August 2009

[Ally]

Flaherty to make Deficit Reduction top Priority

OTTAWA — Finance Minister Jim Flaherty says he`s been given marching orders to prepare Canada for life in a post-financial-crisis world -- starting with a more fulsome plan to return Canada to a budget surplus as soon as possible.

As a result, Mr. Flaherty said he would be wary of accepting new spending commitments beyond what`s in Ottawa`s $46-billion stimulus package, including proposed changes that would enrich the Employment Insurance program.

For the past two days, the federal Finance Minister has met with business, academic and think-tank leaders at a conference centre in Chelsea, Que., to gather feedback as to what should drive government policy in the short- and long-term.

In an interview, Mr. Flaherty said the most pressing issue he heard was the need to lay out a more detailed road map toward a budget surplus once the two-year, $46.6-billion stimulus plan has expired. It is an indication deficit reduction could emerge as a key policy theme for the Conservative government once Parliament returns in the fall — and speculation about election timing resumes in earnest.

"What I have heard a lot about is the need to reduce government deficit and debt over time," the Minister told the National Post. "There was an acceptance broadly of the need for stimulus spending now … but there is definitely a desire to have a definite plan that would take the government out of deficit over time."

Read the full article here.

 

[Ally]

Bernanke: Near Term Growth Prospects Good

JACKSON HOLE, Wyo. -- U.S. Federal Reserve chief Ben Bernanke on Friday said prospects for a return to global economic growth looked good "in the near term," the clearest signal yet the world`s most powerful central banker thinks a recovery is at hand.

"After contracting sharply over the past year, economic activity appears to be leveling out, both in the United States and abroad, and the prospects for a return to growth in the near term appear good," Bernanke told an annual Fed conference here in the shadows of the Grand Teton mountains.

"Although we have avoided the worst, difficult challenges still lie ahead," he said, cautioning that the "recovery is likely to be relatively slow at first, with unemployment declining only gradually from high levels."

His remarks were a bit more upbeat than a statement from Fed policy-makers last week, and nodded toward private forecasts for a solid upturn in the second half of 2009, while stressing headwinds still face the global economy.

Bernanke said "critical challenges remain" from financial markets still strained from a severe crisis that broke two years ago. The difficulties households and businesses face in getting loans is another source of stress, he said.

Read the full article here.

 

[Ally]

Late Payments on U.S. Mortgages hit Record High

NEW YORK - Late payments on U.S. mortgages increased to a record high in the second quarter, with almost one in eight homeowners delinquent or in the process of foreclosure.

The percentage of loans on which foreclosure actions were started edged down from the first quarter, driven by a sharp drop in actions on subprime adjustable-rate mortgages, the Mortgage Bankers Association said on Thursday.

But other types of loans, particularly prime, fixed-rate loans, saw a surge in foreclosure actions as rising unemployment affected more borrowers, the trade group said.

The percentage of loans on which foreclosure actions was started dipped to 1.36 per cent in the second quarter from an all-time high of 1.37 per cent in the first quarter. The rate was up 28 basis points from 1.08 per cent in the second quarter of 2008, the MBA said in its National Delinquency Survey.

It was the first quarter-over-quarter dip since the third of 2008, but the trade group warned the numbers did not necessarily herald a positive trend.

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[Ally]

B.C. boasts of $3.7 Billion worth of New Major Construction Projects

Developers added proposals for 41 new large construction projects worth $3.7 billion to B.C.`s inventory of major works between April and the end of June, Economic Development Minister Iain Black said Thursday.

That brings the list of major construction jobs proposed or underway to 882 with a value of $188 billion, raising the inventory`s value for the 19th straight quarter, Black said.

However, an increasing number of projects has been moved to the "on hold" column of the report.

"These consistent increases reflect investors` steadfast confidence in our province`s economic recovery, as well as government`s actions to support B.C.`s construction industry," Black said in a news release.

"We`re investing $14 billion to build vital public infrastructure in every region of B.C. and to create up to 88,000 jobs when B.C. needs them most."

Read the full article here.

 

[Ally]

Why Foreign Investors love Canada and Our Dollar
What is it that`s attracting foreigners to the splendors of Canada? Is it the Rockies? Niagara Falls? Our ability to be polite in multiple languages?

