June 2012 Canadian Economic Fundamentals

[Ally]

Canada job vacancy rate edges up in first quarter





In a sign of a modest tightening in Canada's job market, the job vacancy rate in Canada rose to an average of 1.8 percent in the first quarter of 2012 from 1.6 percent a year earlier, Statistics Canada reported on Wednesday.




By comparison, Canada's unemployment rate, not seasonally adjusted, was an average of 7.8 percent in the first three months of 2012 and 8.1 percent a year earlier.




The government agency also reported that for every job vacancy, there were an average of 5.8 unemployed people in the first quarter, down from 6.5 in the first quarter of 2011.




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[Ally]

Inflation drop makes interest rate hike less likely




Inflation tumbled to just above one per cent in May, making it less likely the Bank of Canada will be raising interest rates any time soon, according to economists.




Friday, Statistics Canada revealed the annual inflation rate fell to 1.2 per cent in May, largely because of a year-to-year drop in gasoline prices, the first time that`s happened in almost two years.




While there has been speculation for months that the Bank of Canada could be raising its key overnight lending rate from 1 per cent to curb household debt, they`d have a hard time justifying that move now, suggested Jim Stanford, an economist with the Canadian Auto Workers union. Raising rates with the economy just creeping along could prove to be disastrous, Stanford argued.





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[Ally]

Poll: Investors worried about new mortgage rules




In the latest CREW poll 66% of readers answered `yes` to the question `Will the new 25-year cap for insured mortgages hurt you?`




The poll comes on the heels of a press conference by Finance Minister Jim Flaherty Thursday, announcing key changes to mortgage rules, including lowering the maximum amortization on a government-insured mortgage to 25 years from the current 30.




Investor Edward Renkema says the split in the poll is probably indicative of how many investors currently have Canadian Mortgage and Housing Corporation (CMHC) coverage on their investment properties.





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[Ally]

Loonie higher after report shows inflation at lowest level in nearly 2 years




TORONTO - The Canadian dollar moved slightly higher Friday as the country's inflation rate dropped to its lowest level in nearly two years.




The loonie gained 0.45 of a cent to 97.60 cents US after losing nearly a cent amid commodity drops a day earlier.




A report from Statistics Canada said the inflation rate fell to 1.2 per cent in May as Canadians paid less for gasoline, video equipment and some types of clothing, while price gains in many other consumer goods moderated.





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[Ally]

Mortgage rules 'blunt instrument'




`I`m disappointed with this particular set of changes,` Royal LePage CEO Phil Soper said, on the heels of last week`s announcement. `The market is clearly cooling on a national basis, and I`m concerned that what is essentially a Toronto problem is being attacked with a blunt instrument that`s going to hurt the housing market nationwide.`




He`s not alone, with growing numbers of real estate agents now offering the same concerns ahead of July 9 ` the day 25-year maximum amortizations replace 30 and maximum loan-to-values on refinances fall to 80 per cent from 85.




Bank economists are now suggesting home prices will be reduced by as much as 5 per cent in the short-term, and not just in new-construction condo markets.





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[Ally]

Don't be too smug, Canada




As we approach the 145th Canada Day, it is tempting for Canadians to feel exceptionally good about their country. We have reason to feel good in relative terms; many of our global peers are in terrible shape. Europe is in a huge fiscal and financial mess, with no apparent game plan or end in sight. The U.S. recovery has firmed up, nearly four years after the financial crisis, but the U.S. still has to deal with a massive fiscal hole. Japan is recovering from last year's earthquakes, but its power supply system is fragmented and it too has serious problems with fiscal debt and rapid population aging.




But before we get too smug, let's take an honest look at our own policies and performance. We quickly discover that Canada has challenges of its own.





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[Ally]

CIBC takes a cautious path to growth



Last July, a group of senior bankers were summoned to a meeting room on the fifth floor of Canadian Imperial Bank of Commerce`s headquarters in downtown Toronto to talk about one of its biggest deals in years.





The room lacked the usual accoutrements of high finance. Instead of polished wood and panoramic views, the walls seemed almost bare. But like many of the rooms where CIBC chief executive officer Gerry McCaughey liked to plot strategy, the emptiness was by design.





