July 2011 Canadian Economic Fundamentals

[Ally]

Oil markets face production shortfall in second half





The International Energy Agency may not have a solution but no one can accuse them of no longer understanding the gravity of the problem.




In their June report, the IEA warned that unless OPEC could increase production by at least 1.5 million barrels a day, world oil demand is going to surpass available supply during the second half of the year.





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[Ally]

Home sales rise while prices ease




Home sales rose across Canada last month ` except in Vancouver and Toronto ` signalling that the country`s housing market remains resilient, the Canadian Real Estate Association said Friday.




Nationally, house sales rose 2.6 per cent in June from a month earlier, while the average resale price decreased slightly, by 0.9 per cent.





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[Ally]

Economists looking for signs of rate hike timing





OTTAWA ` The Bank of Canada faces a conundrum.



With the Canadian economy on track, it is not a question of whether the central bank should raise rates, but rather when the increase will come.




But faced with a growing credit crisis in Europe and fiscal gridlock in the United States, Bank of Canada governor Mark Carney has repeatedly raised concerns about the potential fallout on the Canadian economy.




"The proverbial rock is an economy that is expected to grow just fast enough to absorb the limited amounted of slack that's still tamping inflation," BMO economist Sal Guatieri wrote in a report.





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[Ally]

Canadian dollar to strengthen further on BoC rate expectations





The Canadian dollar continued to retrace the decline from back in May, and the appreciation in the loonie may accelerate in the following week should the Bank of Canada show an increased willingness to raise the benchmark interest rate off of 1.00%.







According to Credit Suisse overnight index swaps, market participants widely expect the central bank





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[Ally]

Will America's debt crisis have Canadian aftershocks?




Republicans and Democrats probably will reach a deal to pay America`s bills before the U.S. government runs out of cash at the end of July. Probably.




But if worse comes to worst, here`s a question that few in Washington are asking: What will a U.S. default mean for Canada?




The surprising answer: If a U.S. default does not last very long ` that is, less than a few days ` it would likely prove surprisingly bullish for Canada.




But if the default extends itself longer, Canada would be dragged down after the United States into a catastrophic failure.





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[Ally]

Canadian home resales up in June; national average prices was $372,700 CREA





The Canadian Real Estate Association says Canada's home prices continued to rise last month and a majority of the country's local markets showed a balance between supply and demand, including in Toronto.



The national average price for Canadian home resales was $372,700 in June, up 8.7 per cent from the same month last year as the number of sales increased.




The Canadian Real Estate Association said Friday its members sold 10.8 per cent more homes last month compared with June 2010. June's sales activity was also 2.6 per cent higher than in May.




CREA says 60 per cent of local housing markets in Canada were balanced in June - meaning the number of sales and new listings were about the same.





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[Ally]

Immigration to Canada drops by 25%






Canada let 25 per cent fewer immigrants into the country in the first quarter of this year compared to the same period in 2010, raising concerns the Conservative government is embarking on a bold plan to restrict the country`s immigration levels.




The number of permanent resident visas issued by Citizenship and Immigration Canada between January and March fell from 84,083 in 2010 to 63,224 this year, according to figures obtained by the Star.




The latest department numbers show a decline across the board, with visas for skilled workers down 28 per cent, family-sponsored relatives down 14 per cent, and refugees dropping by 25 per cent.




The significant drop in visas comes on the eve of public consultations Immigration Minister Jason Kenney is holding on the country`s immigration levels and classes of people that should be allowed in. The first meeting was held in Calgary last week, and another is scheduled in Toronto Wednesday.





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[Ally]

Economic growth slows for China




China's economic growth has slowed down in the second quarter this year after the government stepped up its battle against inflation.




Growth was 9.5 per cent in the three months to the end of June compared to a year earlier. That figure is down from 9.7 per cent in the previous quarter.




But it may not be good news for China, as inflation hit a three-year-high of 6.4 per cent last month, even though controlling prices is the top priority for the Chinese government.




The slowdown in growth comes amid concerns China is heading for a hard fall after manufacturing activity almost stalled in June, which could have a serious impact on countries struggling to recover from the financial crisis.





