Dupuis: Housing the goose that laid the golden egg
Last week, I detailed the economic impact of the residential construction industry in the GTA and mentioned in passing a statement by Gluskin Sheff chief economist and strategist David Rosenberg to the effect that housing was behind Canada`s miraculous economic recovery.
This week, I re-read Rosenberg`s economic commentary called "Coffee with Dave: Market Musings and Data Deciphering," and took heart in his glowing comments about the contribution of housing to the economy, particularly of late.
"Looking back to last year, it would have been inconceivable to be talking about a Canadian economic miracle, but that is exactly what we have on our hands today; a classic V-shaped recovery. This begs the question as to what has been the principal factor underpinning this impressive Canadian economic revival, especially in relation to what is happening in the United States. We can answer the question in one word: housing," Rosenberg wrote.
"The housing sector is the quintessential leading indicator of the economy, and true to form, it caught fire before the overall economy did," Rosenberg added.
From there, Rosenberg looks at the direct and indirect impacts of the housing sector noting that every dollar increase in housing wealth translates into seven to nine cents of incremental spending in the GDP accounts. "Housing has tremendous spin-off effects outside the wealth effect – the impact on building materials, real estate income, legal services, architecture billing, classified ads, infrastructure, etc. – and it`s all locally driven," he notes.
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