June 2010

[Ally]

Bank rule fears `misplaced`: Carney

OTTAWA -- The coming Group of 20 reforms to global banking rules should pose no threat to the economic recovery, Bank of Canada governor Mark Carney said Thursday, arguing fears of their impact are "misplaced."

"Some are concerned that the implementation of these reforms could be damaging to the economic recovery. This apprehension is misplaced," the governor said in a speech to a securities conference in Montreal.

His remarks emerged just hours after the Institute of International Financial, a bank lobby group, warned that a string of regulatory reforms affecting the banking sector could cut 3% off global GDP over the next five years and cost roughly 10 million jobs.

Mr. Carney said the G20 leaders` summit in Toronto this month should "harden" the resolve to strike an agreement on banking reforms, which would require banks to hold more and better capital on their balance sheets, and face tighter leverage limits. The goal is to strike a deal in time for the November G20 leaders summit to be held in Seoul.

Introduction of these changes are scheduled to happen by the end of 2012, although Mr. Carney indicated implementation would be phased-in or done gradually. Some countries could adopt the rule changes ahead of others based on the strength of their financial system and economy, as was discussed at last weekend`s G20 gathering of finance and central bank officials in Busan, South Korea.

When all is said and done, Mr. Carney said the final proposals, developed by the so-called Basel Committee, "will make the global system look more like Canada`s," which had more stringent bank capital requirements compared to its peers.

Read the full article here.

 

[Ally]

Canada records small April trade surplus, house prices rise

OTTAWA — Canada`s balance of trade with the rest of the world swung back into surplus in April as imports fell more than exports, Statistics Canada reported Thursday. Meanwhile house prices posted a modest rise.

The country posted a surplus of $175 million during the month, following a $236-million deficit in March, the federal agency said.

Exports declined one per cent, while imports dropped 2.2 per cent, it said.

Economists had expected a surplus of between $600 million and $700 million in April.

Statistics Canada said the March trade figure was revised downward from an initial estimate of a $254-million surplus.

"Overall, this was somewhat of a disappointing trade report, mainly given the `miss` between expectations and the actual print,"said Ian Pollick, portfolio strategist at TD Securities.

Read the full article here.

 

[Ally]

Canadians resume eating out, study shows

Canadians have resumed eating out, a study shows.

After a year in decline, visits to restaurants rose 2.3 per cent in the latest three month period, the study by the NPD Group shows.

Even families with small children visited restaurants more often, another sign that consumer confidence, along with the economy, is improving, the market research group concluded.

"When they`re feeling a little more confident about their future prospects they free up their spending a bit more and restaurants are typically the first place you see that," said Linda Strachan, the firm`s restaurant industry analyst.

The owner of the Hot House Café, in downtown Toronto, says he`s also noticed the change.

Read the full article here.

 

[Ally]

G20 bank closings `brutal` for real estate industry

Forget about the fake lake. What if you can`t close on the sale of your property because your bank was shut down for the G20 Toronto summit?

While media attention might be on the uproar over the $1.9 million man-made lake and pavilion being built for the media at the meeting of world leaders, real estate and legal professionals are worried over a potential "disaster" in the making.

The last Friday in June is traditionally the busiest for house closings from buyers who have purchased in the spring market that saw record sales this year. If downtown banks close during that week thousands of closings could be affected creating major market turmoil, say industry professionals.

"It was already going to be brutal without the summit because we`ve been so busy. The timing couldn`t be worse," says Andrew Zsolt, president of Coldwell Banker Terrequity Realty Brokerage.

Zsolt, who has 14 offices in the Greater Toronto Area, said he expects his agents to close about 500 sales at the end of this month alone.

"We usually tell buyers to try not to close in the last week of June because it`s so busy. It`s right after school and before full cottage season so they`re all in a rush. It could be a bit of a disaster," says Zsolt.

Read the full article here.

 

[Ally]

Economy to grow briskly: RBC

A new report from RBC Economics says strong domestic demand and increased job creation will continue Canada`s robust economic rebound, as the global economy bounces back from the European debt crisis.

