May 2011 Canadian Economic Fundamentals

[Ally]

Is China's economic boom over?



Back in 2007, Premier Wen Jiabao called the Chinese economy increasingly unstable, unbalanced, uncoordinated and ultimately unsustainable. He has used the same language this year and there's every chance the description will still apply in another four years.





The timing of when China's growth model will "ultimately" run out of steam is probably the most critical question facing the world economy.





Mature economies such as the United States and Germany are lucky to grow faster than around 3%. China, by contrast, has expanded 10.1% a year on average since 1978.





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[Ally]

Global economic recovery takes a breather



It was fun while it lasted. After several strong quarters, the global economic recovery appears to be sputtering. In particular, the industrial sector, a key driver of the bounce-back from a historic worldwide recession, looks to be fraying.





`People need to seriously consider the scenario where global industrial growth, once again, starts to throttle back ` because it`s not that far away,` said Lakshman Achuthan, managing director of the Economic Cycle Research Institute.





A report on U.S. durables goods orders due on Wednesday should give fresh insight into manufacturing demand after an unexpected plunge in the Philadelphia Federal Reserve Bank`s index of May factory activity caught investors by surprise.





Economists are looking for a 2.2% decline in durables orders for May, according to a Reuters poll. A closely watched measure of non-defense orders excluding aircraft, seen as a proxy for business investment, is projected to inch up just 0.2%.





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[Ally]

BoC rate hike on hold until September: RBC



The Bank of Canada`s plan to raise interest rates and exit its stimulus program has been delayed to September due to renewed uncertainty about the fiscal crunch in Europe and its potential spillover effects into Canada, the team at RBC Economics said Tuesday.





Dawn Desjardins, assistant chief economist with RBC, expects the BoC to maintain its 1.00% rate until September, and has cut the forecast rate to 1.75% by the end of 2011 from 2.00%. RBC maintains expectations for the overnight rate to hit 2.5% in mid-2012, and forecast GDP growth of 3.2% in 2011 and 3.1% in 2012.





RBC had originally forecasted rate hikes in July, September, October and December this year. The bank now only expects hikes in September, October and December, Ms. Desjardins said in an e-mail.





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[Ally]

Canadian housing prices risk slide: Report



PARIS ` Canada's housing market faces a risk of sliding prices, according to a report released Wednesday that warns the current global economic rebound from the 2008 crisis could falter.







The Organization for Economic Co-operation and Development's twice-a-year economic outlook report said the world economy is in an uneven recovery and confronting far more "downside" than "upside" risks.







The negative risks include the possibility of an inflationary rise in oil and other commodity prices, a deeper slowdown in China's economy, continued deficit problems and housing market weakness plaguing the United States and Japan, and mounting sovereign debt problems facing Europe.





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[Ally]

Canadian economy 'spilling beyond our borders'




Canada is generating more in sales from the foreign affiliates of Canadian companies as the country`s exports as whole, the head of Export Development Canada said.







While Canadian exports totalled about $450-billion last year, foreign affiliates are generating sales in the range of more than $500-billion, said Stephen Poloz, president and chief executive of Export Development Canada.







`The Canadian economy is spilling beyond our borders,` Mr. Poloz told a Toronto audience at the Four Seasons Hotel. `There is another whole Canadian economy out there.`





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[Ally]

Jobless rate to be at or above 7% through 2014, TD warns




Canada is among the top countries in the OECD when it comes to employment, and among the lowest in terms of long-term jobless levels. But unemployment is still forecast to remain at or above 7 per cent for the next few years.




Canada's jobless rate is projected to be 7.7 per cent this year, down from the 2010 level, and will ease gradually to 7.4 per cent in 2012, 7.2 per cent in 2013, and 7 per cent in 2012, Toronto-Dominion Bank economists said Tuesday in a new forecast.





The projections highlight the struggle of getting the labour market back to its pre-recession peak, particularly given Canada's strength.





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[Ally]

Home resale prices rise for fourth consecutive month




Home resale prices rose in March for a fourth straight month as prices rose in five of six metropolitan markets, according to a recent report.




The Teranet-National Bank Composite House Price Index, which measures price changes for repeat sales of single-family homes in six metropolitan areas, showed overall prices were up 0.6 percent in March from February.




Overall prices were up 4.1 percent from a year earlier.




In March, prices rose in five of the six metropolitan markets surveyed. The largest monthly advance was in the Montreal market, 1.2 per cent. The rise was 0.6 per cent in Toronto and Vancouver, 0.4 per cent in Ottawa and 0.3 per cent in Halifax. Calgary trailed for a third consecutive month, though its 0.1 per cent decline was the smallest of the seven decreases reported in the last eight months.





