June 2010

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U.S. home-builder confidence dips
The U.S. National Association of Home Builders /Wells Fargo builder confidence index dropped to 17 this month from 22 in May. The drop represents the largest decrease in confidence since November, 2006. Any figure under 50 indicates that respondents view conditions as poor.

The decline in confidence comes as job losses and financial woes continue to dog many prospective buyers. The mortgage delinquency rate has risen over the past year, to nearly 10 per cent of all outstanding home loans. While the crisis began with defaults by subprime borrowers, it is now prime borrowers who are struggling to keep up. Prime borrowers made up 36.7 per cent of loan foreclosures in the first quarter, up from 28.9 per cent last year.

Tax credit ends

Rates of mortgage applications tumbled by 27 per cent in May following the expiration on April 30 of a federally funded tax break of up to $8,000 (U.S.) for the purchase of a new home. The tax credit was extended to April 30 in November 2009 by the Obama administration with the aim of bolstering the housing market.

"The home-buyer tax credit did its job in stoking spring sales and we expected a temporary pullback in the builders` outlook after the credit expired at the end of April," NAHB chairman Bob Jones said in a press release. "However, the reduction in consumer activity may have been more dramatic than some builders had anticipated, which resulted in their lower confidence levels."

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Rate hike not a given: Carney

OTTAWA - Bay Street economists are betting the Bank of Canada will raise interest rates again in July even though the central bank governor reinforced yesterday that more hikes are no sure bet as government austerity threatens global growth.

In a speech in Charlottetown, Mark Carney said "considerable uncertainties" remain in the global economy, and that the paring back of debt among households, banks and countries had "barely begun, and will ... temper the pace" of global growth.

The central bank raised its key interest rate by 25 basis points on June 1, based on stronger-than-anticipated domestic growth. Prior to yesterday`s speech, the betting among economists and traders was for Mr. Carney to increase rates again on July 20.

Mr. Carney, however, appeared to dampen expectations yesterday, arguing any further removal of stimulus from the strongest Group of Seven economy over the next two years had to be balanced against global developments.

"In light of the scale and volatility of these conflicting forces," Mr. Carney said, "it should be evident that no particular path for monetary policy is preordained."

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Family income in Canada flatlined in 2008

OTTAWA -- Following four years of growth, the average after-tax income for Canadian families remained "virtually unchanged" in 2008 from the previous year — just as a global recession was starting.

Statistics Canada reported Thursday that the median, post-tax income — after adjusting for inflation — in 2008 was $63,900.

Post-tax income for single individuals also remained constant in that year, at $24,900, marking the first time in three years where there was no significant change.

Meanwhile, at the provincial level, family incomes rose in Saskatchewan and British Columbia — both noting a rise of 5.7%. But Alberta families were the strongest breadwinners, bringing in $77,200 annually in 2008.

For singles, the greatest increases were in Alberta and Manitoba, recording income increases of 13% and 12%, respectively. That statistic remained virtually unchanged elsewhere.

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Resource industries are sucking Canada dry

OTTAWA -- Natural resource industries in Canada are consuming about five times more water than the rest of the country, leaving the nation vulnerable to a looming scarcity challenge in the absence of a new national plan, says a new report published by a federal government advisory panel on business and environmental issues.

The study, Changing Currents, was produced by the National Round Table on the Environment and the Economy. It raised the concerns after finishing the first half of a two-year study examining whether Canada has enough water to support economic growth while maintaining healthy ecosystems.

"Canada`s apparent water abundance masks a looming scarcity challenge for our important natural resource sectors and for certain regions of our country," said the report. "Water scarcity is not a national problem in Canada, but it is certainly a regional one and this can be of national significance. One need only look to the prairies of Alberta and Saskatchewan and to British Columbia`s Okanagan Valley to witness clear examples of regions facing water shortages."

The report suggests that the federal government should co-ordinate a national approach to better manage use and consumption while researching all of the risks.

"There is an overall lack of capacity and expertise across the country to effectively manage water resources,"said the report. "This is reflected in the reduction of scientific capacity as well (as) policy expertise within governments."

It also highlights a wide range of factors that could affect Canada`s supply of the resource.

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Bay Street still betting on July rate hike

OTTAWA -- Bay Street economists are betting the Bank of Canada will raise interest rates again in July even though the central bank governor reinforced Wednesday that more hikes are no sure bet as aggressive budget-cutting measures in Europe threaten the pace of global growth.

In a speech in Charlottetown, Mark Carney said "considerable uncertainties" remain in the global economy, and that the paring back of debt among households, banks and countries had "barely begun, and will ... temper the pace" of global growth.

The central bank raised its key interest rate by 25 basis points on June 1, based on stronger-than-anticipated domestic growth. Prior to Wednesday`s speech, the betting among economists and traders was for Mr. Carney to increase rates again on July 20.