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[Ally]

Rent control hurts everyone in the long run





The option of rent control and reform of it has been debated across Canada, especially in cities like Winnipeg and Ottawa, where vacancies are low and rents are rising.









But Real Estate Investment Network President Don Campbell told CRE Online such rent control regulations have unintended consequences that will hurt investors, developers, the government, and even renters. Politically, controlling the rising cost of rents might look good to voters, but it will be a long-term detriment all around, he said.







`Often these bills are passed due to the optics of the bill and often throughout history they are instigated in election years,` he said.








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[Ally]

Carney unlikely to take tough line on inflation, economists say





OTTAWA ` The Bank of Canada will hold interest rates steady on Tuesday and is unlikely to substantially toughen its tone on future monetary tightening in the face of mounting global debt crises, economists say.







The central bank, whose mandate is to keep inflation in check, will have to walk a tightrope between relatively strong recent Canadian data and developments in Europe, where over-indebtedness threatens several national economies, and the United States, where political bickering holds back a resolution on raising that country's debt ceiling.







Statistics Canada's May inflation report, for instance, showed the cost of living rising by 3.7 per cent annually, well beyond the Bank of Canada's two per cent target. The June inflation report will be released Friday.






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[Ally]

B.C., Ontario snub energy summit




EDMONTON - What national energy strategy?




Looks like the energy ministers of Ontario and British Columbia, home to more than half the country's population, didn't get the memo.




Neither were on hand Monday as a two-day national energy summit - ostensibly aimed at forging support for a new national energy strategy - got underway in Kananaskis.




Brad Duguid, Ontario's Minister of Energy and Infrastructure, was tied up on other matters, I was told. A spokesman cited unspecified "ministerial duties" for Duguid's absence. As for B.C. Energy and Mines Minister Rich Coleman, an internal meeting apparently took precedence over attending the gathering with his provincial counterparts and newly named federal Natural Resources Minister Joe Oliver.





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[Ally]

Bank of Canada keeps key rate on hold





OTTAWA ` The Bank of Canada held its benchmark interest rate steady on Tuesday, as widely expected, as the global economy remained fragile amid debt problems in Europe and the United States.







But the central bank hinted higher borrowing costs could be coming sooner than later if the domestic economy maintains steady growth.







The bank's lending rate has been at a near-historic low of one per cent since last September in an effort to spur economic growth following the downturn.







"To the extent that the expansion continues and the current material excess supply in the economy is gradually absorbed, some of the considerable monetary policy stimulus currently in place will be withdrawn," the Bank of Canada said in its interest rate statement. "Such reduction would need to be carefully considered."




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[Ally]

Calgary company defrauded investors of millions: Alberta Securities Commission





A Calgary company raised millions from investors for real estate deals with companies which didn`t actually own the properties, and funneled $7 million from one specified project to others, an Alberta Securities Commission hearing heard Monday.




`This is a case about deceit,` ASC lawyer Tom McCartney told the panel.




Shire International Real Estate Investments Ltd. and its president and sole director Jeanette Cleone Couch, as well as related entities, made false and misleading statements in an offering memorandum related to property in Hawaii and `perpetrated a fraud` on investors relating to a Calgary site, the ASC alleges.






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[Ally]

Bank of Canada leaves interest rate unchanged





OTTAWA - The Bank of Canada left its key overnight interest rate unchanged at one per cent Tuesday, as it said the influential U.S. economy has grown at a slower pace than expected.







However, the central bank noted that as the Canadian economy continues to grow, it will have to move to raise rates to keep inflation in check.







"To the extent that the expansion continues and the current material excess supply in the economy is gradually absorbed, some of the considerable monetary policy stimulus currently in place will be withdrawn, consistent with achieving the two per cent inflation target," the Bank of Canada said.







Read the full article here.

 

[Ally]

Loonie soars on hawkish tone



TORONTO ` The Canadian dollar powered to its highest level against the U.S. dollar in 2-1/2 months Tuesday after the Bank of Canada held its key interest rate steady, but hinted more firmly than before that it would resume increasing rates.





