October 2010 Canadian Economic Fundamentals

[Ally]

Canada needs to diversify its energy markets, say energy security experts

Calgary - Government intervention in energy projects could become more of a probability as Canada seeks to secure and diversify market access, according to policy experts.

Canada needs to diversify its market for oil, natural gas and electricity at the same time ensuring open access to our largest trade partner, the United States, said speakers at an energy security conference.

"As exporters of energy, we need to ensure the markets are there as opposed to most countries who are most concerned about being able to access energy," said Bruce Colin, executive director of the Canada School of Energy and Environment.

"It`s hard to be a so-called energy super power when you`ve only got one market," he noted. "So if we are going to move either a clean energy super power or an energy super power, we`ve got to diversify our markets. And that`s where looking toward Asia and certainly China and India would be helpful."

Diversity could also enhance the trade relationship between Canada and the U.S., added Jack Mintz, director of the University of Calgary`s School of Public Policy.

Read the full article here.

 

[Ally]

Rising loonie eases pressure on rates

Analysts are unanimous in their belief the Bank of Canada will hold rates steady at its October policy meeting on Tuesday, but they will parse the statements of bank governor Mark Carney for signs of how long interest costs could be on hold.

The bank raised rates at its past three meetings to one per cent after the economy rose vigorously out of its recessionary depths early in the year.

But the economy has cooled sharply in recent months, leading many analysts to conclude rate hikes will be on hold into the first half of 2011, as the housing market cools, exports slow and the U.S. struggles to create jobs.

All eighteen analysts polled by Bloomberg expect the bank to keep rates steady.

Carney will elaborate on the decision on Wednesday when the bank releases its monetary policy report.

Read the full article here.

 

[Ally]

September home sales off 20% year-over-year

The weather is turning cooler – and so are sales in the Canadian housing market.

Canadian home sales were up a seasonally adjusted 3 per cent in September over August, according to the Canadian Real Estate Association in figures released Friday.

However, actual year over year activity in September fell by 19.8 per cent compared with 2009.

And unlike the strong increases in past months, prices are flat lining and back to where they were a year ago. Average prices are now at $331,089, down 0.4 per cent from September 2009.

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

One thing that`s keeping pricing from dropping further is that new listings remain 15 per cent below the peak reached in April, as some vendors have decided to take their homes off the market.

Read the full article here.

 

[Ally]

1% rate hike likely here for long haul

Analysts are unanimous in their belief the Bank of Canada will hold rates steady at its October policy meeting tomorrow, but they will parse the statements of bank governor Mark Carney for signs of how long interest costs could be on hold.

The bank raised its target rate over its past three meetings to 1% after the economy rose vigorously out of its re-cessionary depths early in the year.

But the economy has cooled sharply in recent months, leading many analysts to conclude rate hikes will be on hold into the first half of 2011 or later, as the housing market cools, exports slow and the U.S. struggles to create jobs.

All 18 analysts polled by Bloomberg expect the bank to keep rates steady. Mr. Carney will elaborate on the decision on Wednesday when the bank releases its monetary policy report.

The likelihood of a pause is made greater by the recent stellar rise in the Canadian dollar, CIBC said in a weekly report.

Read the full article here.

 

[Ally]

U.S. foundations against the oilsands

There has never been a major oil spill in Vancouver harbour, but this coming Sunday protestors who say a spill is inevitable will take kayaks and canoes out into the water to stare down oil tankers. Chances are there won`t be a tanker in sight, but there will be a party boat, organizers say.

If the campaign against oil tankers were to succeed in Vancouver, overseas exports of Canadian oil would be blocked and Canada would be stuck with only one major customer for Alberta oil: the United States. That`s the trade-off.

Like most protests, the one against oil tankers has all the look and feel of a Canadian grassroots movement. The campaign against Alberta`s oil sands also seems to rise out of the people, but the interesting thing is that there are very few roots under that grass. Money comes in from a small core of U.S. charitable groups. One of those groups — the U.S. Tides Foundation of California (Tides U.S.) and its Canadian counterpart have paid millions to at least 36 campaign organizations. (See list below.)

All the money, at least US$6-million, comes from a single, foreign charity. The Tides U.S. campaign against Alberta oil is a campaign against one of Canada`s most important industries. It`s fair for Canadians to inquire about who`s funding this campaign and why. The trouble is, nobody knows.

But Tides U.S. is not alone. U.S. tax returns and public records show that Tides U.S. and charities based in California and New York have granted US$15-million since 2003 specifically for campaigns against Alberta oil and against oil tanker traffic and pipelines through British Columbia. The purposes for these grants are clearly outlined in the filings. For example, Tides U.S. received US$700,000 in 2009 from the Oak Foundation of San Francisco "to raise the visibility of the tar sands issue and slow the expansion of tar sands production by stopping new infrastructure development."

