June 2011 Canadian Economic Fundamentals

[Ally]

Canada's growth losing steam: OECD




Major economies, with the exception of the United States, are losing momentum as the outlook for growth worsens in European and developing countries, the OECD`s leading indicator for April showed on Tuesday.




The Paris-based Organization for Economic Co-operation and Development said its composite leading indicator for member countries stalled in April to stand unchanged at March`s level of 103.0 points.





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[Ally]

China curbs lending as inflation hits 5.5%




Still driving inflation is the rising price of food, which makes up about 30 per cent of the consumer price index. Food prices climbed 11.7 per cent year on year in May, compared to 11.5 per cent the previous month, after severe drought in the country`s south was followed in some places by flooding. But clothing and household items have also seen price increases.




`This highlights that Chinese households are feeling the squeeze from higher prices for basic necessities, and will likely prompt further public pressure on the government to tackle this problem,` wrote analyst Brian Jackson, with RBC in Hong Kong. `We expect that headline measures of inflation will fall later in the year as base effects turn more favourable and policy tightening gains traction, but more increases seem likely in the next few months with risks also growing that price pressures will fail to ease as quickly as Beijing would like.`





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[Ally]

Bank of Canada to delay rate hikes to 2012: TD Bank




Toronto-Dominion Bank (TD-T) became the first primary dealer to push its forecast for the next Bank of Canada rate hike into 2012, warning the economy has not fully emerged from the shadow of the financial crisis.




TD, Canada's second-biggest lender, said on Tuesday it expects that the Bank of Canada will next raise its key policy rate by a quarter-point in January to 1.25 percent.




It's the bank's second revised call in as many months. TD last month shifted its long-held forecast of a July interest rate hike to September.




"All the reasons for them to hold off in September apply just as equally to remaining on hold through the balance of the year," said David Tulk, chief Canada macro strategist.




"If you look at the balance of risk, it's still is tilted firmly to the downside."





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[Ally]

Stocks almost as cheap as March 2009




With the S&P 500 trading well below its long-term average and U.S. corporate bond yields near record lows, stocks are almost as cheap relative to bonds as they were in March 2009, according to Ed Solbach, a strategist at Desjardins Securities.




He told clients the recent correction is `typical` and has been very similar to the previous six since March 2009, as a `reset` with lower U.S. bond yields, commodity prices and oil prices in particular will help the U.S. consumer and fragile housing market recovery. There has also been a stronger U.S. dollar `risk-off` trade.




`Investors have been very concerned as stocks have declined for six consecutive weeks, but we note that over the last 11 years, only one of five corrections lasted longer than six weeks,` Mr. Solbach said in a research note.





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[Ally]

Canadian home sales stable in May




OTTAWA ` June 15th, 2011 ` According to statistics released today by The Canadian Real Estate Association (CREA), national resale housing activity remained stable in May compared to April.




Highlights:

` Sales activity held steady from April to May, but posted the first year-over-year gain in over a year due to falling demand in May 2010.

` Year-to-date sales are in line with the ten-year average.

` New listings also remained stable from April to May.

` National housing market remains firmly entrenched in balanced territory.

` National average price is still being skewed upward by historically high sales activity in certain Vancouver

neighbourhoods.






Seasonally adjusted national home sales activityedged down by less than one per cent in May 2011 compared to the previous month. Among major markets were activity declines in Vancouver and Ottawa, offsetting gains in Edmonton and Toronto, where sales reached the second highest level on record for the month of May.





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[Ally]

Risk aversion at the heart of Canada's poor productivity performance, Deliotte says





OTTAWA ` The mystery of Canada's decades-long failure to make its economy more efficient lies in Canadians' reluctance to embrace risk, says a report Wednesday from professional services firm Deloitte Canada.







Economists have long been baffled as to the reasons for Canada's poor productivity record, which has hampered the country's economic advance and Canadians' standard of living.







But Deloitte says its yearlong study proves that the lower risk tolerance of Canadian executives to invest more in the tools that would unleash a more vibrant economy lies at the heart of it.







"Our study substantiates for the first time that it's true ` not a hypothesis ` that Canadians are indeed more risk averse than Americans, despite our current positive economic climate," said Deloitte Canada vice-chairman Bill Currie.






Read the full article here.

 

[Ally]

Economy needs to be weaned off consumer spending: Report





OTTAWA ` Canadians' level of household debt is not simply a worrying statistic for over-extended individuals, it's also a growing public policy concern for governments that depend on consumer spending to fatten up the gross domestic product.







