August 2011 Canadian Economic Fundamentals

[Ally]

Confidence takes a beating




Stock markets stayed in positive territory Wednesday, but with bad news still piled up from the U.S. to Europe, pessimism won the day in some corners.




TD Economics downgraded its forecast for global growth in a new report, issued Wednesday. Its economists also warned that Canada could slip into recession if the U.S. continues to weaken.




Consumer confidence fell to its lowest level in two years, a decline that could have serious implications for spending and retail sales.




The downbeat mood spread even to Ontario Truckers, an industry that typically feels the first rumblings of a downturn in the economy.





Read the full article here.

 

[Ally]

Housing starts hold steady through 2012




Construction on new homes should hold steady for the rest of 2011 and into next year, as a robust housing market is expected to remain supported by strong employment and low mortgage rates, Canada Mortgage and Housing Corp. said Wednesday.




The agency forecasts that an average 183,200 units will be built in 2011, with about 183,900 new homes built next year.




"Housing starts have been strong in the last few months, but are forecast to moderate closer in line with demographic fundamentals," said Mathieu Laberge, deputy chief economist for CMHC.




"Despite recent financial uncertainty, factors such as employment, immigration and mortgage rates remain supportive of the Canadian housing sector."





Read the full article here.

 

[Ally]

B.C. votes to scrap the HST






VICTORIA - British Columbians have voted to scrap the Harmonized Sales Tax, Elections BC announced Friday, meaning the province will now begin a transition back to the former PST.





54.73 per cent of people voted to scrap the HST in the referendum, Elections BC said as it released official results, with 45.27 per cent voting to keep it in place.





The result is a victory for former premier Bill Vander Zalm, who has led a campaign against the tax for close to two years, and who forced the recent referendum by collecting more than 500,000 signatures on a petition.





Finance Minister Kevin Falcon said today he was "disappointed" by the result, but "not surprised."






Read the full article here.

 

[Ally]

Mortgage refinancing drops under new rules: CMHC




Canada Mortgage and Housing Corp. says that it has seen mortgage refinance activity drop nearly 40 per cent since Ottawa brought in new rules.




The crown corporation, which must now issue quarterly financial results as a result of a new law, issued its second-quarter results on Monday and they include insight into how Canada`s housing industry is faring.





Read the full article here.

 

[Ally]

Politicians have worsened financial crisis





Economists may deny it, but the current practically worldwide recession is in most respects more political than economic.




The economic details are different in the U.S., Europe and China, but the underlying reason why a problem turned into a crisis is political in every locale.




Despite the complexities, this pattern illustrates one of the few valid generalizations to be made about politics: politicians who try to fix economic problems invariably make them worse.




When the Wall Street financial markets tanked in 2008, one of the consequences was anger at the erstwhile wizards who brought it about. It turned out they were irresponsible enough to invent complex paper assets that depended for their value on house prices rising forever. But they knew, and we know, that prices of everything rise and fall. When it became clear that no one could determine what the paper was worth, we had a full-scale financial crisis.






Read the full article here.

 

[Ally]

Interest rates drop at banks supports housing markets





Despite some indications of lower sales prices in the West Kootenay-Boundary, the housing market in B.C. and across Canada remains buoyant and mortgage trends show signs of encouraging further investments.






The Bank of Canada is ready to meet on Sept. 7 to set upcoming interest rates. Interest rates are a strong indicator for housing sales.





Recently, RBC and Toronto Dominion (TD) increased their variable interest rates, but lowered their fixed mortgage rates to bring them more in line with the long-standing low prime interest rates.





Read the full article here.

 

[Ally]

What makes a city a magnet for talent?






When Vancouver wants to impress potential investors, an obvious place to start is Canada`s Pacific Gateway. This vast transportation project ` whose partners include Port Metro Vancouver, the federal and provincial governments, and Canadian National Railway Co. ` is spending more than $22-billion to improve port, rail, road and air infrastructure. Its goal is to make B.C. the continent`s main transport hub for trade with Asia.