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[Ally]

Competition Bureau sues Toronto Real Estate Board




The Competition Bureau is suing the largest real estate board in Canada, alleging the Toronto board is preventing agents from creating new services that would make it easier for consumers to buy and sell homes.




The Toronto Real Estate Board represents 31,000 agents, and operates the Multiple Listing Service for the region. The Competition Bureau says the board is `restricting how its member agents can provide information from the Toronto MLS system to their customers, thereby denying member agents the ability to provide innovative brokerage services over the Internet.`





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[Ally]

Home resale price index up most in 9 months






TORONTO (Reuters) - Home resale prices rose in March for a fourth straight month, its biggest advance in nine, as prices rose in nearly all of the metropolitan markets tracked by the Teranet-National Bank Composite House Price Index.





The index, which measures price changes for repeat sales of single-family homes in six metropolitan areas, on Wednesday showed overall prices were up 0.6 percent in March from February. Five metropolitan areas reported increases in the month.





"This should calm those who were fearing a severe downward price correction," said Marc Pinsonneault, senior economist at National Bank Financial.





"On the other hand, we do not think that the acceleration of home price inflation in March represents the start of a lasting trend."





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[Ally]

Top 10 features of a profitable rental property




From the first decision to invest in real estate to actually buying your first rental property, there is a lot of work to be done. This task may be daunting for the first-time investor. Owning property is a tough business and the field is peppered with land mines that can obliterate your returns. Here we`ll take a look at the top 10 things you should consider when shopping for an income property. (For related reading, check out Simple Ways To Invest In Real Estate.)





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[Ally]

The running out of resources myth





The premise behind the question `Are we running out of natural resources?` is terribly mistaken. There is indeed a finite quantity of fossil fuels and other resources in the Earth`s crust. But that does not mean that we will ever run out of them. In fact, human beings will likely cease using fossil fuels long before we have used them up, and this transition is independent of any policy designed to speed up the development of alternative energy sources.



Fears that we are running out of commodities are not new. In the 18th century, Thomas Malthus predicted that mass starvation would result from an inability of the food supply to adjust for rapid population growth. In the 1970s, the Club of Rome predicted massive shortages of natural resources due to overconsumption and overpopulation, with disastrous effects on human health and material well-being. In 1980, The Global 2000 Report to the President noted that: `If present trends continue, the world in 2000 will be more crowded, more polluted, less stable ecologically, and more vulnerable to disruption than the world we live in now.` `




But the ecosystem hasn`t collapsed. We haven`t run out of oil. We are still successfully feeding ourselves. Our incomes are rising and our health status is improving around the globe. Why?





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[Ally]

Prospects weak for Spain's youth as jobless rate balloons



The first thing Silvia Huelves was told when she started studying architecture was that she should take up Chinese or Japanese ` she was not going to build anything in Spain any time soon.





It wasn`t criticism of her skills but a reflection on the state of the country, where the jobless rate among 16-24-year-olds is a staggering 45 per cent and a construction sector slump caused nearly two years of recession.



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[Ally]

Ottawa beating deficit target




The Conservative government is expected to beat its deficit target for the last fiscal year, but the final numbers won`t be known until fall.




According to the Fiscal Monitor ` a monthly tracking report ` the federal deficit from April 1, 2010, to March 31, 2011, stands at $34.4-billion. That`s nearly $6-billion lower than the $40.5-billion deficit forecast in the March, 2011, budget that failed to win Parliamentary support before the election.





However the report cautions against citing the $6-billion figure, as further adjustments are expected before the final number is released in the fall.





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[Ally]

Target's arrival sparks mall land rush





The race for Canadian retail space is on, with U.S. discounter Target Corp. (TGT-N49.37-0.04-0.08%) naming the first 105 Zellers stores it plans to convert to its own banner in the next two years.




Target`s bold step into this market has landlords scrambling to expand their shopping centres and build new ones to serve foreign retailers that want to set up shop here in the next few years. U.S. chains such as J. Crew and Nordstrom Inc. are attracted by Canadians` appetite for shopping: Sales average $580 per square foot in Canada, while the U.S. market average is $309.





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[Ally]

OECD urges Bank of Canada to raise rates




The Bank of Canada should raise borrowing costs within the next few months to show consumers and businesses that it has a grip on inflation, the Organization for Economic Co-operation says in a new assessment of Canada`s economy.




Policy makers need not be aggressive in raising rates, as the reduction of fiscal stimulus, slower consumer spending as households pare record levels of debt, and a higher dollar will restrain economic growth this year, the Paris-based OECD says in the report.





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[Ally]

Canadians to get rate hike reprieve




The Bank of Canada is widely expected to leave its key benchmark interest rate unchanged next Tuesday ` and may even sit on the sidelines until September, economists say.




