June 2012 Canadian Economic Fundamentals

[Ally]

Dutch disease not a Canadian issue





A study recently released by The Pembina Institute warns of the "economic downsides" of oil-sands development. The study bolsters the "Dutch disease" charge put forth by New Democratic Party leader Thomas Mulcair and others, claiming that the oil boom hurts the manufacturing sector. The Pembina study also charges that the petroleum sector benefits from preferential tax treatment.




In contrast to these claims, The Macdonald-Laurier Institute recently released a report showing that the oil boom creates manufacturing jobs in Ontario and other provinces, and provides large flows of tax revenue to the federal government.






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[Ally]

Forget peak oil, the global water crisis will shake humanity to its core




You don`t hear much about the water crisis in the United States. Water is still cheap here and our borders contain a relatively large freshwater supply.




But in some places the crisis is in flames.






1.6 billion people live in regions with absolute water scarcity and by 2025 two-thirds of the world`s population could be living under water stressed conditions.





Read the full article here.

 

[Ally]

Food prices dropping due to bumper crop yields



A UN agency says world food prices dropped sharply in May, reaching their lowest level in eight months due to favourable supplies and currency fluctuations.





The UN Food and Agriculture Organization said in its monthly report Friday that global prices of a basket of food commodities fell by four per cent in May.





FAO's grain analyst Abdolreza Abbassian said crop prices have come down sharply from their peak "but they remain still high and vulnerable due to risks related to weather conditions."





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[Ally]

OSFI relents on tougher HELOC rule




Canada`s federal banking regulator is backing away from a proposed rule that would force banks to amortize loans secured by real estate.




The Office of the Superintendent of Financial Institutions said on Wednesday it`s no longer planning to require that home equity lines of credit, or HELOCs, be paid off over a set period.




However the regulator said it still regards HELOCs as risky products that need more scrutiny, and that it still plans to restrict the maximum loan-to-value to 65%, a significant reduction to the current limit of 80%.





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[Ally]

Regulator dials down proposed mortgage rule changes



Canada`s banking regulator is taking a softer stand on new mortgage underwriting rules than expected, a move that should lessen banks` and mortgage brokers` fears of a new, tougher regime.





But that relief may be short-lived: Some industry watchers speculate that the Office of the Superintendent of Financial Institutions will implement firmer rules in other areas when it releases its final guidelines around the end of the month.





The changes by OSFI are part of a larger, international effort to try to prevent another housing crisis like the subprime mortgage disaster. The new guidelines may help cool the country`s overheated housing market by tightening the rules around consumer lending.





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[Ally]

Unemployment rate steady at 7.3% as hirin comes to an abrupt halt





OTTAWA - Canada`s economy created a negligible 7,700 jobs in May in an abrupt halt to a two-month hiring spree that had yielded the biggest employment gains in three decades, and the unemployment rate held steady at 7.3 percent.




The figures released by Statistics Canada on Friday were below a median forecast of 10,000 net new jobs by analysts in a Reuters poll. Details of the report offered little room for optimism; it showed the private sector shedding jobs, and that nearly five times as many part-time positions were added than full time ones.






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[Ally]

Canada's job growth likely tepid despite blockbuster months, economists say



May`s job figures might shed some light on what`s behind some of the startling activity in Canada`s employment sector recently, but a longer-term look will be far more revealing, economists say.




May has a hard act to follow ` between March and April, the Canadian economy created 140,000 positions. It hasn`t managed that kind of one-two punch in more than 30 years, so the question is: How long will this jobs juggernaut last?




`The last two months were just astonishingly strong job creation,` said Craig Alexander, chief economist at TD Economics, adding that is `not consistent with the underlying pace of growth in the economy.`




`We`re overdue for a pullback,` he said.




While March`s mammoth gain of 82,300 jobs was way off the radar, the 58,200 positions created in April was in many respects an even bigger surprise, given the meagre expectations for the month and the weak trend of employment growth at the start of the year.





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[Ally]

Job numbers hold up, despite gathering clouds



Canada's jobs market is holding up surprisingly well in the face of mounting global economic uncertainty.





As grim reports pile up from the euro zone and the U.S. labour market shows signs of faltering, Canadian employment remains sturdy, thanks to strength in Alberta and among the country's factories.





The economy eked out a small gain in hiring last month, dispelling worries of a drop, following two months of robust gains. All told, the labour market has seen an average of 28,000 new jobs a month over the past half year, a respectable showing given the external turmoil.





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[Ally]

Home inspector liable for cost of removing mould




A recent court ruling found a home inspector liable for the cost of removing mould from a house.




The inspector did not find any mould during his inspection, but the owner had a mould allergy and after she took possession there were problems. She sued and a judge ruled that the inspector should have suspected mould based on his review of the premises.





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[Ally]

Economy and employment factors affect housing market



You cannot have a healthy housing market without employment growth. In addition to providing income, it also supports homebuyer confidence. A new home purchase requires both the ability and the willingness to make a large financial commitment.





After four months of moving sideways, employment in Canada increased sharply in March and April. There was an increase of 58,200 jobs in April, following an increase of 82,300 in March. This was the largest consecutive increase since 1981. All of the job gains have been in the private sector and they are concentrated in full-time work. This means that the economic fundamentals are still positive for Canada`s housing sector.





