October 2010 Canadian Economic Fundamentals

[Ally]

Canada still top economic dog, IMF finds

OTTAWA - Despite the recent slowdown, the International Monetary Fund said yesterday it still forecasts Canada to be the leader in economic growth among major industrialized countries this year and next.

The finding is contained in the group`s latest world economic outlook, which suggested growth in emerging markets would be three times faster than in rich nations in 2011.

The IMF forecast indicated the Canadian economy is set to grow 3.1% this year and 2.7% in 2011, which would be tops among major industrialized economies. Next year`s expected advance would be ahead of the average 2.2% growth anticipated for the other big industrialized economies, such as Japan, the United States and Europe.

The updated IMF forecast for Canada is down from the group`s previously envisaged 3.6% advance in 2010, and just a shade off the 2.8% gain anticipated in 2011.

As for global growth, the IMF trimmed its forecast for 2011 to 4.2% from a July projection of 4.3%. For this year, it expects the world economy to grow 4.8%, up from an earlier forecast of 4.6%.

Read the full article here.

 

[Ally]

Canada `shining example` on world stage

On Friday, I will be in Washington, D.C., to host one of Canada`s last meetings as chair of the Group of Seven (G7) industrialized nations. I will also chair the Commonwealth finance ministers meeting and attend the annual meetings of the International Monetary Fund and the World Bank.

These meetings come as we wind down a remarkable year for Canada on the international stage and a tumultuous two years for the world economy.

Our Canadian economy`s resilience in the wake of the global recession and our leadership in seeking solutions have cemented our reputation as a shining example in the global efforts to make the world a more stable place.

No doubt, Canada is punching above its weight on the world stage.

Canada continues to serve as a world role model, having weathered the global recession better than all other G7 countries and being recognized internationally for the strength of its financial system.

However, as a global leader, we have also faced challenges this year. We fought and won against the push for a global bank tax, and highlighted more appropriate approaches for ensuring a stable financial sector. Our regulatory system and financial stewardship have served as an example to many countries around the world, which have taken their cue from the Canadian model as they consider reforms to their own.

Read the full article here.

 

[Ally]

Canada`s job numbers: What the analysts say
It was unexpected news: The Canadian economy lost 6,600 jobs in September, Statistics Canada revealed Friday. The numbers showed that the country`s recovery is starting to falter, after initially experiencing a strong rebound from recession.

So what does this mean for the country and its recovery going forward? Here`s a roundup of what some of the country`s top analysts and economists think:

Douglas Porter, Economist, BMO Capital Markets

This report is not nearly as dire as the headline decline would suggest, given the strength in full-time and private sector jobs. However, there is no denying the fact that employment conditions have cooled markedly from the piping hot pace seen as recently as the spring. Renewed solid job gains will be tough to come by in the months ahead amid the lacklustre pace of underlying growth that has spilled over from the U.S. into Canada.



Derek Burleton, Deputy Chief Economist

, TD Bank Financial Group

With gains in actual hours worked and full-time positions registered in the month, the September report was somewhat better than that implied by the decline in the headline job count. Still, today`s data highlight that the nation`s job market is cooling on a trend basis in lockstep with the simmering down in the overall economy since the spring of the year.

Looking forward, we expect the trend rate to average in the sub-par 5,000-10,000 positions per month over the remainder of this year and in early 2011, before a gradual acceleration is recorded later next year. In this environment of slow job growth, the unemployment rate is likely to hold steady at around 8%.

Read the full article here.

 

[Ally]

Return decorum to the house

It is tempting to encourage support for Motion M-517, Conservative MP Michael Chong`s bill to reform the daily gong show known as Question Period, solely because the Bloc Quebecois is so strongly opposed.

In a vote on Wednesday, the private member`s bill was supported by 235 MPs from the Conservative, Liberal and NDP benches, while 44 Bloc MPs opposed it. The Bloc claims the bill`s recommendations would "muzzle" it by reducing the number of questions it gets to ask and limiting the opportunity for surprise "ambush questions."

The real reason for the Bloc`s objection may be Mr. Chong`s status as a staunch federalist who famously resigned his Cabinet post over the government`s resolution to recognize the Quebecois people as a nation in 2006. As Mr. Chong noted: "A dysfunctional Parliament is not inconsistent with the goal of a separatist party."

But the real basis for supporting Mr. Chong`s admirable initiative is near-universal agreement that Question Period desperately needs fixing. Question Period -- the daily 45-minute forum in which opposition members get to put questions to the government -- has become a national disgrace. Decorum is abandoned as MPs shower ritual abuse on one another, posing questions designed solely to embarrass and receiving responses intended to insult or obfuscate. All in an atmosphere so toxic it`s a wonder MPs don`t emerge gagging and coughing every afternoon.

Read the full article here.