Consumerism was fine fiscal policy as long as Canadians didn't borrow too much and put money away for a rainy day, says Rock Lefebvre, vice-president of research and standards for the Certified General Accountants (CGA) Association of Canada and author of the report, A Driving Force No More: Have Canadian Consumers Reached Their Limits?







But with household debt reaching record levels, debt accumulation outpacing income growth and increases to historically low interest rates visible on the horizon, governments find themselves in a bit of a Catch-22 situation, advocating cautious borrowing while at the same time relying on consumers to buy things to bolster the fragile recovery, says Lefebvre.




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[Ally]

Might doesn't always make right, especially when comparing Canadian and U.S. real estate markets





When sizing up Canadian markets alongside their U.S. counterparts we often hear that what`s happening south of the border is sure to make its way north. Given that approach, there has been a lot of talk lately about the Canadian real estate market heading for an implosion.





Statistics Canada has reported a steady price climb with its new housing price index rising 1.9 per cent since last April. And Scotia Capital reported that Canadian real estate prices had increased five per cent in the first quarter of this year compared to the same period in 2010.





Taking what may look like healthy growth a step further, CIBC warned last month that 17 per cent of Canadian homes are overvalued. A five to 10 per cent price correction is likely to take place in the next two years, the report added. The report went on to say that homes in B.C. are overvalued by 20 per cent, 17 per cent in Alberta, 13 per cent in Manitoba, Saskatchewan and Quebec, 11 per cent in Ontario and 8.6 per cent in Atlantic Canada.





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[Ally]

Canadian provincial monthly rental rate and vacany summary, April 2011




Demand for rental accommodations in Canada has increased over the past year as rental vacancy rates across Canada`s 35 major city centers (CMA`s) has decreased to 2.5% in April 2011 from 2.9% a year ago in April 2010 according to the latest figures released by Canada Mortgage and Housing Corporation (CMHC).




`Immigration continues to be a factor in supporting rental housing demand. Recent immigrants tend to rent first before becoming homeowners,` said Bob Dugan, Chief Economist at CMHC`s Market Analysis Centre.




`In addition, condominium completions moved lower in the past months, while rental apartment unit completions remained relatively stable. As a result, the overall demand for rental apartment units increased faster than supply for this type of housing. Accordingly, this pushed Canada`s vacancy rate downward.`





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[Ally]

Ottawa OK on lending limits





TORONTO ` Despite worries around record consumer debt levels and an overexuberant housing market, Canada`s finance minister said he has no plans to tighten mortgage rules again.




`We just took action` in March, Jim Flaherty told reporters in Toronto, adding that there has already been `moderation` in activity.




The comments come a week after a strong warning from Bank of Canada governor Mark Carney that Canadians` love affair with cheap credit has left them `highly vulnerable` to adverse economic shock. Speaking in Vancouver, home to the country`s most expensive real estate, Mr. Carney noted that growth in home construction, renovations and other residential investment has consistently outstripped overall growth in the economy for the past seven years. As a result, some pockets of the market may have become overheated, he said.





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[Ally]

Risks rising, Bank of Canada warns




Risks to the economy and financial system have edged higher over the past six months, the Bank of Canada warned Wednesday, citing the European debt crisis, the uneven global recovery, and vulnerable consumers who are not doing enough to cut their debts.




In their latest semi-annual assessment of the financial system, central bank policy makers said Canada`s banking sector remains relatively sound.





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[Ally]

Vancouver housing pulls prices higher




Sales of resale homes in Canada were basically flat in May, compared to April, falling by less than 1 per cent, though they gained on the year by 2.7 per cent.




Prices climbed 8.6 per cent from a year earlier, but the Canadian Real Estate Association (CREA) said the national average of $376,817 was skewed by strong sales in `selected pricey` areas of Vancouver and broad price increases in Toronto, where supply is still tight given demand.





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[Ally]

How the euro crisis could change the world





Greece's embattled government may have narrowly scraped by in a confidence vote last night, but, to borrow from Hunter S. Thompson, there's fear and loathing on the euro trail today.





Euro ripple effect on banks




Prime Minister George Papandreou's government survived - note how everyone uses the term "survive" - what had been billed as a crucial parliamentary vote, paving the way for Athens to push forward with a fresh round of cuts tied to the terms of its bailout.




It survived because the 155 politicians in his party voted to support him, against the 143 opponents who wanted him gone. That's in a parliament of 300 seats, and, really, that vote has changed little.





Read the full article here.