The blank walls were, in fact, oversized floor-to-ceiling whiteboards. They were handy tools, since Mr. McCaughey ` a hyper-focused banker with a professorial bent ` has been known to vault from his chair mid-sentence during a meeting to diagram ideas and scribble down notes.





Read the full article here.

 

[Ally]

Don't be too smug, Canada




As we approach the 145th Canada Day, it is tempting for Canadians to feel exceptionally good about their country. We have reason to feel good in relative terms; many of our global peers are in terrible shape. Europe is in a huge fiscal and financial mess, with no apparent game plan or end in sight. The U.S. recovery has firmed up, nearly four years after the financial crisis, but the U.S. still has to deal with a massive fiscal hole. Japan is recovering from last year's earthquakes, but its power supply system is fragmented and it too has serious problems with fiscal debt and rapid population aging.




But before we get too smug, let's take an honest look at our own policies and performance. We quickly discover that Canada has challenges of its own.





Read the full article here.

 

[Ally]

Despite economic growth, job gains, family incomes remain stagnant




OTTAWA - The growing economy hasn't done very much to boost Canadian incomes, a new report from Statistics Canada confirms.




The agency reported Monday that median, after-tax income for families of two or more amounted to $65,500 in 2010, virtually unchanged from 2009 or the year before after adjusting for inflation.




The result was slightly better for two-parent families with children. That segment saw median, after-tax income grow to $78,800 from $77,200 the year before.




There was no data from 2011, but weekly wages and other income reports suggest that there would likely be little improvement last year as well, analysts said.




That's still a better record than what has occurred in the United States, where incomes have actually contracted, but economist Benjamin Tal of CIBC World Markets says Canadians should take little comfort.




"Something is not working here (in economy), this is not a positive report," said Tal.





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[Ally]

Canadian's faith in economy and job creation falls sharply




OTTAWA ` Global economic turmoil and negative reports at home are taking their toll on the faith of ordinary Canadians and Americans in the economy.




The Conference Board`s latest consumer confidence reading for June, released Tuesday shows a fall of 6.8 points to 74 in June, about where it stood in January




It was much the same story south of the border where the Conference Board`s U.S. index dropped for the fourth month in a row to 62 points, also the lowest level since the start of the year.





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[Ally]

Is Canada too smug about its economic future?




Over the past four years, Canada has been feted as the country that does practically everything right. Its banks are beloved by everyone from economist Paul Krugman to Moody`s Investment Service (MCO), which rated them earlier this year as the safest in the world.




While U.S. politicians bickered for years over free-trade deals with South Korea, Colombia, and Panama, Canadians signed several pacts and launched free-trade talks with 50 other nations. Its economy has grown faster`and its debt has stayed smaller`than its Group of Seven peers. (The International Monetary Fund expects Canada`s net debt-to-GDP ratio to be 33 percent by 2016, compared with 85.7 percent in the U.S.) Even the controversy over Canada`s Keystone XL pipeline underscored the fact that Alberta has the resources to ship more than 700,000 barrels of oil a day to U.S. refineries. What a problem to have. No wonder China Investment Corp., Beijing`s sovereign wealth fund, set up its first foreign office in Toronto last year instead of in New York.





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[Ally]

How economic synchronization kept Canada from the edge of the "fiscal cliff"



European leaders are so far incapable of coming together to guide their economy back from the brink, and at the same time members of congress in the United States are bickering beside the edge of a `fiscal cliff.`





Meanwhile, here in Canada, everyone seems to be getting along just fine.





In a remarkable show of collaboration, the Bank of Canada, politicians, and government agencies are synchronizing their efforts to steer the Canadian economy through the ongoing financial crisis.





Read the full article here.

 

[Ally]

Thomas Mulcair, would you please explain this for us?





I keep waiting for NDP leader Thomas Mulcair to explain why the Canadian dollar continues to hover north of 97 cents US, despite the 28% nosedive in crude oil prices since early March, to Monday`s close of just over $79 US a barrel in New York.



But so far, he seems disinclined to explain this curious divergence. How disappointing. We could learn so much from him, I`m sure.




After all, it wasn`t long ago that the federal opposition leader was telling anyone who would listen ` including most of the national media, which dutifully reported his grave warnings ` that Canada`s lofty loonie was primarily due to the impact of high oil prices, a phenomenon popularly known as Dutch disease.