Read the full article here.

 

[Ally]

CMHC anticipating strong 2011 finish in real estate industry




Canada`s national housing agency says the country`s real estate industry will be strong in the back half of the year, building on favourable economic conditions in the first six months of 2011.




Canada Mortgage and Housing Corp., in a report accompanying its quarterly earnings, said Monday that mortgage rates near historic lows and improvements in employment have led to fewer claims under its mortgage insurance business despite higher home prices.




CMHC insurance protects lenders against default.





Read the full article here.

 

[Ally]

Mortgage refinancing lower after new rules, CMHC finds




Canada`s national housing agency says the country`s real estate industry will be strong in the back half of the year, building on favourable economic conditions in the first six months of 2011.




Canada Mortgage and Housing Corp. says mortgage rates near historic lows, as well as reduced unemployment, combined with increased house prices have led to fewer claims under its mortgage insurance business, which protects lenders against default.




The agency says it expects fixed mortgage rates to stay relatively flat for most of the year, with the five-year posted rate at between 4.1 per cent to 5.6 per cent, then increase slightly in 2012, while variable rate mortgages will remain near historically low levels.





Read the full article here.

 

[Ally]

Economists now expect fewer interest rate hikes in 2012




Canadian economists have cut by half their expectations for Bank of Canada policy-rate increases through the end of next year as the global economic outlook deteriorates, a Bloomberg survey shows.




The median forecast for the central bank`s key lending rate was reduced by 75 basis points for each quarter in 2012, bringing it to 1.75% at the end of next year, according to the monthly Bloomberg News economist survey taken Aug. 22-29. The overnight rate had been projected to increase to 2.5% next year in last month`s survey.




Reports over the past month showed Canada`s economy weakening even before the impact of financial-market turmoil stemming from Europe`s debt crisis and Standard & Poor`s downgrade of U.S. debt. Bank of Canada Governor Mark Carney told lawmakers on Aug. 19 the Canadian economy stalled and may have even contracted in the second quarter.





Read the full article here.

 

[Ally]

House prices will remain stable through 2011, then rise in 2012: CMHC





CMHC said the average MLS price will plateau through 2011 to an average of $367,500, and then rise 1.3% to reach $372,400 in 2012.







`Despite recent financial uncertainty, factors such as employment, immigration and mortgage rates remain supportive of the Canadian housing sector,` said Mathieu Laberge, deputy chief economist for CMHC.







The CMHC report is the latest to predict moderate gains in the market through 2012, but other analysts such as Capital Economics have said Canada`s housing prices will collapse by as much as 25% over the next three years.





Read the full article here.

 

[Ally]

B.C. court rules against tenant in foreclosed home





It led to the February ruling by the British Columbia Supreme Court in Kelowna, ultimately evicting the tenant, according to a recent summary by the British Columbia Real Estate Association (BCREA) in an issue of its Legally Speaking publication. The details of the case, First National Financial GP Corp v. Sirotka, could serve as a cautionary tale for lenders, purchasers of foreclosed properties, and tenants alike.

The BCREA summary was written by Mike Managan, an experienced trial lawyer. He noted the case took shape in 2009 when the lender began foreclosure proceedings. On Dec. 1, the owners rented the property out on a month-to-month basis.





Just a week later, the court granted judgement to the lender to take back the home, but the tenant remained without knowledge of this. In 2010, the lender was able to start listing the property and the court approved a sale on Nov. 17 that year. The new owner asked the court for an order of possession, requiring the tenant to vacate the property. The tenant argued she had not been notified of the foreclosure in signing the lease.





When the tenant refused to leave, it took a BC Supreme Court ruling to eventually force her out.







Read the full article here.

 

[Ally]

No progress in Quebec prosperity: report



MONTREAL ` Quebec`s power to generate wealth remains crippled by persistent structural weaknesses in its economy, notably a worsening cost-of-labour situation that is dragging it down versus other provinces.