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[Ally]

West is where the money is

It is not easy starting a business at the best of times, but Benjamin Dalziel and Joseph Facciola picked just about the worst time possible when they left Ontario to open a food-and-wine tour business in the upscale resort town of Whistler, B.C., in September 2008.

The concept, a guided three-hour walking tour that includes a four-course dinner spread across four restaurants, seems like a good one, but a risky tourism venture from two guys with little business experience at the apex of global economic armageddon? Seriously?

"Well, I was looking for work in Toronto right as the economy was starting to crumble, and nobody was hiring," Mr. Dalziel said. "Definitely, we were worried [about things like financing and people not vacationing] but we figured if we couldn`t pull it off when we`re young and motivated, we wouldn`t be able to do it later in life."

The enthusiasm and optimism of Mr. Dalziel and other independent business owners for their prospects moving is a major reason why cities and regions in Western Canada continue to hold most of the top spots of the third annual FP/CFIB ranking of Canada`s top 100 entrepreneurial cities.

"Optimism levels are considerably higher now than in the past year," Ted Mallett, chief economist with the Canadian Federation of Independent Business, said in an interview. "Alberta, for instance, had a bigger bounceback than most other provinces as it had a bigger drop in optimism [the previous year]."

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[Ally]

Cashing in on recovery

From his shop in Grande Prairie, a small city in northwestern Alberta near the B.C. border, Jay Morris has easy access to a steady supply of trade workers, materials and low tax rates to help fuel the growth of his company, Wildhorse Oilfield Services Ltd.

"It`s cheaper to do business in Alberta," Mr. Morris says. Although he operates in British Columbia, locating his head office in Grande Prairie made sense because it`s a hub of activity serving northern and central Alberta, as well as British Columbia.

"That`s why we`re set up the way we are, so we can do a lot of the [prefabrication] work here and realize savings on this end and still do work out there. It`s a competitive edge," he says.

It`s an ideal situation in many ways. Low taxes and a business-friendly environment have helped fuel the growth of Wildhorse, even during the recession. The company is set to double its revenue year over year. "We`re very optimistic," Mr. Morris says.

Grande Prairie topped the annual FP/ Canadian Federation of Independent Business (CFIB) ranking for business-friendly cities, marking a shift away from Quebec, where many cities in the Top 10 last year were found.

Read the full article here.

 

[Ally]

Canadian housing prices indicative of balanced housing market: Royal LePage

OTTAWA — Canada`s housing market, while no longer red-hot, remains on steady ground, according to a report by Royal LePage.

The real estate services firm said Tuesday that home prices in the third quarter of this year saw growth of less than five per cent, year-over-year, "which is historically typical of balanced real estate markets."

The average price of a Canadian bungalow in the three-month period ending in September was $324,531, up 4.6 per cent from a year earlier, Royal LePage said. The average two-storey was up 4.4 per cent to $360,329, and the rate for a condominium rose 3.9 per cent to $226,481.

Phil Soper, chief executive of Royal LePage Real Estate Services, said while annual price growth was slightly lower than five per cent in the last quarter, it`s basically in line with that level when factoring in a lower rate of inflation.

In the early part of this year and latter part of 2009, double-digit price growth, year-to-year, was the norm. The Canadian Real Estate Association recorded a surge of more than 20 per cent in October 2009.

Read the full article here.

 

[Ally]

Housing market on rise

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

The Ottawa-based group said sales in September climbed three% 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 CREA president Georges Pahud.

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]

Canadian job market will get worse: TD

Canada`s job market will get gloomier before it gets better, with job creation expected to be cut in half in 2011 as hiring shifts away from the services and back toward goods-producing industries, a jobs report from TD Economics said Tuesday.

Derek Burleton, deputy chief economist with TD Economics, forecasts net job creation to slide to less than 200,000 in 2011, almost half of the 350,000 jobs created in 2010, before headwinds start to clear out in 2012.

Instead, businesses will focus on increasing productivity in the coming months.

"The recent downturn was characterized by a period of more rapidly declining productivity, followed by a more muted bounce-back than was the case in the early 1990s," Mr. Burleton said in the report.

Coupled with this development is a shift towards more hiring in the goods-producing industries, such as manufacturing and primary industries, expected to account for a third of all jobs gains by 2012.

At the same time, the services industries will also see a fundamental shift between the public and private sectors.

Read the full article here.