This, in turn, was killing Canada`s manufacturing sector, Mulcair theorized ` a theory refuted by none other than the head of the Canadian Manufacturers and Exporters Association.





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[Ally]

Canadian average home price forecast to decline over next two years





CALGARY ` Average home prices in Canada will likely contract 10 to 15 per cent over the next two years, says a report released Wednesday by TD Economics.




The report said that while new lending rules announced recently are not intended to severely impede household spending and housing demand, their impact will be substantial.




`In particular, the previous rule changes had a significant impact on home sales, particularly in the six months following implementation. The policy changes, combined with modestly higher interest rates and a gradual deterioration in affordability, are expected to trigger a welcomed unwinding of excesses in the Canadian housing market,` said the report.






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[Ally]

The oil sands: Even more ethical than you thought




As Thomas Mulcair can attest, it is rather easier to speak about the oil sands than it is to actually get up here and see what is going on. Fort McMurray, Alta. is remote, and while my first visit was rather longer than Mr. Mulcair`s, it was still only a full day.




Three years ago, upon the occasion of the merger of oil sands pioneer Suncor with Petro-Canada, this column examined some of the ethical questions posed by oil sands development. The argument then was just emerging about `ethical oil,` namely that Alberta oil is morally and strategically superior because it does not support odious regimes, from Venezuela to Saudi Arabia to Russia. The argument has only become stronger since then, propelled by Ezra Levant`s eponymous book, and adopted in the rhetoric of the federal government.





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[Ally]

Moody's: Mortgage rule changes too late?




The warning comes from Moody`s Investor`s Service, following last week`s announcement from Finance Minister Jim Flaherty that rules on government-back mortgages would be tightened to reduce the risk of a housing market crash.




`The government`s moves may have come too late, owing to the buildup in consumer debt that has already occurred,` Moody`s said in a research note Monday.




The changes included reducing the maximum amortization on a government-backed loan to 25 years, from 30 years and reducing the amount consumers can borrow against their home to 80 per cent, down from 85 per cent.




Flaherty had previous said the government would step in `if necessary` but Moody`s is concerned the government waited too long, making a soft landing difficult to engineer.





Read the full article here.

 

[Ally]

Canadian, U.S. CFOs grow glum on economic outlook





Reversing a year of rising optimism, Canadian and U.S. chief financial officers are suddenly more downbeat on the prospects for the economy and their own companies, according to a quarterly survey by Deloitte being released Thursday.






Read the full article here.

 

[Ally]

Earnings rise at strongest pace in over a year







Earnings are rising at the strongest pace in more than a year, a turnaround after wage gains lagged the pace of inflation through much of 2011.






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[Ally]

Accepted accounting practicies: The RioCan case


A common lease clause to negotiate is the `Operating Cost` definition and its inclusions and exclusions. One of the prime concerns for each party is how `capital costs` are addressed.







Over the years many cases have dealt with whether or not a landlord was entitled to charge back costs incurred for a major repair or replacement. Of course much hinged on the wording of the lease. An April 2012 decision of the Ontario Superior Court of Justice in RioCan Holdings Inc. v. Metro Ontario Real Estate Limited [2012] ONSC 1819 indicates the significance of the lease language once again.







In 2002, Riocan carried out extensive repairs (costing $430,000.00) to the pavement of a plaza parking lot in Windsor, Ontario. The process involved `pulverizing the asphalt and underlying granular base, compacting it, and adding a new layer of hot mix.` Riocan amortized the costs over twenty years (its lease form did not require it to do so) and charged its tenants. After 3 years of payments, the Plaza`s anchor tenant disputed the additional monthly cost of $858.00, refused to make further payments and then set-off all of the payments made from its future rent instalments notwithstanding there was no express set-off right in the lease.







Read the full article here.

 

[Ally]

Canada, Israel sign energy deal




CALGARY ` Canada and Israel are joining forces over energy.




The two countries signed an agreement on energy cooperation Tuesday that will allow for more collaboration over resource development projects and renewable power research. Joe Oliver, Canada`s Minister of Natural Resources, signed the agreement along with Israeli Energy and Water Resources Minister Uzi Landau in Tel Aviv.




Ahead of a news conference planned for Thursday, Mr. Oliver said in a statement there was `tremendous opportunities for Canada and Israel to cooperate more closely on energy issues.`





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