In its second annual report card on Quebec prosperity, released Tuesday, the province`s largest employer council warns that little has changed over the past year in Quebec`s overall prosperousness picture. And without concerted effort by business and political leaders, it says Quebec will grow even poorer compared to other jurisdictions.




`The fundamental problems remain in their entirety,` Norma Kozhaya, lead researcher at the Conseil du Patronat, said in an interview. `We weren`t expecting a dramatic change in the space of a year. But if we still see little improvement five years from now, then an alarm should go off.`





Read the full article here.

 

[Ally]

GDP is king, but don't forget Gross Domestic Income




Statistics Canada`s GDP release always produces headlines, and so it should: it`s an important, timely indicator of the state of the business cycle. But there`s another indicator that is published along with GDP: Gross Domestic Income (GDI). GDI doesn`t receive much in the way of public attention, but I think it deserves more.





The basic difference between GDP and GDI is that while GDP measures the volume of output produced, GDI attempts to measure how this output translates into buying power. (See here for a recent Statistics Canada study explaining the difference, and see here for an attempt to make the same point in laymen`s terms.) In the standard one-good models that inhabit much of macroeconomics, there`s no point in making this distinction: what is produced is the same thing that that is consumed. And up until 2002 or so, there really wasn`t much point in looking at GDI instead of GDP; both measures produced almost identical estimates.





Read the full article here.

 

[Ally]

Canada is losing its 'wiggle room' if U.S. economy goes sour again




As worries about another U.S. recession mount, Canada`s economy is highly exposed to any downturn and is less equipped to fight a slump than it was three years ago.




Heavy government and consumer debt, along with reduced flexibility for stimulus spending and monetary policy mean Canada today has less resilience to a crumbling U.S. economy compared with the global financial crisis of 2008.





Read the full article here.

 

[Ally]

A plain-vanilla recession? More like a rocky road




This month`s sharp selloff has raised a lot of questions about whether the latest stock market downturn was just a severe correction that is already beginning to pass or the start of a bear market that will continue to maul portfolios over the year to come.




The answer depends on whether the economy ` the U.S. economy, in this case ` is still growing or sliding into recession.





Read the full article here.

 

[Ally]

Economic conditions will help Canada's real estate sector stay healthy: CMHC




Canada's national housing agency says it expects home sales and construction activity will cool but remain healthy in the second half of the year, due to favourable economic conditions that push up demand for homes.




Canada Mortgage and Housing Corp. said Monday that lower unemployment, a steady level of immigration, and low interest rates are working together to prop up Canada's real estate industry.




"I think the Canadian housing market is healthy at the moment despite the uncertainty we observed in the financial market," Mathieu Laberge, deputy Chief Economist at CMHC said in an interview.





Read the full article here.

 

[Ally]

Canadian economy likely to regain momentum after dip in 2nd quarter





The Canadian economy is likely to regain momentum after faltering in the second quarter of 2011, Central 1 Credit Union chief economist Helmut Pastrick said Wednesday.




The economy, as measured in gross domestic product, shrank for the first time since the end of the recession in mid-2009.




Statistics Canada said GDP contracted 0.4 per cent between the second and first quarters of this year, when expressed in annualized terms. That's the weakest performance since the 3.7-per-cent decline seen in the second quarter of 2009.






Read the full article here.

 

[Ally]

Canada's GDP shrunk last quarter




Canada has officially sunk halfway into recession.




A dismal second quarter saw the Canadian economy contract for the first time since the recent recession, meeting the first of two consecutive quarters of negative growth required for a double dip.




Finance Minister Jim Flaherty, speaking to reporters in Toronto, said the data proves the Canadian economy is still fragile and vulnerable.




"Global economic growth has been weak in recent months and as a trading nation, we must recognize that turmoil abroad will inevitably have an impact on our economy," he said.





Read the full article here.