That`s good news for consumers who will continue to enjoy record low interest rates on mortgages and other borrowing.




Even if the central bank leaves its overnight rate unchanged at 1 per cent next week, it`s likely to again warn consumers that the clock is ticking: interest rates will be going up; it`s just a matter of when.





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[Ally]

Ottawa's shortfall less than forecast




OTTAWA ` The federal government deficit for the past fiscal year was lower than projected, the Department of Finance said Friday.







Preliminary figures put that deficit at $34.4 billion for the 12 months ended in March. While that`s expected to be higher after year-end adjustments are made ` such as calculating tax returns and assessing current values of assets and liability ` it is still expected to come in lower than the $40.5-billion deficit that was projected when the Conservative government tabled its budget March 22.







The budget was never passed as the minority government was defeated by Opposition parties in the House of Commons, but the Conservatives were returned to power in the May 2 election with a majority government.







The past year`s deficit will also mark a decline from the $47-billion shortfall seen in the 2009-10 fiscal year, the government said.





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[Ally]

Overcome your condophobia




Our friends loved their new condo on the shore of Bedford Basin in Nova Scotia. They had sold their charming house a few miles away and, they thought, moved onward and upward. Their new home was a dream, with gleaming hardwood floors and vistas down the water toward Halifax. This was their retirement palace.




But three years later, they were gone. They bought a new house nearby, said good riddance to their erstwhile condo retirement palace and a very special good riddance to some of their neighbours in the building.




"I finally couldn't stand having to deal with the idiots in the building," our friend said. "It was like the lunatics were running the asylum. I even went on the condo board of directors. But it was no use. We had to leave to retain our sanity."





Read the full article here.

 

[Ally]

A world of financial ruin




The present U.S. administration, building, certainly on unpromising leavings from its predecessor, has shuffled from one delayed reaction placebo to another to anesthetize financial markets with a sequence of consciousness-lowering deferrals. First we were waiting for the Simpson-Bowles debt commission, which held any actual attention to the problem at bay for nearly two years. It reported quite sensibly and sank like lead weight, but without a ripple. The administration's budget proposed a dynamic eventual freeze on 15% of federal government expenses, a solution that underwhelmed almost everyone.




The House Budget Committee chairman, Republican Paul Ryan, proposed a plan that only cut the deficit initially by a little over 10%, but cut very appreciably into future outlays and was at least something that could serve as an opening gambit. Barack Obama then pilloried the congressman on national television in strictures usually reserved for judicial or editorial condemnations of skinheads who steal the hearing aids and Zimmer frames of the elderly and the mittens of the new-born. Newt Gingrich -who succeeded the politically late Donald "the Stillbirther" Trump as the most improbable candidate for national office since the 1948 Progressive nominee for vice president, Glen H. ("The Singing Cowboy of Idaho") Taylor ("Oh Give me a Home by the Capital Dome"), was so shaken by the implications of possibly having to do something about such bonecracking deficits that he called for a "national conversation" about it, a tocsin that stirred the nation to the depths of its finger tips.




When Barack Obama took office, the official normal money supply of the United States was about $1.1-trillion. The $3-trillion in federal budget deficits that have been run up since then have largely, technically, escaped the money supply, though accretions have almost doubled the official total, an unheard of rate of growth (about 40% annualized) in a hard-currency country. About 70% of this debt has been paid by the issuance of bonds to the central bank of the United States, the Federal Reserve, a subsidiary of the United States government. Whatever the balance sheets say, this has produced the effect of a money-supply increase, which has brought pump-priming to a level of over-achievement not seen since Noah felt the compulsion to build an ark. And the annual trillion-dollar deluge is forecast to continue for a decade.





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[Ally]

A recipe for riots




PEOPLE living in the towns of sub-Saharan Africa spend a bigger share of their income on food than do urban residents almost anywhere else in the world. Labourers often use up over half their wage just to eat. And since Africans tend to depend on a few staple crops, rises in cereal prices can be devastating. More money on food means less on school fees, sanitation and health. It may also mean more girls forced into prostitution and more violent crime.




In some African markets maize and wheat prices have risen by 30% this year. Political tension invariably rises, too. Burkina Faso, Mozambique, Senegal and Uganda have had food-related demonstrations and riots. Some people worry that price rises may push Sierra Leone back into chaos and keep CÃte d`Ivoire on edge. Higher prices have left providers to the hungriest, such as the UN`s World Food Programme, badly short of cash.




Some African governments are managing food markets well. Kenya recently waived duty on wheat and maize imports, dampening prices as well as anger. Other countries have offset increases by launching food-for-work schemes or handing out vouchers for water and other services to boost the amount of money consumers can spend on food.





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