The bank`s latest Economic Outlook report, released Thursday, calls for real GDP growth of 3.6 per cent this year, after Canada`s first-quarter growth surged to 6.1 per cent, the fastest pace in over a decade.

"Canada`s economy continued to surge ahead as domestic demand was backed by increases in consumer, housing and government spending," said Craig Wright, the bank`s chief economist.

"Looking ahead, positive signs in the job market indicate that the recovery will continue in the near term, as private investment increases following a sharp decline during the recession and core inflation remains on target."

The bank says the economy will continue to show gradual improvement as businesses rebuild inventories following a sharp reduction during the recession.

Read the full article here.

 

[Ally]

RBC predicts rapid economic growth after record first quarter

Canada`s economy is expected to surge in 2010, according to a new report from RBC Economics, which predicts gross domestic product growth of 3.6 per cent as a result of strong demand and increased job creation.

RBC says Canada`s real GDP grew at 6.1 per cent in the first quarter, the fastest pace in a decade.

"Canada`s economy continued to surge ahead as domestic demand was backed by increases in consumer, housing and government spending," said Craig Wright, senior vice-president and chief economist at RBC.

"Looking ahead, positive signs in the job market indicate that the recovery will continue in the near term, as private investment increases following a sharp decline during the recession and core inflation remains on target."

According to RBC, as businesses rebuild inventory, the economy should continue to show a gradual improvement. It predicts continued growth in 2011 of about 3.5 per cent.

"Stronger-than-expected economic data and higher inflation have reduced the need for emergency low interest rates, although uncertainty arising from the European debt crisis adds an element of caution to further rate increases," Wright said.

Read the full article here.

 

[Ally]

Strategic thinking for Alberta`s energy sector needed from the rest of Canada

There are a number of interesting, if not controversial, assumptions made in a study released Tuesday by the Canadian International Council, the think-tank funded by Research In Motion billionaire Jim Balsillie.

The report, issued on the eve of the Canadian G8 and G20 summits, covers a number of important aspects of Canada`s economy and makes suggestions as to what needs to change for this country to position itself for success in the global context.

No surprise, the 100-page study titled Open Canada: A Global Positioning Strategy for a Networked Age -- authored by a panel chaired by former Globe and Mail editor Edward Greenspon -- hits on nine key themes such as the need to foster stronger nationalist sentiment, the lack of investment in innovation, the economic dependence on the United States, the need to rebuild diplomatic influence in the world, leveraging economic relationships and, of course, there`s a section on energy.

"Today, Canada`s energy resources earn enormous export revenues, fuel the broader economy and position this country beautifully in an age of intense global competition for resources."

Nicely put, by any measure.

Read the full article here.

 

[Ally]

Wells Fargo closes outlets in Canada

Wells Fargo Financial Corp. Canada is closing its outlets across the country and will no longer make customer loans, but will maintain existing real estate, auto and consumer loan accounts.

"In response to recent analysis of our operations, we have made the decision to stop originating consumer loan products in Canada," the company said in a statement to customers on its website, which states that Wells Fargo has 130 stores across Canada.

The company is also suspending originations in its private-label credit card business.

Wells Fargo & Co., one of the largest banks in the United States, began to withdraw consumer lending from Canada in 2008 at the height of the financial and economic crisis. In November 2008, it decided to exit the indirect auto-lending business. Then, last July, Wells Fargo stopped offering residential mortgages and home-equity loans in Canada.

Wells Fargo Financial was the largest of the company`s five business lines in Canada, with consumer receivables of $1.9 billion at the end of April.

Wells Fargo and other U.S. lenders such as General Electric Co. thrived in Canada before the financial crisis. The companies loaned money to consumers and home buyers, including those who may not have qualified for loans from Canadian banks.

Read the full article here.

 

[Ally]

Canada`s oilsands are a blessing

BP`s tragic Deepwater Horizon oil well rupture in the Gulf of Mexico points out a cruel irony -- that Canada`s so-called "dirty oil" from the Athabasca Sands is now looking pretty good compared to oil from offshore drilling.