Well, maybe. But lately, it`s been our picturesque bonds.

Statistics Canada reported this week that foreign investors purchased a net $10.5-billion of Canadian securities in June, more than half in bonds. That`s on top of a net $18.8-billion inflow of foreign investment in May, and lifted the year-to-date net inflow to a whopping $61-billion - almost 70 per cent of which was in bonds. The Canadian dollar`s recent surge may have discouraged foreign tourists from vacationing in the Great White North (foreign visits to Canada were down 13 per cent in June), but it`s had no such effect on foreign investment.

CHICKEN OR EGG?

As National Bank Financial noted in a report this week, the portfolio position for Canadian investment (net foreign purchases of Canadian securities minus net Canadian purchases of foreign securities) has been rising in concert with the currency in recent months.

One possible explanation for this is the relative strength in the loonie, which may be attracting foreign money in search of returns enhanced by a stable and rising currency.

Read the full article here.

 

[Ally]

Federal Deficit hits $5 Billion in June: Finance Report

OTTAWA - Lower tax revenues and higher bills for Employment Insurance and the auto bailout pushed the federal government $5 billion into the red in June.

In the same month last year, the government had a $1.6 billion surplus. The Finance Department`s monthly Fiscal Monitor, released Friday, pegged the deficit for the first three months of the fiscal year - April to June - at $12.5 billion, compared with an $800 million surplus in the same period in 2008.

In June, revenues fell 13.1 per cent, or $2.7 billion from 2008, due to a lower take from income tax and the GST.

Total spending hit $20.7 billion in June, up 25.2 per cent, or $4.2 billion, because of higher EI costs and support payments for the auto industry. EI payments jumped by 39 per cent, or $400 million.

For the April-June period, revenues were off $5.3 billion and spending rose by $8.5 billion.

Read the full article here.

 

[Ally]

Loonie Gets Boost from Upbeat Retail Sales Data

TORONTO (Reuters) - Canada`s dollar rose to its highest level in over two weeks versus the U.S. currency on Monday after domestic retail sales data topped expectations.

The latest domestic data showed retail sales in Canada rose 1 percent from May, far surpassing the consensus forecast for a 0.2 percent increase.

That immediately sent the Canadian dollar up to C$1.0746 to the U.S. dollar, or 93.06 U.S. cents, which marked its highest level since August 6. Ahead of the data it was flat around C$1.0780 to the U.S. dollar, or 92.76 U.S. cents.

"The data was stronger than expected and it kind of confirms the uptrend that we`ve seen in the Loonie since late last week," said George Davis, chief technical strategist at RBC Capital Markets.

"Given the strength that we`ve seen since last Thursday I think it`s just given some positive reinforcement to that trend and we`ve seen some added buying of Canada in response."

Read the full article here.

 

[Ally]

Loonie set for another run at U.S.-Dollar Parity

Praise for the loonie and damnation for the U.S. dollar from some of the most important voices in U.S. finance set the stage this week for a renewed Canadian assault on U.S.-dollar parity, if not the eventual demise of the greenback as the world`s reserve currency.

"There`s no doubt that the mirror image will be a stronger Canadian dollar. Regaining par or in fact rising to a new high is going to be a matter of when, not if," said David Rosenberg, chief economist at Gluskin Sheff and Associates in Toronto.

A vote of confidence this week from U.S. banking giant Goldman Sachs, which recommended selling the greenback in favour of the loonie because of its exposure to oil, helped put the Canadian dollar on a path for four straight days of gains through Friday, closing at 92.43 cents US at week`s end.

Currency specialists and economists say the Canadian dollar will soon return to parity with the greenback, likely within the next six to 12 months. It reached that point, and beyond, last year for the first time in decades as crude climbed toward $150 US a barrel.

"Fundamentally, Canada remains quite attractive, we think. And in the short and medium term, we`re quite bullish on the Canadian dollar," said Shaun Osborne, chief currency strategist at TD Securities, who sees parity as early as year`s end.

Read the full article here.

 

[Ally]

When Rearranging Your Debt, do so Legally

It has been nearly six months since the Lipson decision, in which the Supreme Court of Canada effectively blessed the debt-swap strategy known as the "Singleton shuffle." But a new court decision reminds us how critical it is when rearranging your debt to do so legally.

