January 2011 Canadian Economic Fundamentals

[Ally]

Oil drops 2% as U.S. dollar rises





NEW YORK - Oil prices tumbled more than 2 per cent on Thursday to below $89 a barrel as a stronger dollar and weaker U.S. equities deterred buyers.




Oil markets fell back as Wall Street dipped on disappointing retail sales and investors turned cautious ahead of Friday`s U.S. employment report for December.




Oil`s losses added to a volatile start to trading in the New Year, with crude extending December`s gains and touching a 27-month high on Monday before investors began to reassess the optimistic outlook for commodities in 2011.




Thursday saw further pressure on oil from gains in the dollar against the euro which weighed on dollar-denominated commodities. Recent U.S. data has painted a rosier economic picture in contrast to worries about the eurozone`s sovereign debt crisis.




Read the full article here.

 

[Ally]

Canadian job market better than expected in December





OTTAWA ` Canada's job market performed somewhat better than expected last month, with gains concentrated in full-time, private-sector employment, in industrial sectors and for those younger than 25.







There were 22,000 additional people working in Canada last month, Statistics Canada said Friday. That slightly exceeded economists' expectations for gains of 20,000.







Most experts anticipated a surge in people looking for work would cause the unemployment rate to rise to 7.7 per cent, but it remained steady at 7.6 per cent.







The gains for December came from full-time employment, which provided jobs for 38,000 more people last month.







"Notable" gains were seen in the sectors of manufacturing, transportation and warehousing. Declines were seen in areas such as construction, health care and social assistance, wholesale and retail, and agriculture.




Read the full article here.

 

[Ally]

Global economy expected to plod ahead in 2011





Look for the aftermath of a recession, rather than a recovery, to dominate global economic conditions in 2011.




Peter Hall, chief economist for Export Development Canada, said in an interview Thursday that the "most painful phase" is over as the world economy adjusts to the behaviour of consumers who are trying to beef up savings in lieu of accumulating debt.




Hall is describing 2010 as "the year of the false start" in his first weekly commentary of the new year, and notes that the global economy is hauling a lot of baggage that must be shed before a real recovery can begin.




However, he believes that the first phase of that recovery could begin late this year -- including some hopeful signs for British Columbia's beleaguered forest industry.




Read the full article here.

 

[Ally]

Statistics Canada December Labour Force Survey






Employment edged up for the second consecutive month in December, with an increase of 22,000. The unemployment rate held steady at 7.6%. Compared with December 2009, employment increased by 2.2% (+369,000), following a decline of 1.1% the previous year.



Read the full article here.

 

[Ally]

Canadian housing prices set to rise in 2011




A new survey says Canada`s real estate market is heading into a stronger-than-expected year that will likely see home prices steadily rise, while overall transactions moderate.






Royal LePage reports that average home prices are expected to rise three per cent to $348,600 in 2011, while the number of transactions is predicted to fall two per cent.




The survey also found that average house prices rose between 3.9 per cent and 4.6 per cent in the fourth quarter of 2010.




Royal LePage said that price appreciation is expected to continue a moderate and steady climb throughout the year.




Activity in the housing sector was helped by low borrowing costs in the fourth quarter of last year, and the report says that trend will likely continue into the first half of 2011 as homebuyers weigh the possibility of rising mortgage rates later this year.



Read the full article here.

 

[Ally]

B.C. loses jobs as Canada gains in December; Unemployment stays at 7.6%





VANCOUVER - There was good news in the job market for much of Canada this past December with the release of new data showing job gains throughout the country ` everywhere but British Columbia, that is.




In all, there were 22,000 additional people working in Canada last month, Statistics Canada said Friday. That slightly exceeded economists' expectations for gains of 20,000.




B.C., meanwhile, lost 22,000 jobs, most of them (19,900) full-time positions.




The construction trade, health care and social assistance sectors suffered the heaviest job losses, but professionals working in the scientific and technical services sectors as well as finance, insurance, leasing and real estate also suffered.




Read the full article here.

 

[Ally]

Chinflation good news



Much depends on the price of cabbage in Beijing and 2011 may become the Year of Chinflation.

If so, that is reason for optimism.





It is a positive indication that a re-balancing of the global economy has been underway: Spenders (read US consumer) are saving and savers (read Chinese) are spending.





Unfortunately, the soaring Vegetable Index in China contributed to the 5% spike in November for consumer prices. This represents a red flag which the government has duly noted lest it translate into hyperinflation. On Christmas Day, as Americans and Canadians were unwrapping made-in-China gifts, Beijing hiked its interest rates for the first time in years. This is designed to shore up the currency which, in turn, should make next year`s gifts pricier.





Overall optimism is appropriate. Canadians are well-advised to tune out the noise and alarmism by Republican Party hopefuls that the US is about to default on its debts. If the Americans are in trouble, with public debts at 100% of GDP, then so is Canada, virtually all European nations, Japan and, frankly, just about everyone else.





It`s also important to note that what damages and annoys Americans, often enriches Canadians. Last year, for instance, heard much American whingeing but was, on balance, a very good year for the frozen chosen north of the border. To wit, and as predicted by myself and others, commodity prices soared and deflation avoided by printing money.