Mr. Carney, however, appeared to dampen expectations Wednesday, arguing any further removal of stimulus from the strongest Group of Seven economy over the next two years had to be balanced against global developments.

"In light of the scale and volatility of these conflicting forces," Mr. Carney said, "it should be evident that no particular path for monetary policy is preordained."

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Maybe your mortgage needs a check-up

While about 80% of Canadians visit a doctor at least once a year to help ensure they remain physically healthy, the number of people who check their financial health by regularly reviewing their mortgage is far less.

Plenty can change in someone`s life in a year, never mind during the standard five-year mortgage a lot of Canadians sign up for. A career change, kids, retirement or newfound money or it could be that such a major event is on the horizon. All can affect the type of mortgage that fits just right.

"A lot of people don`t like to face up to it but, doing an annual financial check-up is a very smart thing to do," says Peter Aceto, CEO and president of Toronto-based ING Direct Canada. "Managing your financial lifestyle is just as important as managing your diet and exercise."

Aceto says people often just wait for a renewal letter before they look at their mortgage, and even then they`ll likely send the contract back without considering if it is meeting their current needs because they feel changing providers or the terms is futile. But they should put just as much thought into a renewal or a review as they did when they signed the initial deal.

Kelvin Mangaroo, founder of RateSupermarket.ca, which compares mortgage rates and brokers across the country, agrees. "Canadian consumers tend to become complacent about their mortgage payments and they could be saving a lot of money." He says home owners should annually review three main things: their current and expected future risk profile and net income as well as rates.

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Canadian banks still at risk in a global downturn

Despite their recent stellar performance, Canada`s banks could face serious challenges that will affect their results if the global economy deteriorates.

While global growth will most likely stay on track in coming months, investors should be aware that "downside risk could be meaningful" if concerns around European sovereign debt and other issues fail to get resolved, said Murray Leith, an analyst at Odlum Brown Ltd.

In a note to clients Mr. Leith said Canadian bank stocks have enjoyed a remarkable recovery with the S&P/TSX Diversified Bank Index more than doubling since the dark days of the financial crisis last year.

But the banks are now fully priced, especially compared to their global peers.

"Given the premium level of valuation, there is not a lot of room for error," he said.

Mr. Leith continues to rate the stocks as a "Buy" but he said he has "modestly" lowered his price targets based on the assumption that global economic growth will slow somewhat in coming quarters but will not fall off track.

In the wake of the crisis both the banks themselves and their regulators have taken credit for the relatively small losses experienced by the sector, but according to Mr. Leith, luck also played a role, as the Canadian economy was helped significantly by resurgent commodity prices in the immediate aftermath of the meltdown.

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Flaherty still cautious on recovery

Canadian Finance Minister Jim Flaherty said he`s still "cautious" about a recovery in Canada and a lag in employment growth, even amid signs the expansion has accelerated.

Mr. Flaherty, speaking to reporters in Toronto, said that while the country`s recession is "technically" over, the country`s jobless rate is high. He said there are also concerns "on the credit side".

"I do expect that over time, we will continue to see some drag on the job numbers, that they will not be as good as the economy overall might indicate," Mr. Flaherty said.

While recent data have shown Canada`s economy is recovering, unemployment hasn`t declined much from the highest in more than a decade. Canada`s jobless rate reached 8.7% last August, the highest in more than 11 years, and averaged 8.2% during the first three months of this year.

The jobless rate averaged 7% the previous decade.

"There`s still significant unemployment in Canada, above what we`re used to in Canada, that`s a concern," Mr. Flaherty said.

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No sign Europe debt crisis spreading: Flaherty

NEW DELHI -- Finance Minister Jim Flaherty said on Monday Europe was following the right path to manage the debt crisis plaguing a group of countries and said there were no signs that the crisis was spreading beyond Greece, Spain and Portugal.

On Monday, the euro EUR slumped to a four-year low and stocks fell in Asia as investors worried that European austerity measures would stifle a recovery and crimp Asian exports to the West.

"The strategy that is being followed by the European countries I think is the right way to go, and is necessary that some of the European countries, as you know, take some significant steps in terms of fiscal consolidation," Mr. Flaherty told reporters during a visit to New Delhi.

Asked if the debt crisis was spreading beyond the three countries, Mr. Flaherty said, "not yet, not that I have seen. We have to obviously be cautious and vigilant."

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Carney: Canada to lead G7 growth

CHARLOTTETOWN—Bank of Canada governor Mark Carney says the world is entering an "age of austerity" that will take about $7 trillion out of global output by 2015 and restrain economic growth.

In a noon-hour speech to a business audience in Charlottetown on Wednesday, Carney said Canada will lead the big advanced economies of the Group of Seven in growth over the next two years — although that may not be saying much.