 

[Ally]

Panic looms as economic leaders meet in Washington

Recent actions of world leaders show just how panicked they are about the "perilous" economic outlook, although it is a situation unlikely to be resolved when finance ministers from the world`s major developed nations meet today, economists warn.

"Sovereign states the world over are sending sickly and increasingly desperate signals as they raid the medicine box for a motley cocktail of stimulus-inducing programs," TD Securities economist Eric Lascelles says.

"The sheer number of these is almost overwhelming, and they have ranged from additional quantitative easing in Japan to foreign exchange intervention in South Korea, to stronger capital controls in Brazil, to legislative threats in the U.S."

The implications are that "if sovereign states are worried, it is time for the rest of us to be very concerned," Lascelles wrote in a commentary.

"Second, while some actions undertaken [are] reasonably constructive [they] show just how panicked sovereigns are, and threaten to trip up what remains of the global recovery."

Read the full article here.

 

[Ally]

History of unemployment rates in Canada

Read the story here.

 

[Ally]

Canada will lead economic growth: IMF

Despite the recent slowdown, the International Monetary Fund said Wednesday that it still expects Canada will be the leader in economic growth among industrialized countries this year and next.

The finding is contained in the organization`s latest world economic outlook, released Wednesday, which suggested growth in the emerging markets would advance three times faster than rich nations next year.

The IMF forecast that indicated the Canadian economy is set to grow 3.1 per cent this year and 2.7 per cent in 2011, which would be tops among major industrialized econ-omies.

Plus, next year`s expected advance of 2.7 per cent would be ahead of the average 2.2-per-cent growth anticipated for the other major econ-omies, such as Japan, the United States and Europe.

The updated IMF forecast for Canada is down from the group`s previously forecast of 3.6 per cent growth in 2010, and just a shade off the 2.8-per-cent gain anticipated in 2011.

The Bank of Canada had anticipated 3.5-per-cent growth this year and 2.9 per cent in 2011, although those forecasts are expected to be lowered when the central bank releases its updated economic outlook on Oct. 20.

Read the full article here.

 

[Ally]

Residential building plans plunge

EDMONTON - The value of Canadian building permits fell sharply in August, but while in other provinces the decline was felt in non-residential projects, Alberta`s declines came entirely in the residential sector, Statistics Canada reported Thursday.

The province`s 20.6-per-cent decline in housing permits in August was second only to the drop in P.E.I., at 39.6 per cent. Intentions were down 24 per cent in Edmonton and 27 per cent in Calgary.

Across Alberta, cities issued permits for $851 million worth of construction projects in August, an 11.1-percent decline from July.

"The decline in Alberta was due entirely to fewer residential permits, which plunged 20.6 per cent to $481 million," said ATB Financial economist Dan Sumner in a statement.

Read the full article here.

 

[Ally]

Bank of Canada seen on hold as Canada loses jobs

OTTAWA — More proof the Canadian economy has cooled emerged Friday with labour data indicating a net 6,600 jobs were lost in September, giving the Bank of Canada additional reasons to refrain from rate hikes in the coming months.

Yet there were bright spots within the data — such as a 37,000 addition in full-time jobs — that gave analysts encouragement about the health of the Canadian economy.

The unemployment rate dropped, to eight per cent, although that was driven by more people opting to stop looking for a job and, among other things, return to school. Plus, the headline job loss was below the consensus call for a 10,000 gain in September.

September marked the second time in three months the economy reported monthly net job losses, following an amazing six-month streak beginning last January in which monthly job growth averaged 51,000. A total 19,900 jobs were created for the three-month period ended Sept. 30.

Read the full article here.

 

[Ally]

Housing weakness expected to be a drag on growth

OTTAWA — Canada`s housing market helped lift the economy in the early part of the recovery but will now act as a drag on growth, with starts falling for two straight quarters and expected to continue to fall in the months ahead, economists say.

Canada Mortgage and Housing reported Friday housing starts declined 1.5 per cent in September from the previous month, bringing the seasonally adjusted annual rate to 186,400 units in September.

Analysts had called for a bigger drop in starts, to 179,000.

Starts have now fallen for four of the past five months, leading to two straight quarters of overcall declines.

"After helping to support the rebound in real GDP growth over the last year, residential investment is likely to be a drag on economic growth through the second half of this year," said Diana Petramala, an economist at TD Economics.

Those declines will also hurt employment, adding upside risk to a construction industry whose unemployment rate is already 2.5 percentage points higher than the national average, at 10.5 per cent, Petramala said.

Read the full article here.

 

[Ally]

Canadian deals outpaced world in third quater: PwC

Canadian mergers and acquisitions activity outpaced the rest of the world in the third quarter thanks to billion-dollar deals. However the actual number of transactions declined to its lowest level since 2008, PwC said Friday.

For the quarter, companies announced almost $95-billion in Canadian deals, up 168% from the prior quarter.