Read the full article here.

 

[Ally]

What Canada's job market looks like



View the graph here.

 

[Ally]

Jeff Rubin: Peak oil means massive sovereign defaults





Legendary oil pundit Jeff Rubin has an article out today on the effect of peak oil on sovereign debt.






He says treasury yields are incredibly low, despite record levels of borrowing in recent years, because everyone is counting on a booming recovery. But you can't have a booming recovery when oil climbs over $100.






Rubin:




That suddenly makes all that government debt very energy intensive. It will take huge amounts of energy, particularly oil, to achieve the growth rates that all the near-bankrupt governments around the world need to even service their debt, let alone repay it.






So consider just how sustainable economic growth would be in a world of oil prices of $100 to $225 per barrel. Because those are the price parameters we`d be facing in the unlikely event that we actually see the kind of economic growth that bond markets and public treasuries around the world are so desperately depending on.



Read the full article here.

 

[Ally]

Don't fear inflation dragon





It`s hard to miss the bold headlines in recent weeks sounding the inflation alarm in emerging markets. For investors with money in such markets ` or planning to put it there in the near-term ` it`s hard not to start getting nervous.




The inflation problem hindering these countries is real. Inflation in China hit a 28-month high of 5.1% in November, spurring the country`s central bank to hike interest rates. Meanwhile, global food prices surpassed the record highs seen during 2008`s food crisis this week, and there is little pointing to relief any time soon.




The inflation worries come as emerging markets have enjoyed the liquidity unleashed by Western central banks in the past two years, while fuelling double-digit returns for investors in the process. That excess liquidity, however, has caught up with them, and is now manifesting itself as potentially damaging inflation.




So what do all these inflationary pressures mean for investing in emerging markets?




Read the full article here.

 

[Ally]

PM encouraged, but cautious, as job numbers improve





OTTAWA ` Prime Minister Stephen Harper said Friday the surge in new jobs in late 2010 is yet another "encouraging" sign the Canadian economy is on its way to recovery, although he cautioned global economic fragility could still pose a threat.





Harper made his comments in the wake of figures released by Statistics Canada, which reported that 22,000 new jobs were created in December ` with many of the gains concentrated in full-time, private-sector employment. The unemployment rate in Canada remained unchanged at 7.6 per cent.





"I think, overall, today's numbers are encouraging," Harper told a news conference in Welland, Ont., where he met local leaders to get input for the upcoming federal budget.




Read the full article here.

 

[Ally]

You can buy a house with no money down




If you have a good job and want to buy a first home, but don`t have a down payment, can it be done? The answer is maybe and depends on how you answer these questions.






How's you credit score? In order to qualify for a mortgage you must have a good credit rating. Try and reduce or eliminate all outstanding credit card debt first. Cancel credit cards that you are not using.




Do not change jobs just before applying for a mortgage. The lender will want to see that you have a stable employment history. You can go to Equifax.ca to obtain a free copy of your credit score. If any information in your credit file is incorrect, take the time to get it fixed before applying for any mortgage loan.






Do you qualify for an insured mortgage? With an insured mortgage, you are able to finance up to 95 per cent of the purchase price, either through CMHC or a private mortgage insurer. You will need to have at least the remaining 5 per cent down payment, as well as approximately an additional 1.5 per cent to cover the land transfer tax, legal, moving and other closing fees.



Read the full article here.

 

[Ally]

Coal and gas fuel increase in electricity use





Fossil fuels don`t get much respect, but in a year when Ontario`s rivers ran low, they kept the province`s lights on and air conditioners humming.




Ontario`s much-maligned coal-fired generating plants boosted their output by 29 per cent in 2010, year-end statistics show.




The Liberal government has pledged to shut the coal plants by 2014.




Meanwhile, output from gas-fired plants surged by 33 per cent.




The increases from the fossil plants were needed to offset a 19 per cent drop in output from hydroelectric plants, which ran far below capacity this year because of low runoff following the warm, dry winter.



Read the full article here.

 

[Ally]

Canada sees robust gains in new job data





The Canadian job market capped off its best year since 2002 with a solid December performance highlighted by robust gains in fulltime private-sector positions -- powered by a record surge in manufacturing, Statistics Canada reported Friday.




The economy produced 22,000 net new jobs in December, the best in four months, and the unemployment rate was unchanged at 7.6%, its lowest level since January 2009.




Full-time employment was up 38,000 in the month, the fourth such increase in the past five months, with the bulk of those new positions in the private sector. The ranks of part-time and self-employed workers shrank in December, likely an indication that people found better-paying full-time work.




Some analysts say the data set the stage for stronger-than-expected GDP expansion in 2011, especially as consumer demand and business confidence in the United States, Canada's largest trading partner, revs up.



Read the full article here.

 

[Ally]

Guessing rate hikes now that much harder




Bay Street's favourite guessing game - when will Mark Carney raise interest rates? - is getting a little harder to play.