Canada`s domestic economy has recovered nicely from recession, but growth is slowing and the global outlook is getting worse.

"The coming age of austerity carries its own risks," he said. "Fiscal policy that is tighter, sooner for all could create deficient demand in the global economy. To recoup this enormous sum ($7 trillion), both the public and private sectors must be bold."

Carney says Canada is somewhat sheltered from the problems facing much of the developed world in the wake of the recent recession. But it can`t altogether avoid the global shocks.

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Search For Your Dormant Bank Accounts Name: Type a full or partial name: John John* John Brown John OR Brown Province/territory: AllBritish ColumbiaAlbertaSaskatchewanManitobaOntarioQuebecNew BrunswickNewfoundland and LabradorNova ScotiaPrince Edward IslandYukon TerritoryNorthwest TerritoriesNunavut


SEARCH HELP

IF YOU TYPE... YOU WILL GET: John all names containing "John" only —
John Brown Marian John John* all names containing or beginning with "John" —
John Brown Helen Johnson Johnny Smith John AND Brown all names containing only "John" AND only "Brown" —
John Brown John E. Brown John OR Brown: all names containing "John" OR "Brown" —
John Brown Ed John Harry Brown

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Economic indicators continue to rise in May

OTTAWA — A key barometer of Canada`s economic performance rose in May for the 12th consecutive month, led by the manufacturing sector, Statistics Canada reported Friday.

The composite leading index gained 0.9 per cent from the previous month. Most analysts had expected an increase of 0.7 per cent in May.

"However, the upturn in the index a year ago was led by housing and the stock market," the federal agency said. "These components have stopped contributing to growth, replaced instead by the manufacturing components."

The housing index fell 1.2 per cent in May, its first decline since April 2009 as existing home sales and housing starts slowed. While people were buying fewer homes, they were still furnishing them — appliance and furniture sales strengthened even as sales of other durable goods, notably automobiles, slowed.

And after 13 consecutive increases, the Toronto stock market has stopped trending upward, Statistics Canada said.

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Bumps in road to slow Canada`s recovery: forecast

GDP growth to slow after outpacing G7 countries through early 2010

Canada has been an economic lion since the end of 2009, with growth out-pacing that of its G7 peers by a wide margin. But the second half of this year will tame that roar, according to a quarterly economic forecast released Thursday by TD Economics.

"The pace of Canada`s economic revival stands out in the world. Real GDP has virtually recouped all of the losses recorded during the recession. And real consumer spending has already eclipsed its pre-recession level," said Craig Alexander, chief economist for TD Bank Financial Group.

Canada`s gross domestic product grew by a five-to six-per-cent annualized rate in the fourth quarter of 2009 and the first quarter of 2010, while the average in the rest of the G7 countries was 1.3 per cent, the report says. For the second quarter of this year, TD forecast growth of at least four per cent before what the bank calls a "pothole recovery" slows everything down to a more "moderate" speed.

"Bumps lay ahead as households and governments shift their attention to addressing their recent largesse," said Alexander. "What`s more, volatility remains the watchword of the day."

Potholes identified in the report include worries over sovereign debt, uncertainty about the strength of the economic recovery in the industrialized world and concern that strong recoveries in emerging markets could create significant imbalances.

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Leading index suggests robust growth

Statistics Canada`s index of leading economic indicators rose 0.9 per cent last month, the federal data agency said Friday.

The leading index includes 10 components that collectively provide insight into where the economy is likely headed in the next six to 12 months. Growth in the leading index usually only exceeds one per cent in the early stages of recovery from a downturn.

The 0.9 per cent figure is in line with the index`s average month-over-month showing for the past year. It peaked in December 2009 at 1.5 per cent.

The gain came despite decreases in two factors people often look to for signs of economic health — housing and the stock market.

The housing component of the index dropped 1.2 per cent in May, its first month-over-month decline since April 2009. Existing home sales continued to retreat slowly from their record high reached over the winter, while the year-long rally in housing starts stalled.

The Toronto stock market also stopped trending up, after 13 straight monthly increases.

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Negotiating agreements takes nerves of steel

Real estate agreements typically start with an offer being made by an interested buyer and then accepted by a seller. But there is so much more that goes on in between and both buyers and sellers need to understand how to properly prepare for what can be very stressful negotiations.

In most real estate contracts, the buyer leaves the offer open for acceptance by the seller for a period of up to 24 hours. This is called the irrevocable date and time. By signing the offer under seal, once it is delivered, the buyer is not permitted to change his or her mind until the irrevocable date and time noted in the offer. Sellers can accept the offer, reject it or make a counter offer back to the buyer. Eventually, an agreement is reached.