Globally, the total value of M&A deals declined 9% compared with the previous quarter.

"This quarter was characterized by marquee mega-deals," Kristian Knibutat, national deals leader for PwC, said in a release.

Australian miner BHP Billiton PLC`s $39-billion hostile bid for Potash Corp. of Saskatchewan accounted for 42% of the total value in the quarter, while there were also 13 other deals of $1-billion or more, he said.

As for the number of deals, the 675 announced was down 12% from the second quarter and the slowest quarter since the 2008 credit crisis.

Read the full article here.

 

[Ally]

How can I afford a $790,00 house?

I`ve spent the majority of my adult life dreaming of the day that I become a homeowner. Unfortunately, I live in Vancouver - one of the most expensive real estate markets in North America. How expensive is Vancouver? According to the Vancouver real Estate Board, last month the average detached home in Greater Vancouver was $790,992. And the median household income in Vancouver? A paltry $47,229. Ouch.

Still, the statistics don`t make me any less determined to become a homeowner. One of the main reasons I wanted to get out of debt so quickly after college was the knowledge that with a debt-free life, I could save money faster for a down payment, and position myself in the best possible way to qualify for a mortgage.

Buying a home is no joke. Chances are, it will be the single biggest purchase of your life, and you don`t want to mess around.

Plan ahead & make your goals a reality
I have realistic expectations. I know that as first-time home owners, my partner and I simply cannot afford an $800,000 house in Vancouver. And since we aren`t willing to move elsewhere, we have accepted the high cost of living. We know that for our first home we have to downsize our expectations, and know that we will probably end up in a townhouse. I know that one day, we will get into a house of our own, but for now I would rather buy something that I am comfortable with, instead of being house poor.

Read the full article here.

 

[Ally]

Widespread gains reported in manufacturing sector

OTTAWA—Manufacturing sales increased two per cent in August to $45.1 billion.

Statistics Canada reports gains were widespread but the increase was powered by motor vehicle and petroleum and coal product manufacturers.

The agency says higher sales volumes were responsible for most of the gain.

Constant-dollar manufacturing sales were up 2.1 per cent as 15 of 21 industries, representing 81.8 per cent of total sales, reported increases.

Sales rose 13.9 per cent to $4 billion in the motor vehicle manufacturing industry as August production increased following widespread plant shutdowns in July.

Sales rose 2.4 per cent in the petroleum and coal products industry to $5.4 billion, largely on the strength of higher sales volumes.

Other industries contributing to the overall increase in factory sales included non-metallic mineral products (up 6.3 per cent), fabricated metal products (2.3), chemicals (1.5) and paper (2.3).

Read the full article here.

 

[Ally]

Home sales, prices up in September

TORONTO — Housing sales rose in September for a second straight month while average prices reversed the falling trend with a 1.9% increase from August, the Canadian Real Estate Association said Friday.

The Ottawa-based group said sales in September climbed 3% from August on a seasonally adjusted basis. It was the highest number of sales since last May.

At the same time prices also showed some growth. The average sale price across the Multiple Listing Service last month was $331,089, on par with where it stood a year ago, and an increase from $324,928 in August.

"Supply and demand are rebalancing, and that`s keeping prices steady in many markets," said Georges Pahud, president of CREA.

With demand improving slightly and the supply of homes falling, the number of months of inventory in the market dropped for a second straight month, the group said. New listings remain 15% below the peak reached in April.

Read the full article here.

 

[Ally]

Survey finds Canadian small businesses surviving through recession

More than half of Canadian entrepreneurs say the recent recession had either no impact or a positive impact on their business, says a survey released today by RBC.

And the majority (72 per cent) are optimistic about the success of their companies over the next year, even though 58 per cent of small business owners do not think the recession is over yet, and just 23 per cent say that they will be adding staff in the next year. Most entrepreneurs (65 per cent) believe the outlook for the Canadian economy is positive, ranking it `good`, `very good` or `excellent`.

"Entrepreneurs are optimistic which is consistent with what our clients are telling us and this is reflected in their plans for the future," said Mike Michell, national director, Small Business, RBC. "Small business owners feel as though they have weathered the storm well, but are still prudently approaching the future by reviewing their business plans and assessing their financing options."

Small business owners say that the biggest challenges they currently face are finding clients and developing their market (22 per cent), keeping a steady workload (13 per cent), and maintaining sufficient cash flow and financing growth (11 per cent). Of the 36 per cent of entrepreneurs that experienced a negative impact as a result of the recession, 72 per cent say that sales revenue decreased, and 54 per cent say there are fewer business opportunities.

Read the full article here.

 

[Ally]

Cottage intentions count with the taxman

For those fortunate enough to own a vacation property, Thanksgiving weekend is often the last time the family will gather together at the cottage or cabin until next year`s May long weekend.