For the past 10 years, green-leaning politicians and policy gurus have talked about the "ecological carnage of the tar sands" and targeted them as the "worst project in the world." Al Gore likened the sands to the last vein the junkie finds in his big toe. Waterloo academic Thomas Homer-Dixon recently bemoaned that "The rapacious exploitation of Canada`s tar sands has distorted our economy, corrupted our politics, ruined our environment, and turned us, collectively, into a rogue nation of carbon polluters." Even Toronto peak oil pop star Jeff Rubin has sneered, "You know you are at the bottom of the ninth when you have to schlep a tonne of sand to get a barrel of oil."

Anybody who didn`t believe their tar-sands-are-evil-and-stupid mantra was clearly guilty of thought crime.

All this criticism is becoming increasingly moot now the oilsands and heavy oil of Alberta and Saskatchewan are proving themselves to be one of the world`s most stable and productive petroleum sources. It`s a resource that has turned Canada overnight into the world`s major new petro power.

For most people, the Athabasca Sands conjure up the image of a large industrial site with monster trucks delivering oil sand to giant washing machines that belch steam and CO2 into the atmosphere and spew hot waste water into greasy tailing ponds that snare unwary ducks. But that picture is starting to change, since almost 90 per cent of the bitumen is underground and we can`t get the energy out by surface mining.

Read the full article here.

 

[Ally]

Number of millionaires surges 32% in Canada

NEW YORK - While most of the world`s wealthy saw a big chunk of their net worth evaporate during the worst financial crisis in decades, Canada`s rich got richer.

Canada saw average annual growth in wealth of 4% from 2007 to 2009 and it is forecast to continue at that pace for the next five years, according to a study on global wealth released yesterday by Boston Consulting Group.

Canada didn`t manage to crack the top 10, but the number of millionaires in the country surged 32% to 162,000.

In marked contrast, global wealth -- defined by the consulting firm as bankable assets -- dropped 10% in 2008 from its record US$111.6-trillion in 2007 as the financial crisis deepened. But it rebounded nearly 12% last year as investors poured money back into stocks, pushing global wealth just shy of its high to US$111.5-trillion.

"What a difference a year makes," Monish Kumar, senior partner with BCG, told reporters yesterday at a briefing in New York. "Last year [it was] all doom and gloom on the state of the market."

Read the full article here.

 

[Ally]

Loonie rising to reserve rank?

Canada`s economy has received its fair share of praise over the last year for successfully navigating through the financial crisis and leading the global economic recovery. But the loonie as a global reserve currency?

According to BNP Paribas, the French bank, the Canadian dollar is becoming a reserve currency for some of the world`s central banks. That means it is being held in increasing quantities by central banks and other institutions in their foreign-exchange reserves as it is seen as a safe and solid bet.

The currency may not be about to topple the mighty U.S. greenback off its perch as world`s No. 1 reserve currency -- and the go-to asset in times of financial uncertainty -- just yet but it is beginning to rank up there with the Norwegian crown and the Australian dollar as a secondary reserve currency, says Sabestein Galy, a foreign exchange strategist at BNP.

"Investors have made the bet that Canada is a safe place to be," said Mr. Galy in an interview after sending out a note on the Canadian dollar. "The loonie looks to be operating as a reserve currency."

Until 2008, the Canadian dollar was known primarily as an equity and oil investment. Mr. Galy said markets perceived the risk of the currency as high, preventing it from ever being considered a reserve currency.

Read the full article here.

 

[Ally]

Flaherty`s silver bullet

Finance Minister Jim Flaherty, who must be congratulated for his role in slaying a universal bank tax, is nevertheless continuing to push another silver bullet -- "embedded contingent capital" (ECC)--to address systemic financial risk.