 

[Ally]

Job seekers heading back to Alberta




Job seekers are flooding back to Alberta after a two-year lull, lured by a resurgence in the oil patch and growing hiring demands.




Alberta saw a net inflow of 5,300 people from other provinces in the first quarter of 2011 -- its highest rate of interprovincial migration since the first quarter of 2006, according to Statistics Canada preliminary population data reported Wednesday.





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[Ally]

The latest on Canada's population change and pension holdings





Almost every day, there is fascinating information published in one form or another ` often by Statistics Canada ` on the changing nature of the Canadian social and economic make-up.




As just one example, Statistics Canada has recently released data on this year`s first quarter population estimates for the country and the provinces. Alberta has returned to the spotlight.




Prior to the recession, the mega energy project construction boom in Alberta pulled workers in from almost all other regions of the country.




The effect culminated when the global price of oil peaked at US $144 per barrel in July 2008.




In the subsequent trough of the recession, the price of oil fell to only US $33 per barrel and Oil Sands work was cancelled or put on hold. Workers returned to their home provinces.






Read the full article here.

 

[Ally]

The little guy didn't suffer as badly as feared





One striking consequence of the recession has been increased concern, you might even say obsession, with inequality. Filmmaker Michael Moore's diatribes against capitalism now seem almost mainstream. Going on three years after the crash, anger against bankers and CEOs is still fierce. Support for higher taxes on the super-rich seems strong. The NDP is the official Opposition, of all things, and didn't deign over the weekend to remove its commitment to socialism from its charter.




For we fans of free markets and smaller government, it's not a happy time. Because inequality typically rises when the economy sags, we've been dreading the latest income statistics, which Statistics Canada produces, with a two-year lag, every June. The expected rise in inequality could only fuel the populist anger.




So when it came out last week the numbers for 2009 weren't half as bad as they might have been. Granted, they're only for the first post-recession year. Granted, they're a lot easier to be blasà about when you haven't lost your own job or seen a big drop in your income (just a six-month salary freeze). But still ...




Read the full article here.

 

[Ally]

Alberta jobs luring more Canadians to province





The promise of jobs is again luring people to Alberta, with the most Canadians heading here in the first three months of this year since the start of the boom.




Between January and the end of March, an estimated 5,300 more people moved to the province than left, according to Statistics Canada, the best first quarter since 2006.




Last year, net migration in those three months was 300.




"Especially in the past three or four months, the market has definitely picked up, especially in the energy professions," said Dale Pauls, recruiting manager for GFR Recruiting, which focuses on engineers. "The oilsands are definitely the buzzword out there."






Read the full article here.

 

[Ally]

Immigration leads the way for population spike in Canada: StatsCan





The Canadian population jumped by more than 70,000 in the first quarter of 2011, with immigration responsible for the bulk of the increase.







The 0.2 per cent total increase in population was slower than the same period from 2010, when the national head count increased by more than 85,000, according to the preliminary findings that were released Wednesday by Statistics Canada. As of April, Canada's population was recorded at just under 34.35 million.







International migration accounted for nearly 50,000 new people registered in Canada, while the number of births outweighed the number of deaths by 21,500 between January and April.




Read the full article here.

 

[Ally]

Home buying advice from the pizza guy




Now we are getting tips on the housing market from the pizza delivery person.




Odlum Brown director of investment research Murray Leith says he got a little investment advice from an unlikely source.




`The tip came from the local pizza delivery guy. When arrived with the pizza I had ordered for my sons, he asked if I was interested in selling my house in Vancouver,` Mr. Leith said in a note to clients.




The vice-president of Odlum Brown said the pizza guy relayed he had contacts in China and he should seriously consider an offer because he could get him a good price.




`Equally remarkable, a client who lives nearby had a Chinese person show up at his door with a cash-stuffed suitcase to express his interest in his home,` says Mr. Leith `It is fair to say that the situation is getting a little crazy.`





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[Ally]

Caught in a bidding war? Know the rules




Multiple offers or bidding wars continue to happen all over the GTA. Buyers, sellers and real estate agents need to be aware of what to expect. The rules may be different, depending on whether you are selling your home through a real estate agent, or privately.




I have been asked a range of questions on this subject: `Why can there not be a silent auction when a house is sold?` `What does registering an offer mean?` `How did the house sell last night when the seller said offers were not to be delivered for three days?`




To create the atmosphere for multiple offers, it may indicate on the MLS listing that interested offers are to be submitted in three days. The seller hopes this will give many buyers the opportunity to visit the property during the three-day period and that this will result in multiple offers.





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