While the benefits of sipping a gin and tonic on a summer day on the dock or cruising around the lake may justify the cost of that second property, the ability to defer some of the expenses by renting it out when you`re not there can often make or break the decision to purchase that second home.

But renting out your vacation property is not always as easy at it seems and can lead to trouble with the taxman if you try to claim rental losses when the revenue doesn`t materialize.

Take the recent case of Mike Daoust, who in 2004 purchased a cottage at Moth Lake in Manitoba. In 2005 and 2006, he claimed rental losses of more than $9,000 and $6,500 respectively. He sold the cottage last year for an $80,000 gain.

Read the full article here.

 

[Ally]

Flaherty seen to stay on course on economy

OTTAWA -- Fresh off meeting his global peers in Washington, Finance Minister Jim Flaherty is set to outline his government`s outlook on the economy and public finances in the annual fall fiscal update, to be released Tuesday.

In a Mississauga, Ont., speech to that city`s Chinese business association, Mr. Flaherty is expected to reinforce the government`s message that the economy is the top priority because the global recovery remains "fragile," say people familiar with the update`s release. The recovery has hit another rough patch in recent days due to a series of extraordinary exchange-rate interventions by advanced and emerging economies -- a topic that dominated talks between Mr. Flaherty and his peers over the weekend at meetings of the International Monetary Fund and World Bank.

Sources added the update is not expected to contain any new policy measures that would "protect" the recovery, as Mr. Flaherty vowed a few weeks ago when releasing the latest report on federal stimulus spending.

Since that pledge, Ottawa has indicated it may fund some stimulus-linked infrastructure projects past the March 31, 2011, if they are relatively close to completion; and introduced measures that would cap increases in Employment Insurance benefits, beginning on Jan. 1, that would extend for several years. Business and labour groups warned bringing in higher EI premiums at this time could crimp already-slowing GDP growth.

Read the full article here.

 

[Ally]

IMF fails to find concensus to ease currency frictions as talks end

WASHINGTON — The world`s top finance officials closed out three days of talks here Sunday after failing to reach a consensus on measures to head off what some see as a looming currency war.

The International Monetary Fund steering committee, which has been struggling to address friction among key economies including China and the United States, said Saturday the organization should continue its study.

"While the international monetary system has proved resilient, tensions and vulnerabilities remain as a result of widening global imbalances, continued volatile capital flows, exchange rate movements and issues related to the supply and accumulation of official reserves," the IMF panel said in a statement after its meeting.

"We call on the Fund to deepen its work in these areas, including in-depth studies to help increase the effectiveness of policies to manage capital flows."

The statement from the International Monetary and Financial Committee, the policy arm of the IMF, stopped short of any specific call on China or others to change policies of using a low currency and accumulation of reserves to boost exports.

Read the full article here.

 

[Ally]

New market penetration - A passage to India

Growth-focused North American companies can no longer ignore India. Traditionally known as a centre for business process outsourcing, India is rapidly joining the ranks of the first world as a major market for consumer goods and services.

According to the IMF, India is projected to generate GDP growth of 9.7% in 2010 and 8.4% in 2011. Much of this growth can be traced to burgeoning consumer demand. According to Stewart Hall, economist for HSBC Securities Canada: "India is essentially a high-growth economy. It`s a story fueled to a large extent by domestic consumption." Domestic growth, according to the IMF, is being driven by a "low reliance on exports, accommodative polices and strong capital inflows."

There remains considerable room for economic expansion arising from strong economic fundamentals. These include: growing urbanization, a large, young workforce and an expanding service sector. All of these factors are contributing to the emergence of a sizable, materialistic and ambitious middle class. According to McKinsey, India`s middle class is projected to grow from about 5% of the population to more than 40% by 2025, creating the World`s fifth-largest consumer market.

Given the opportunity, what factors should companies consider when crafting their Indian-entry strategy?

Read the full article here.

 

[Ally]

New home prices still climbing

The housing sector received a small boost Wednesday with news from Statistics Canada that new home prices are continuing to climb, albeit slowly.

The StatsCan data, which shows prices up 2.9% from a year ago, follows reports from last month that sales of existing homes climbed in August for the first time in four months. Existing home prices continued to fall, dropping 1.6% in August from a month ago.

With the Canadian Real Estate Association set to release September results Friday, any price increase has to be seen as positive news for the industry. StatsCan did say the price increase from July to August was only 0.1% nationwide.

Craig Alexander, chief economist with TD Bank Financial Group, was cautious about interpreting the latest results as a turnaround for a resale housing sector that saw sales dip 20% in August from a year ago.

"The bulk of the change in new home prices is reflective of what is happening to construction costs not what is happening to supply and demand in the real estate market," says Mr. Alexander, suggesting it may not play out for the entire housing market.

Read the full article here.