Under the scheme, banks would sell debt that would convert into equity if they got into serious trouble, thus putting the burden of too-big-to-fail onto bondholders rather than taxpayers. However, there is one big difference between taxpayers and bondholders: Bondholders have a choice. How likely are they to buy instruments that might be dubbed "first under the bus bonds?"

The financial crisis has produced a welter of wonky ideas that combine a desire to punish bankers--whether bailed out or not -- and to ensure that such a crisis never happens again. Again. These include restrictions on bank size and a smorgasbord of surcharges, levies, taxes and imposts.

Yesterday the Institute of International Finance warned that such reforms could chop 3% off global GDP in the coming five years. While such a figure is essentially plucked from thin air (and we have to remember that the IIF is a lobby group), there would undoubtedly be hefty costs to the measures currently being considered.

Ottawa`s main case for ECC seems to be that it is less bad than the alternatives, but some critics point out that, due to likely high risk premiums, Mr. Flaherty`s scheme might wind up being more expensive than the bank tax it is designed to avoid.

Read the full article here.

 

[Ally]

Canada`s rich got richer during the financial crisis

NEW YORK – While most of the world`s wealthy saw a big chunk of their net worth evaporate during the worst financial crisis in decades, Canada`s rich got richer.

Canada saw average annual growth in wealth of 4% from 2007 to 2009 and it is forecast to continue at that pace for the next five years, according to a study on global wealth released Thursday by Boston Consulting Group.

In marked contrast, global wealth – defined by the consulting firm as bankable assets – dropped 10% in 2008 from its record US$111.6-trillion in 2007 as the financial crisis deepened. But it rebounded nearly 12% last year as investors poured money back into stocks, pushing global wealth just shy of its high to US$111.5-trillion.

"What a difference a year makes," Monish Kumar, senior partner with BCG, told reporters Thursday at a briefing in New York. "Last year [it was] all doom and gloom on the state of the market."

With assets recovered to close to pre-crisis levels, global wealth is expected to continue to expand. But it will grow at an average annual rate of around 6% over the next five years through 2014 – a much slacker pace than 2009`s sharp recovery, the consulting firm forecast. Still, that`s faster than the 4.8% annual growth from the end of 2004 through 2009.

Read the full article here.

 

[Ally]

Home building still bright spot in Canada`s economy

OTTAWA -- Residential construction is a bright spot in the Canadian economy, according to a national survey that points to good short- and long-term prospects for housing starts in most parts of the country.

The outlook for short-term housing starts is positive in all but three of the 27 metropolitan areas surveyed by the Conference Board of Canada for its June monthly monitor, based on residential building permit data.

The long-term outlook, based on demographic requirements, isn`t quite as rosy, but it`s still positive, with 14 of the areas expected to post gains in housing starts.

All but six of the areas reported year-over-year growth in housing starts, with London, Ont., Edmonton, Trois-Rivieres, Que., Victoria and Abbotsford, B.C., showing the greatest increases from May of 2009.

Read the full article here.

 

[Ally]

Walmart begins Canadian banking push

Freshly-minted Walmart Canada Bank kicked off its foray into financial services with a rewards MasterCard credit card on Tuesday, but the low-price retailing giant is not ruling out bringing serious competition to the country`s handful of big banks through products and services such as loans and mortgages.

"Walmart will always look to save customers more so they can live better. That`s our mission," said Trudy Fahie, chief executive of Walmart Bank Canada. "The bank offering will be no different than our retail offering."

Read the full article here.

 

[Amber]

Productivity, sales seen as signs of momentum



Data for worker productivity in the first quarter and manufacturing sales in April both fell short of economists` expectations, as reported by Statistics Canada on Tuesday.

But despite the numerical shortcomings, there were reasons to be encouraged by both reports.

The federal agency said productivity -- the amount of output per hour worked -- improved by 0.7 per cent in the last quarter. That trailed the downwardly revised 1.2-per-cent gain in last year`s fourth quarter, which also happened to be what experts were expecting in the latest quarter.

Still, the latest productivity data could be seen as a sign of continuing momentum, with it being the second-biggest improvement since the second quarter of 2006.