The central bank held its overnight rate at 1.0%, but said core inflation will reach the bank`s 2% target earlier than expected as it sees Canadian economic growth accelerating in the second half of 2011, in contrast to rising risks abroad.





`There is a vague shift in the tone of the statement, toward slightly more hawkish,` said Camilla Sutton, chief currency strategist, Scotia Capital. `So in terms of what the market will price in, (the statement) will probably pull forward their expectations for interest rate hikes ever so slightly.`





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[Ally]

Shunning Canadian oil will force U.S. to rely on energy from repressive regimes: Report




OTTAWA` The United States could be forced to buy oil from repressive governments that restrict civil, political and economic freedoms if attempts to limit imports of Canadian oil are successful, the Fraser Institute said in a report Tuesday.




`In recent years, Canada`s oil exports have been assailed by groups trying to persuade American consumers and policy-makers that a reduction in Canadian oil imports would not have negative consequences for the United States,` said Mark Milke, Fraser Institute director of Alberta policy and author of In America`s National Interest ` Canadian Oil.




`On the contrary, in the absence of Canadian oil, Americans would likely face increased costs for oil and possible supply limitations. Americans should also not overlook the critical issue of civil, political, and economic freedoms. Unlike Canada, most other sources of oil imports are from governments that any reasonable person would find objectionable.`





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[Ally]

Dollar surges as Bank of Canada interest rate unchanged




The Canadian dollar soared nearly a penny in trading Tuesday after the Bank of Canada decided to keep its benchmark overnight interest rate steady at one per cent.




The loonie closed at $1.0517 US, a jump of 0.88 of a cent compared with Monday's close of $1.0429.




The currency rose as economists interpreted the Bank of Canada's decision to hold firm as further evidence of a coming rate hike when the central bank meets later in the year.




"Our expectation [is]...for the bank to make good on its promise to withdraw 'some of the considerable monetary policy stimulus currently in place' with the case for a September hike," said RBC assistant chief economist Dawn Desjardins in a commentary after the rate decision Tuesday morning.





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[Ally]

Why Canadian mortgage rates are on a roller coster




If there's one question being kicked around the barbecue more than any other this summer, it's probably this: should I lock in my variable rate mortgage?




But with interest rates bouncing around, to the point where they make a mortgage-rate chart look more like the diagram of a rollercoaster, homeowners can be forgiven if they are hesitant.




After all, every time mortgage rates rise, they seem to come back down again. Recently, Royal Bank tried to raise mortgage rates, increasing the cost of its five-year fixed mortgage by 0.15 per cent, only to quietly lower them a few weeks later.





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[Ally]

Immigration numbers won't jump drastically: Kenney




Canada needs more immigrants to sustain its economic growth but the Conservative government won`t significantly increase immigration levels because Canadians don`t want too many newcomers and the federal government can`t afford to integrate them either, Citizenship and Immigration Minister Jason Kenney says.




Canada faces a labour shortage and needs immigrants to offset the balance of an aging population, Kenney is expected to tell the Vancouver Board of Trade Tuesday.




`Several studies have concluded that we would have to quadruple immigration levels from 250,000 to more than one million annually in order to maintain the (working) age ratio in the Canadian population. But that`s not going to happen,` he is to say, according to his speaking notes.





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[Ally]

Home building jumps in June after dismal spring




WASHINGTON - Builders broke ground on more single-family homes and apartments in June, helping the battered construction industry gain a little life after a dismal spring.




The Commerce Department said Tuesday that builders began work on a seasonally adjusted 629,000 homes last month, a 14.6 per cent increase from May.




Still, that's roughly half the 1.2 million homes per year that economists say must be built to sustain a healthy housing market. Jennifer Lee, a senior economist at BMO Capital Markets, called the gains "just a blip in the overall flat-lining trend of homebuilding activity."




"We have to see a rebound in job creation to sustain a recovery in housing," she said.




Much of the increase in June came from a surge in apartment construction, a volatile part of the industry. That sector jumped more than 30 per cent last month.





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