January 2012 Canadian Economic Fundamentals

[Ally]

Bank chiefs sound alarm over housing market




Canada`s housing market is showing signs of peaking, one of the country`s biggest lenders said, as the banking sector expresses more caution about the outlook for real estate in the coming year.




The market should inevitably cool in 2012 as housing supply begins to outstrip demand, and consumer debt hovers at historic high levels, the head of Canadian Imperial Bank of Commerce told an investor conference on Tuesday.





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[Ally]

Condo risk bubbles up




The latest housing starts data Tuesday showed that the split between new highrise construction and single-unit homes spread to its widest point in more than 20 years last year, as some of Canada`s top bankers voiced their concerns about an overheating condominium market in Canada.




Overall in 2011, construction began on 106,700 units in condominiums or multi-unit buildings, up 17% from a year before, while starts of detached homes dropped about 12% to 66,800. The spread between single- and multi-unit starts is the widest since 1990, said Robert Kavcic, an economist with BMO Capital Markets.





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[Ally]

Toronto set to lag in growth as Saskatoon, Calgary, Edmonton and Regina surge ahead




OTTAWA`Cities in Western Canada will lead the country in growth and prosperity over the next couple of years, according to an outlook released Wednesday by the Conference Board of Canada.




Saskatoon, Calgary, Edmonton and Regina at the top of the Ottawa-based economic forecaster`s new metropolitan outlook.




Next year, Vancouver joins the leaders and Toronto ties Regina for fifth place in the outlook.





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[Ally]

Unemployment data analyzes last three recessions, and we're better off now than we used to be




It may not feel like it, but Canadian workers fared better in the recent downturn than in earlier recessions, data shows.




Statistics Canada looked at which workers were laid off, both temporary and permanent, in the past three recessions: in the early 1980s, early 1990s and in 2008, which was prompted by the global financial crisis.




The study found the most recent recession had lower layoff rates and higher short-term re-employment rates. The recession itself was much shorter, with total employment returning to pre-downturn levels in 27 months, unlike 53 months in the early 1990s and 40 months in the early 1980s.





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[Ally]

Canadian home prices to rise again in 2012: Report





TORONTO ` The price of homes in Canada will continue rising this year, but the hottest markets in Toronto and Vancouver will grow much more slowly, predicts the country's largest real estate broker.



Low mortgage rates will continue underpinning housing demand despite the weakening economy, said Royal LePage Real Estate Services in its annual housing outlook Thursday.





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[Ally]

Easy money cushions the risk of real estate correction




There's a brilliant reason to get into our expensive and possibly weakening housing market right now. A 10-year mortgage is available for less than 4 per cent. You can thank the banks for this unheard-of rate. In the past week or so, competition between them on mortgage rates has gone nuclear.





Have you caught all the warnings about how the house that you can afford now because mortgage rates are so low will crush you when borrowing costs rise? With a 10-year mortgage, you've got long-term cost certainty. "This is a fantastic opportunity for somebody to lock in and have peace of mind for 10 years without worrying about a renewal," said veteran mortgage broker Vince Gaetano of MonsterMortgage.ca.





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[Ally]

Deteriorating global economy will slow pace of Canadian growth, Bank of Canada





OTTAWA ` The Bank of Canada on Tuesday kept its key interest rate on hold, warning the global economy has "deteriorated" and that will slow the pace of growth in this country.







While the Canadian economy "had more momentum than anticipated in the second half of 2011, the pace of growth going forward is expected to be more modest than previously envisaged, largely due to the external environment," the central bank said.







The bank's overnight lending rate has remained at a near-record low of one per cent since September 2010.






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[Ally]

Don't settle for new 'natural' jobless rate of 7%




The unemployment rate for December was 7.5 per cent. For many people, the end of the recession will occur when things go back to where they were back in 2007-08: somewhere around 6 per cent. That`s almost certainly too much to hope for.




According to the Bank of Canada`s revised projection released yesterday, the `output gap` -- the difference between actual GDP and the Bank`s estimate of potential output -- will close sometime in the latter half of next year. As it is, GDP was only 0.7 per cent below potential in the third quarter of 2011, so the economy is about four-fifths of the way out of the recession hole.





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[Ally]

Flaherty keeping wary eye on housing market




Finance Minister Jim Flaherty says he stands ready to intervene in the housing market again, just as a mortgage price war breaks out among Canada`s major banks.




Mr. Flaherty said Tuesday that he`s watching the market closely, although he has no plans to tighten the market again at this point.





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[Ally]

How the oil sands stretch all the way to New Brunswick




In recent weeks a number of commentators have floated the concept of bringing Alberta bitumen from the oil sands east by pipeline to be processed in eastern Canadian refineries and shipped to Asian markets via east coast ports. Former New Brunswick Premier Frank McKenna also weighed in suggesting the Irving Refinery in Saint John could be modified to upgrade bitumen from the oil sands.





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[Ally]

2012 Economic Forecasts: Canada the Best Place to Be






There will be significant volatility in financial markets, for three main reasons: In the U.S. and in Canada, growth will struggle to be 2 per cent this year. Europe will have no growth, and the emerging world is still on the fast track, but there will be a slowdown in the overall economic activity.