However, many questions arise about the process, especially when there are multiple offers coming in on the same property. For example, let`s say an offer is made to the seller, but the seller notifies the buyer as follows: "I am thinking about your offer, can you improve it?" This is what typically goes on in discussions between real estate agents while the offer is being considered by the seller. What does this mean? Has the seller rejected the offer? Should the buyer say anything? The proper answer should be that this is the buyer`s best offer right now, and the seller can either accept it or make a counter offer. You do not want to end up negotiating against yourself.

What happens if you are asked to fax your offer to the seller and you have been told that there are other offers on the property? You are suspicious as to whether the seller really has any other offers. In this case, insist on your agent receiving a copy of the confirmation that the seller would have given to the other buyer agent who submitted the other offer. You will not see any of the details of the other offer, but at least you will know that it exists. If the seller refuses to provide this, think twice about participating in this process.

Let`s say your buyer agent is presenting the offer in person to the seller and the seller`s agent, and there are multiple buyers waiting outside for their own turn to present. If the seller indicates that they will not deal with any offer until they have seen all the presentations, then my advice is for your buyer agent to take the offer with them and go back to their car. Tell the seller that if they want to negotiate with you further, they can call you back. By taking the offer back, it has not been delivered and the buyer will still have the opportunity to negotiate further if the seller does indeed call you back.

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EI numbers barely change in April

The number of Canadians receiving Employment Insurance benefits was flat in April, Statistics Canada reported Friday.

The federal agency said 667,400 people received benefits, barely changed from March.

But the number has dropped by 161,900, or 19.5 per cent, from the peak of 829,300 reached in June 2009.

Statistics Canada said the number of new claims filed was also little changed from the month before.

The number of Albertans on EI fell by 2,500 to 49,900 in April. That was its sixth straight monthly decline.

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Most provinces in deficit position

There was a time when most provincial governments brought down surplus budgets. But the recession that began in 2008 took big bites out of provincial tax revenues and by the 2009-10 fiscal year, almost every province was officially in deficit.

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Partnership agreement is similar to a prenup

Being a co-owner or partner in a small business can be a recipe for success because their different skills and experience can come together to make a stronger business than either of them would have had on their own.

Yet with all the demands on their attention, entrepreneurs can easily overlook important long-term planning, such as creating a shareholders` agreement. These agreements can ensure shareholders` rights and obligations are clearly understood and can protect the company`s future in case something goes wrong. It`s vital that these agreements achieve their business objectives but it`s also important to carefully consider their tax consequences.

A shareholders` agreement sets ground rules for important issues such as who can own shares of the business. For example, is ownership restricted to the partners and their family members or will key employees be able to own shares, too? How will the shares be valued if they`re transferred among the owners?

Shareholders` agreements also deal with more difficult issues, such as what will happen in case of a serious disagreement or the death or disability ofa key shareholder, usually by specifying a process for one side to buy out the other and how any such buyout would be funded.

While business partners may be reluctant to bring up these issues, it`s best to create a shareholders` agreement when things are going well. In my experience, private company owners often regret not putting things in writing when disagreements arise and they realize they misunderstood each others` intentions.

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Canada retail sales plunge suggests weakness ahead, say economists


Two-per-cent decline in April, marking only second such drop in 15 months

OTTAWA — A deeper-than-expected drop in April retail sales threatens weakness in consumer spending in the months ahead as over-indebted Canadians retrench in the face of rising rates, economists said Wednesday.

Retail sales fell two per cent in April, giving back all the gains from the previous months, when sales notched their biggest gain in five years, at an upwardly revised rate of 2.2 per cent.

April`s sharp decline came as a surprise to economists, who had been calling for sales to edge down 0.4 per cent, riding on the heels of a strong, post-downturn recovery that extended through 2009 and into 2010.

"There have been recent rumblings that Canada`s previously impressive domestic spending revival was losing steam, and the sharp drop in April retail sales is the loudest warning shot yet," said BMO Capital Markets deputy chief economist Douglas Porter.

"While the setback appears to be a simple case of a reversal of the weather-related jump in the prior month, the fact is that the days of easy gains are over for spending."

Derek Burleton, deputy chief economist at TD Economics, added: "Prospects for consumer-oriented retail sector are less bright for the second half of 2010, and especially in the areas supplying housing and other big-ticket durable goods.

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Political risk a growing concern for investors

LONDON -- Not so long ago, political risk was mostly regarded as a hazard in emerging but not developed markets, except perhaps for trading in oil and other commodities sourced from perceived "dangerous" places.

But since the crash of 2008, political news has fast become a key driver in developed markets. Investors in the world`s most advanced economies are having to adapt.

"Political risk everywhere," proclaimed the title of a Goldman Sachs research note this month.

"In G7 economies, people used to think you could just concentrate on the numbers," said Commerzbank head of emerging markets research Michael Ganske. "Now that has changed. You just can`t ignore the politics."

Mr. Ganske says his colleagues covering mainstream economies now increasingly ask his team for their insight on Western Europe.

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