"As a stand-alone report, [the first quarter saw] relatively solid productivity growth," said Douglas Porter, deputy chief economist for BMO Capital Markets. "If you raise it to an annualized rate, like they do with the GDP numbers, it would`ve produced growth of a little bit better than three-per-cent productivity in the first quarter, which by most metrics is quite a solid report."

Read full article here

 

[Amber]

Upstart real estate companies launch war on commissions

One firm promises to post your home on the Multiple Listing Service for a penny. Another boasts that it`s cheaper to use lawyers than realtors. A third encourages agents to bid on listings to see who might offer the best prices and services.

At least half a dozen new innovative Canadian companies have been launched in the wake of a decision by the federal Competition Bureau to challenge the rules of organized real estate.

This has not sat well with traditional realtors, who see their industry under attack. The newcomers are being characterized as upstarts offering more hype than service. But they say the old rules don`t apply anymore.

The winners so far are consumers in what has been an unprecedented spring awakening for the normally stodgy world of real estate marketing.

"The old system was too rigid. I love competition because you have to be dynamic and creative," said realtor Dawson Pereira. "I have been waiting a long time for this, people finally get to choose."

Read full article here

 

[Amber]

Home sales sputter in May

Buyers backed away from Canada`s housing market in May, driving sales lower in what is traditionally the busiest month of the year for the country`s real estate agents.

The housing market has been key to Canada`s economic recovery, as low interest rates and pent-up demand drove buyers into the market after months of stagnation in 2008. But with interest rates likely heading higher in the second half of the year, many buyers who would have preferred to buy in the fall or early winter chose to buy sooner.

Tougher mortgage rules imposed by the federal government in mid-April also prompted buyers to act sooner, the Canadian Real Estate Association said. Meanwhile, tens of thousands of homeowners have seen the rampant demand and listed their houses for sale to take advantage of high prices.

Sales fell to 8.5 per cent to 40,393 units in May compared with April. Sales remain elevated by historical markers, but are 15 per lower than last fall`s peak.

Prices were essentially flat in May, gaining 0.5 per cent to an average national resale price of $346,881 – the highest on record.


Read full article here

 

[Amber]

U.S. home construction plunges

U.S. home construction plunged last month to the lowest level since December as builders scaled back without a federal tax credit to lure buyers. Building permits also fell, a sign the construction industry won`t fuel the economic recovery.

The Commerce Department said Wednesday that construction of new homes and apartments fell 10 per cent from a month earlier to a seasonally adjusted annual rate of 593,000. April`s figure was revised downward to 659,000.

The results were driven by a 17 per cent decline in the single-family market, which had benefited earlier in the year from federal tax credits of up to $8,000. It was the largest monthly drop in single-family construction since January 1991.


Applications for new building permits, a sign of future activity, also fell. They sank 5.9 per cent to an annual rate of 574,000, the lowest level in a year.

The report missed Wall Street expectations by a wide margin. Economists surveyed by Thomson Reuters had predicted that housing construction would only fall to seasonally adjusted annual rate of 650,000 and had forecast that building permit applications would increase to an annual rate of 630,000.


Read full article here

 

[Amber]

Productivity climbs for a second quarter

Canada`s labour productivity advanced in the first quarter as output rose at a faster pace than hours worked.

Labour productivity among the country`s businesses rose 0.7 per cent in the first three months of the year, thanks to increases in the manufacturing and construction sectors, after increasing 1.2 per cent in the previous quarter, Statistics Canada said Tuesday.

Canada`s sluggish productivity record has long been a source of concern for economists, who fret the country`s living standards will suffer unless improvements are made. Labour productivity tracks real GDP per hour worked.

In a shift from previous quarters, Canadian productivity gains outpaced the U.S., where productivity slowed to 0.6 per cent in the first quarter.

In Canada, output of businesses accelerated to 1.8 per cent in the quarter from 1.4 per cent in the fourth quarter as firms spent more on consumer goods and services, shelter, and inventory accumulation.

Read full article here