Friday's dual jobs reports, which showed Canada's labour market gaining more strength while the U.S. stagnates, has muddied the waters. Some economists believe Mr. Carney and his colleagues at the Bank of Canada will begin raising rates as early as the middle of the year, while others believe it will take longer.




The central bank governor has raised his benchmark overnight rate three times since the recession's end, and then stopped abruptly as it became clear that the global recovery was running out of steam and markets were being rattled by Europe's debt crisis. That rate still sits at a low 1 per cent.




Friday's jobs report showed Canada even more on the mend, churning out full-time jobs as hiring continues to rebound from the recession. Canada hs regained all of the jobs lost to the recession, and now the focus is shifting to more secure, higher paying work, Globe and Mail economics writer Jeremy Torobin reported in Saturday's edition. The manufacturing sector, for example, looks to have been on a roll.



Read the full article here.

 

[Ally]

Slow recovery predicted





Analysts are expecting the week ahead to deliver a picture of tepid growth as housing starts soften, the trade deficit rises and the Bank of Canada's closely watched quarterly outlook shows a tempering in business expectations.




"We're coming more in line with the true nature of the recovery, which will be slow and grinding," said David Tulk, senior macro strategist at TD Securities.




The labour market, which added 22,000 jobs in December, is a perfect example of that, he said, in that much of the gains were front-loaded into the first half of 2010, as was the case in other key sectors, such as the housing market.




"We will need to wait until the second half to see the next positive pulse to Canadian growth that will come through the U.S. in the form of their stimulus program."




Read the full article here.

 

[Ally]

Canadian real estate market to resemble 2010: Report





TORONTO ` The Canadian real estate market will follow a similar pattern this year as that seen in 2010 as buyers pull sales forward into the early months in anticipation of higher interest rates, according to a report from one of Canada's largest real estate firms.



The aftershocks of the recession, including a lingering low interest rate environment, will continue to influence the Canadian real estate market in 2011 -- a year that will be stronger than expected, said the report released Thursday by Royal LePage.




Royal LePage predicts that average home prices will rise three per cent to $348,600 in 2011, driven largely by a rush to buy in the first half of the year in advance of anticipated interest and mortgage rate hikes in the second half.




"Canadians realize that interest rates are unsustainably low and that homes will become effectively more expensive when mortgage rates return to normal levels," said Phil Soper, president of Royal LePage.




"2011 is expected to unfold much like 2010, when close to 60 per cent of sales volume occurred in the first half of the year in anticipation of interest rate increases that never materialized."



Read the full article here.

 

[Ally]

Rising loonie well in hand





OTTAWA - Canadian businesses remain upbeat about sales prospects, intend to carry through with investment plans and are poised to pick up the pace of hiring, a Bank of Canada survey indicated Monday -- all of which could set the stage for more balanced economic growth in 2011 as debt-ridden households take a consumption break.




The findings in the central bank's latest quarterly business outlook survey may also signal that the soft patch that the recovery hit in mid-2010 is behind us. Aiding matters are indications credit conditions continue to ease and demand among firms, large and small, for loans is heating up.




"The survey supports our assertion that while economic growth in Canada has moderated from the rapid pace recorded in the early months of the recovery, it remains well-entrenched and the Canadian economy is well-placed for more balanced growth in the coming quarters," said Francis Fong, an economist at Toronto-Dominion Bank.




Analysts said the findings in the central bank's survey are most impressive when considering the pressure companies face to sell their goods and services in the face of an elevated Canadian dollar.



Read the full article here.

 

[Ally]

Employers gain confidence, good jobs stage comeback





Canada`s economy is creating more secure, higher paying jobs, suggesting companies are responding to a more entrenched recovery and preparing to power it forward.




Employers hired more workers than anticipated in December, Statistics Canada said Friday, creating a net 22,000 new positions, though not enough to nudge the unemployment rate down from 7.6 per cent. More important, the increase was concentrated in full-time private sector jobs, after several months in which gains were largely limited to part-time work, fragile government jobs and self-employment.





Read the full article here.

 

[Ally]

Quebec and the Fairy Godmothers





Today, let's have some fun and play Fairy Godmother to Quebec. Let's grant the province the wish it articulated in Copenhagen. Wave the magic wand and poof, wish granted. Shut down Alberta's oilsands, except, since it`s Quebec making the wish, we have to call it tarsands, even though it's not tar they use to run their Bombardier planes, trains and Skidoos.





Ah, at last! The blight on Canada's reputation shut down. All those dastardly workers from across Canada living in Fort McMurray, Calgary and Edmonton out of jobs, including those waitresses, truck drivers, nurses, teachers, doctors, pilots, engineers etc. They can all go on Employment insurance like Ontario autoworkers and Quebec parts makers!





Closing down Alberta's oil industry would immediately stop the production of 1.8 million barrels of oil a day. Supply and demand being what it is, oil prices will go up and therefore the cost at the pump will go up, too, increasing the cost of everything else.





But lost jobs in Alberta and across the country along with higher gas prices are a small price to pay to save the world and not "embarrass" Quebecers on the world stage. Not to worry though, Saudi Arabia, Libya and Nigeria can come to the rescue.





Read the full article here.