise," said CMHC chief economist Bob Dugan Tuesday while presenting the Crown corporation's 2012 housing outlook.




The CMHC expects employment levels to continue to support a strong housing market, as will mortgage rates remaining at current low levels. Income growth is expected to remain slow in 2011 and 2012, yet it to will be "moderately supportive of housing," the report says.




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The race starts here





OTTAWA and CALGARY -- Enbridge Inc. and TransCanada Corp. are racing to win support for rival pipelines to feed the massive oil-refining hub on the Gulf Coast, and help erase a price discount that has cost the Alberta oil industry billions in lost revenue.



Enbridge is spending $1.5-billion for a half interest in the Seaway crude pipeline, which connects the oil distribution hub of Cushing, Okla., with oil refineries on the Texas Gulf coast. Enbridge, along with partner Enterprise Product Partners LP, plans to reverse the flow of oil in the underused pipe to provide much-needed crude supply to the Texas refineries. The Seaway line was originally designed to ship oil from Texas to the small refining hub in Cushing.




At the same time, TransCanada says it is pursuing plans to quickly construct the most southerly leg of its controversial Keystone XL project - connecting Cushing to the Houston area - even as it fights to win approval for the full $7-billion, 2,700-kilometre project planned to run from Alberta to Texas.





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"Unsellable" real estate assets threaten survival of smaller Spanish banks




Spanish banks, under pressure to cut property-backed debt, hold about 30 billion euros ($41 billion) of real estate that`s `unsellable,` according to a risk adviser to Banco Santander SA (SAN) and five other lenders.




`I`m really worried about the small- and medium-sized banks whose business is 100 percent in Spain and based on real- estate growth,` Pablo Cantos, managing partner of Madrid-based MaC Group, said in an interview. `I foresee Spain will be left with just four large banks.`





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