July 2009

[Amber]

Housing prices post first gain in eight months

OTTAWA — Canadian housing prices rose in May by 0.7 per cent — the first time since October that they didn`t decline month-over-month, according to a national index released Wednesday.

However, May`s increase was not enough to stop the downward trend in year-over-year prices. The Teranet-National Bank home price index fell 6.9 per cent compared to May, 2008, the sixth straight 12-month decline, and a jump from the 6.7 per cent year-over-year drop posted in April.

The index is now down 8.9 per cent from its peak in August, 2008, said Marc Pinsonneault, senior economist with the National Bank Financial Group.

"This series is not seasonally adjusted (due to the short data span), but a quick back-of-the-envelope calculation suggests that prices may have risen by a more modest 0.2 per cent month-over-month if historical patterns were to be considered," cautioned senior TD Securities economist Millan Mulraine in a note, though he saw some reason for optimism.




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[Amber]

Economy has stabilized, Flaherty says

The chorus of voices predicting Canada is emerging from the recession grew louder Thursday as Federal Finance Minister Jim Flaherty chimed in.

The Canadian economy has stabilized and recovery has started, he told reporters in Toronto.

"We`re moving into a period of modest economic growth," he said after participating in the groundbreaking for a new park on the city`s waterfront.

"Consumer confidence is relatively strong and growing, we are seeing good home sales numbers (and) some improvement in retail sales."




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[Amber]

Manufacturers lose a decade of gains

Canada`s factory sector has now lost an entire decade of output gains, but if the past is anything to go by, Canadian manufacturers will find a way to recover.

The plunge in manufacturing activity in May, reported Friday by Statistics Canada in its reading of gross domestic product, brings production levels on the goods side of the economy down to levels not seen since August, 1999.

In the factory sector, output hasn`t been this low since June 1997, notes Krishen Rangasamy, economist at CIBC World Markets .

But a recent research paper on long-term trends in the sector shows Canadian manufacturers are constantly in flux, searching for new ways to be productive, and adapting their output and production in line with the times.




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[Amber]

Libor falls below 0.50%

The rate banks say they charge each other to borrow in dollars for three months fell below 0.5% on Monday, signaling central banks` efforts to end the two-year seizure in credit markets are working.

The London interbank offered rate, or Libor, for such loans dropped to 0.496% on Monday, from 0.502% on July 24, the British Bankers` Association said, taking its decline this year to 93 basis points. The rate, which is a benchmark for about US$360-trillion of financial products around the world, shot up in October 2008 around the time that the global financial crisis was hotting up, but has since come back down dramatically.

"I`m not saying the market has returned to normal, but my view is that the systemic risk we saw after the collapse of Lehman last autumn is perhaps gone," said Christoph Rieger, co- head of fixed-income strategy at Commerzbank AG in Frankfurt. "Rates should stay low in the foreseeable future."

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[Amber]

Don`t look for end of recession in May GDP numbers

OTTAWA -- The Bank of Canada might have declared the recession over, but when gross domestic product numbers for May come out next Friday, they are expected to be a reminder of the recession that was still in full swing two months ago.

According to a poll by Bloomberg, economists expect Statistics Canada to say the economy contracted by 0.3% in May, increased from shrinkage of 0.1% in April, and the 10th straight month of decline.

"Slumping manufacturing-sector activity . . . and weak export demand . . . should be the key sources of drag on activity," Millan Mulraine, economics strategist for TD Securities, wrote in a research note. "Stronger retail sales and residential investment activity, however, should add favourably to the headline number, though they will only provide a partial offset."

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[Amber]

Strong loonie a risk to recovery, Flaherty says

Canadian Finance Minister Jim Flaherty said he agrees with the Bank of Canada`s assessment that the strong Canadian dollar is a risk to the country`s growth prospects.

Speaking Friday to reporters in Toronto, Mr. Flaherty said he is always concerned about volatility in the country`s currency and said he has been in talks recently with Bank of Canada Governor Mark Carney about the issue.

"There is some upward pressure on the dollar which we`re seeing in markets recently, and the governor yesterday expressed some concern about that, and I agree with the governor," Mr. Flaherty said following an infrastructure spending announcement for Toronto`s main train station.

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