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[Ally]

Bank of Canada rate hike off the table, for now




The Bank of Canada this week backed away from its previous stance that it would have to tighten monetary policy soon, but left words of caution for investors betting on a cut in interest rates.




While the BoC took a more bullish stance in its April rate announcement, the euro zone`s sovereign debt crisis and a slowing global economy has tempered such an outlook.




`Some of the risks around the European crisis are materializing and risks remain skewed to the downside. This is leading to a sharp deterioration in global financial conditions,` the bank said in its statement on Tuesday, announcing the rate decision.





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[Ally]

Is Canada in a bubble? Housing experts face off




Housing bubbles can last a long time. Over the last decade, the housing boom has resulted in the largest rises in house prices ever seen in Canada, which have been similar in magnitude to those during the recent boom in the US.




More importantly, Canadian house price appreciation has consistently outpaced household income growth, which has pushed traditional house price-to-income indicators to dangerously high levels. Although far from perfect, we think that these indicators, particularly at these elevated levels, are the most reliable sign as to what we might expect for housing prices in the years ahead.





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[Ally]

Vancouver, Toronto house prices to sink 15% over the next 2-3 years




Toronto-Dominion Bank economists expect house prices in Toronto and Vancouver to sink by at least 15 per cent over the next two to three years.




Canada's two largest real estate markets appear to have gone their separate ways recently, with a slowdown in Vancouver and continued gains in Toronto.




But average prices can be deceiving, said economists Derek Burleton and Leslie Preston.





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[Ally]

Canada is a model that works, Harper tells Europe





OTTAWA ` As uncertainty builds about the fragility of the global economy, Prime Minister Stephen Harper has urged other nations to look to Canada as a model for "practical" economic management.







Harper made the comments Monday in a bluntly worded speech delivered at an international conference in Montreal.







He urged other governments to avoid the politically motivated "false choice" of assuming they have only one option to rescue their faltering economies: "austerity or prosperity."






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[Ally]

Mulcair's wooden-clog-in-mouth disease






We always knew NDP Leader Thomas Mulcair`s boogeyman of Dutch disease was nonsense, nothing more than a ruse to pander to Quebec. Now there`s more evidence that Mulcair is no better at diagnosing diseases than he is at taking the pulse of the economy.




Earlier this week, Jason Langrish wrote in the Financial Post that GM will cut 2,000 jobs at its Oshawa, Ont., plant, sending the work to Tennessee, where the average wage will be $14 per hour compared with $32 per hour in Canada.




`As much as some commentators want to label Dutch disease due to resource production as the cause, even if the dollar were at US80Â, a 20 per cent decrease, the wage bill in Canadian would still be the equivalent of nearly $26 per hour before benefits, surely not low enough to stave off the job losses,` wrote Langrish, executive director of the Canada Europe Roundtable for Business.





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[Ally]

Getting the lay of the land




I`ve received some great feedback from those of you who are reading this column and learning about how our industry mobilizes when a transit plan is given a green light.




This is my third installment, and so far I`ve introduced the complex process of bringing a development project from dirt to door once a major investment in transit is announced by a local or provincial government.





Read the full article here.

 

[Ally]

In a world drowning in oil, OPEC won't rescue falling prices




EDMONTON - Note to oilpatch: don`t expect OPEC to come to the rescue this time.




When crude oil prices tanked in the past, the 12-member cartel could reliably be counted on to slash output in a bid to prop up prices ` a handy insurance policy for domestic producers.




But despite a dizzying 25 per cent plunge in oil prices since March, the Organization of Petroleum Exporting Countries isn`t likely to follow the same industry-friendly script when it meets in Vienna this week.





Read the full article here.

 

[Ally]

Lower oil prices will crimp industry spending





A billion dollars every week. That`s the rate at which the oil and gas industry invests capital into Canada. Other than 2009 ` the depths of the financial crisis ` that pace of injecting money into the economy has been fairly steady since 2006. However, leading indicators suggest that corporate wallets are getting leaner. Spending is likely to slow down in the second half of this year, contributing to a year-over-year decrease of about 15 per cent.






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[Ally]

Outlook for hiring hits two-year low



The hiring outlook among Canadian employers has ebbed to a two-year low, and weakened in many other countries too, suggesting turmoil in Europe is chipping away at confidence.





A quarterly hiring outlook, to be released Tuesday, shows Canadian hiring intentions for the July-to-August period are softer than the prior quarter and now at the lowest level since the third quarter of 2010.





The findings come after last week`s labour force survey showed a slowdown in the pace of hiring in May, following two consecutive strong months, as just six of 16 major industries added to headcount. Some economists, meantime, are lowering their forecasts for Canadian growth as emerging market demand softens and Europe`s debt problems intensify.





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[Ally]

Canadians outpace all other foreign buyers in the U.S. real estate market



Canadians are playing a larger role in the U.S. housing market than in any year since 2007 and they outpace buyers from China and Mexico by far, according to a new survey of American real estate brokers.





The survey by the Washington-based National Association of Realtors (NAR) said foreigners snapped up $82.5-billion (U.S.) worth of houses in the 12-month period ending March 31. That compared with $66.4-billion a year earlier.





Canadians made up the largest share of purchasers, accounting for 24 per cent of all international sales. That compared with 23 per cent in 2011 and 11 per cent in 2007.





Chinese buyers made up the next largest segment at 11 per cent, followed by Mexicans at 8 per cent.





Read the full article here.