After all, in Canada, it`s nearly impossible to write off your mortgage interest without some advance planning.

The Singleton shuffle, named after Vancouver lawyer John Singleton`s 2001 Supreme Court victory, stands for the notion that you can rearrange your financial affairs to make the interest on investment loans tax-deductible. How you do that is by replacing non-deductible debt with tax-deductible debt.

The case decided last month involved Nina Sherle, who owned a rental property (Property A) with a mortgage on it upon which the interest was deductible. She also owned a personal residence (Property B) free and clear.

She wanted to switch properties. In other words, she wanted to live in Property A as her personal residence and rent out Property B. She stated she didn`t want to change her financing strategy, which was to live in her personal residence (soon to be Property A) mortgage-free.

Read the full article here

 

[Ally]

Growth in EI Beneficiaries slows in June

OTTAWA — The number of people receiving regular employment insurance benefits rose at a slower rate in June than in the previous month.

IE beneficiaries grew by 39,460, or 5.1 per cent, to 816,630 during the month, Statistics Canada said Tuesday.

The biggest increases during June were in Alberta, British Columbia and Newfoundland and Labrador, the federal agency said.

During the second quarter of this year, the number of beneficiaries rose 18.8 per cent, down from a growth rate of 25.2 per cent in the previous quarter.

"Since the labour market began to deteriorate last autumn, the number of people receiving EI benefits has risen sharply," the agency said. "Compared with October 2008, the number of people on EI has increased 63.2 per cent, or 316,300."

Read the full article here.

 

[Ally]

Bank of Canada see Recession`s end but warns on Loonie

KINGSTON, Ontario (Reuters) - Canada`s recession most likely ended in the third quarter, the Bank of Canada said on Tuesday, voicing cautious optimism but also warning about the risks of a persistently strong Canadian dollar.

"Two years after the onset of a global financial crisis and after three quarters of severe recession in Canada, the economic outlook for this country, and much of the world, has improved," Deputy Governor Timothy Lane told economists.

"Although the recovery is likely to be muted, and effective and resolute policy implementation will be required, we are likely to experience positive growth this quarter, and a gradual closing of the output gap by the middle of 2011."

But Lane also noted that a good deal of the recovery so far had come from official action, and he said there was a risk that private demand would not emerge as fast as desired.

"At what stage will private demand be robust enough to make the recovery self-sustaining? Clearly, we haven`t reached that point yet," he said.

Read the full article here.

 

[Ally]

Worst of Housing Prices Decline Behind us: Report

OTTAWA — The downturn in Canadian housing prices appears to be a thing of the past, economists say, citing a report showing that home values rose for the second straight month in June.

After eight consecutive monthly declines, prices gained 1.5 per cent in June following May`s two-per-cent advance with the rebound in prices showing up in even some of the markets hardest hit by the recession-driven housing decline, according to the Teranet-National Bank report.

"The worst of home price deflation in Canada is behind us," said National Bank senior economist Marc Pinsonneault.

Read the full article here.

 

[Ally]

Royal Q3 Profits up 24% at $526 Million Despite Rise in Loan Loss Provisions

TORONTO - Royal Bank of Canada (TSX:RY) reported third-quarter financial results that beat analysts` expectations on Thursday, as strong performance by its capital markets division offset losses in international banking and a sharp rise in provisions for credit losses.

Canada`s largest bank reported net income of $1.6 billion or $1.05 per share for the three months ended July 31, the third quarter of the bank`s 2009 fiscal year. That was up 24 per cent from year-earlier profits of $1.3 billion or 92 cents per share.

Cash net income, which excludes certain one-time items, totalled $1.21, soundly beating estimates of 92 cents per share from analysts at Thomson Reuters.

"Global capital markets continued to improve from last quarter and we have seen some signs of recovery in the general economy," Royal Bank chief executive Gordon Nixon said on a conference call with analysts.

"Of course, higher unemployment levels have had an impact on loan portfolios and the low-interest environment in keeping pressure on retail margins."

Read the full article here.