That has an implication for business earnings. It can also create problems for governments, which rely on economic growth for tax revenue.




Then there`s the never-ender in Europe. Remember that they are trying to contain the sovereign debt issue. There is no cure on the table. We will have a number of band-aids put on this over the next little while. But at the end of the day, the longer term problems of dismal growth and the demographic issues Europe faces suggest to me that we will still be talking about the European debt issue five years from now.





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[Ally]

We're number four




Few would have guessed it, but Canada is the fourth largest equity market by float capitalization in the MSCI World Index.




Canada ranks behind only the U.S., U.K. and Japan, climbing from ninth place in 1999.

During that time, Canada`s weight in the global equity benchmark moved to more than 5% from 2%.




`It is the global leader in mining and energy, with the TSX and TSX Venture exchange listing more public mining and oil and gas companies than any other exchange,` UBS strategist George Vasic said.







His 12-month target for the S&P/TSX composite index is 14,000, while his key calls are Bank of Nova Scotia, Canadian Natural Resources, First Quantum Minerals, Magna International, MEG Energy, Potash Corp. and Quebecor.





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[Ally]

Why are mortgage rates hitting record lows?




All across the country, mortgage specialists and brokers are busy fielding calls from people who've just heard about this week's record low mortgage rates.




Bank of Montreal made the biggest splash by announcing a five-year fixed-rate mortgage of 2.99 per cent ` the lowest advertised rate for such a popular mortgage term by any major Canadian bank, ever.




Yes, there are more restrictions than usual attached to this mortgage and it's supposedly just a two-week promotion.





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[Ally]

Is real estate overheated? The bubble discussion rages on




Earlier this week several heads of Canada`s biggest banks warned about a possible correction in the housing market. The comments, delivered at an industry conference in Toronto, were perhaps not unexpected given that senior policy makers including Bank of Canada Governor Mark Carney have been saying pretty much the same thing for the past year. What was surprising was that only days after the comments were made Royal Bank of Canada, Toronto-Dominion Bank and Bank of Montreal have all chopped their mortgage rates.




In other words, they`re making it easier for consumers ` who are already carrying record debt loads ` to buy more houses, take on more debt and potentially drive prices even higher.





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[Ally]

Canada posts surprise surplus, exports jump




Canada posted an unexpected trade surplus in November as a strengthening U.S. economy helped push exports to a three-year high, offering hope to a hard-hit sector.




Trade is a major driver of the economy and Canada sends about 70 per cent of its exports to the United States. A prolonged U.S. recovery would help exporters who have to deal with a strong Canadian dollar and uncertain overseas markets.





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[Ally]

Flaherty says government ready to intervene on housing, but not now






OTTAWA - The Canadian government is watching the housing market closely and is ready to intervene if necessary, but is not about to do so now, Finance Minister Jim Flaherty said on Tuesday, noting he saw indications of softening in the market.







He was speaking to reporters after the Bank of Canada said that very favorable credit conditions were expected to buttress housing activity, and that Canada's ratio of household debt to income was expected to rise further.




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[Ally]

Some Canada property markets likely over-valued: Bank of Canada




TORONTO (Reuters) - Some parts of the Canadian real estate market are "probably overvalued" and policymakers are monitoring to see if further steps are needed to cool it, the head of the country's central bank said in an interview broadcast on Sunday.




It was the second time in recent days that Bank of Canada Governor Mark Carney voiced concern about property prices, which surged after the financial crisis as borrowing costs tumbled.




"We see that in a number of real estate markets in Canada, valuations are at a minimum, firm; in others, they're probably overvalued. So there are risks there. We're watching it closely. We're working with our partners, the federal government, the superintendent of financial institutions," he said in an interview on "Question Period" on CTV.





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[Ally]

Economic indicators beat expectations





OTTAWA ` A key gauge of Canada`s economic outlook rose more than expected in December, bolstered by the housing and manufacturing sectors.




Statistics Canada said Monday its index of leading economic indicators was up 0.8% during the month, following a upwardly revised 0.9% rise in November.




Economists had forecast the index would advance by 0.6% in December.




Eight of the 10 components tracked by the federal agency were ahead for the month.






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[Ally]

Harper to deliver keynote at world economic summit





OTTAWA ` Prime Minister Stephen Harper this week will join the world's political and business elite at an exclusive summit in the Swiss Alps to deliver some blunt words bound to draw attention to Canada.







Among his messages:







- Europe must finally get its debt-ridden house in order, or the economic contagion could sweep around the world and cause a recession.







- Capitalism, despite criticism, is still the best way to create prosperity ` but must be bolstered through proper regulations.






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[Ally]

Alberta cheers end to beef ban




South Korea - the last major Asian market banning Canadian beef since a 2003 mad cow outbreak - has reopened its borders to meat from cattle under 30 months old, the federal government announced Friday.




"This is a great New Year's gift for the Canadian cattle industry and the Canadian economy," federal Agriculture Minister Gerry Ritz said in a news conference at a Spruce Grove ranch.




"This morning, the government of South Korea notified us that all certification conditions are in place and that Canadian beef under 30 months of age can be exported immediately from our accredited facilities."





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