 

[Ally]

CREA Revises Home Sales Forecast Upwards after strong Q2

CALGARY -- Much stronger than expected MLS sales throughout the country in the second quarter of this year has forced the Canadian Real Estate Association to revise its home sales forecast for this year and 2010.

The national organization of realtors said activity has climbed throughout the quarter and into July and the "remarkable recovery of resale housing" has prompted the change to its forecast.

"The speed and magnitude of the rebound in sales activity to date has lifted CREA`s national forecast for the number of transactions to 432,600 units. This represents an annual decline in activity of 0.4 per cent compared to levels set in 2008, and is a significant upward revision from the previously forecast decline of 14.7 per cent in CREA`s forecast issued last May," said the organization.

The difference in the resale housing market now, compared with the beginning of the year, is night and day, and nowhere is this more evident that in the West," said Dale Ripplinger, president of CREA.

The organization said forecast declines in annual activity were trimmed significantly in Alberta.

Read the full article here.

 

[Ally]

Royal Bank Reports 24% Surge in Third-Quarter Profit

TORONTO - Royal Bank of Canada (TSX: RY.TO) reported third-quarter financial results that beat analysts` expectations on Thursday as a strong performance by its capital markets division offset losses in international banking and a sharp rise in provisions for credit losses.

The Toronto-based bank reported net income of $1.6 billion or $1.05 per share for the quarter ended July 31, up 24 per cent from year-earlier profits of $1.3 billion or 92 cents per share.

Cash net income, which excludes certain one-time items, totalled $1.21, soundly beating estimates of 92 cents per share from analysts at Thomson Reuters.

"Our record results this quarter reflect the strength of our franchise, and our ability to take advantage of opportunities and drive efficiencies," Royal Bank chief executive Gordon Nixon said in a statement.

"We are building on our strong competitive positions and successfully executing against our long-term strategy. Our performance this quarter demonstrates the competitive advantage of our diverse business mix."

Read the full article here.

 

[Ally]

Canada Ekes out Meagre Growth in June

OTTAWA — The Canadian economy grew for the first time in 11 months at the tail end of the second quarter, providing new evidence that the recession is coming to an end.

Gross domestic product — the broadest measure of economic performance — increased 0.1 per cent in June, even as the quarter declined overall by 3.4 per cent, Statistics Canada said Monday.

The April to-June contraction marked the third straight quarterly decline, while the June increase — which had been widely predicted — was the first since July 2008.

Many economists expected a three per cent decline during the quarter, following a revised 6.1 per cent contraction in the first quarter. However, the June increase was below the 0.3 per cent that many economist had forecast.

In recent weeks, there have been growing signs that the economy is turning around. Data show retail sales and house prices are improving, and consumer confidence is returning.

Read the full article here.

 

[Ally]

Economy Growth First in Year

OTTAWA – Statistics Canada says the economy grew by 0.1 per cent in June, the first monthly increase since July 2008 as housing and car sales rebounded.

The increase was below private-sector expectations of a 0.2 per cent increase in real gross domestic product.

Economists have been looking for evidence to support the Bank of Canada`s assertion that this country`s economy has begun to recover from the worst recession in decades and will show some growth in the third quarter.

Statistics Canada said the economy slipped 0.9 for the second quarter as a whole, spanning the months of April through June, but that was an improvement over the 1.6 per cent drop recorded in the first quarter of 2009.

June`s growth was driven by higher activity in oil and gas, wholesale trade and real estate.

Read the full article here.

 

[Ally]

Economy of `Cusp of Recovery`

Canada`s version of the Great Global Recession may have seemed brutish, but – if economists are right about new output numbers being released today – it will also have turned out to be mercifully short and relatively mild.

With gross domestic product data released for June and the second quarter, the consensus of economists is that the economy continued to contract sharply for the third straight three-month period. But it will also show that the recession, at least as it is technically defined in terms of gross domestic product, likely ended in June.

The consensus is that the GDP report will show that growth returned to the economy for the first time in 10 months in June – albeit minuscule growth of 0.2 per cent.

If true, and barring an unexpected reversal, Canada will have gotten off relatively easy, economists say.

"We have lost a lot of jobs, but in general, Canada has come out fairly well, fairly unscathed," said economist Pedro Antunes of the Conference Board, an Ottawa-based economic think-tank.

Read the full article here.