 

[Ally]

Real Estate headed for rough patch, data shows

Canada`s weakening real estate market is headed for a rough patch in the months ahead, analysts said after data released Thursday showed housing starts slowing for the fourth consecutive month in August.

Canada Mortgage and Housing said in its monthly report that the seasonally adjusted rate of housing starts slipped 3% in August to 183,300 units from a downwardly revised 188,900 starts in July.

Statistics Canada also said the new housing price index fell 0.1% in July, the first decrease in 13 months.

The decline in housing starts was essentially in line with the 185,000 that analysts had forecast, and follows four straight months of declines in the value of building permits, reported Wednesday.

It was felt across both major components of the housing industry, with single urban starts dropping 3.6% to 65,000 units and urban multiple starts falling 3.7% to 97,800 units, CMHC said.

Read the full article here.

 

[Ally]

Oil prices to support rise in Canadian drilling in 2011

CALGARY - Strong crude prices will drive an increase in drilling across Canada next year, with oil wells outpacing natural gas for a second year running, according to industry observers.

Oil well licences outstripped gas this year for the first time since 1997 as sinking natural gas prices discouraged drilling, analysts noted Monday.

In 2010 crude wells are expected to represent 66 per cent of the licences issued in Canada, a jump from 50 per cent seen last year, UBS analyst Chad Friess said. "Though we remain cautious that natural gas fundamentals will act as a headwind, we see no shortage of oil-focused opportunities in Canada where producers can direct capital," he stated in a morning research note. "In short, we believe oil drilling will more than pick up the slack from any weakness in gas drilling as overall producer budgets should be flat year-over -year."

The investment brokerage forecast 13,000 oil and gas wells will be drilled in Canada in 2011, up from an estimated 11,600 predicted for this year.

Such forecasts are reasonable given the sustained prices seen for crude oil and forecasts of modest increases in demand from Asia and India, said Roger Soucy, outgoing head of the Petroleum Services Association of Canada.

Read the full article here.

 

[Ally]

Housing prices are stabilizing: Survey

TORONTO Increases in Canadian home prices are moderating as the market cools from overheated levels of earlier this year, says one of the country`s largest real estate companies.

A Royal LePage survey published Tuesday said housing prices weakened in the third quarter in most major markets, coming off unseasonably strong sales in the first half of the year when historically low interest rates helped stimulate a rush to market.

Meanwhile, the Bank of Canada announced Tuesday it was keeping its key lending rate — which affects short-term mortgages and other borrowing rates tied to bank prime rates — at 1 per cent after three straight hikes. It is expected to leave it there into next year.

In its announcement, the central bank also said that with household debt so high, it expects Canadians to spend less on consumer goods and on homes, meaning the housing market could be in for a protracted cooling-off period.

Robert Kavcic, an economist at the Bank of Montreal, believes the current 1 per cent rate will last through May, which he says will provide stability at a rate that is historically low enough to keep the costs of borrowing and home ownership in check.

Read the full article here.

 

[Ally]

Bank of Canada keeps interest rate at 1 per cent

OTTAWA The Bank of Canada reversed course on its monetary policy Tuesday, keeping its benchmark interest rate at one per cent in the face of a weakening economy.

The bank had increased short-term interest rates three consecutive occasions since June, but said Tuesday that was enough as it scaled back growth projections for the economy.

And the bank`s bleak new outlook for growth — about half a percentage point lower for this year and next than it projected in July — likely means it will stay on the sidelines for some time, economists said.

The reduced expectations, combined with China raising interest rates to slow down its torrid economy, sent the loonie tumbling almost two cents US.

In an unusually detailed and dour communique accompanying the rate announcement, the central bank`s governing council said it now expects the slow recovery from recession to be so protracted that it won`t be until 2012 before the economy returns to full capacity, a full year later than previously thought.

"The economic outlook for Canada has changed," the bank`s senior officials wrote.

"At this time of transition in the global recovery, with a weaker U.S. outlook, constraints beginning to moderate growth in emerging-market economies and domestic considerations that are expected to slow consumption and housing activity in Canada, any further reduction in monetary policy stimulus would need to be carefully considered."

Read the full article here.

 

[Ally]

Do your due diligence before buying a business

Pointy-haired boss driving you so crazy you dream about owning your own business?

Jason Dolynny had that dream, and when he finally made the jump he opted to buy an existing company rather than start his own.

The type of business wasn`t as much of an issue as why the owners were selling, and the growth potential, he says.

"The business had been in existence for 30 years and the current owners were in their early fifties and wanted to move on," he said.

"It was a stable business but it hadn`t grown in recent years so there was great potential there."

Initial meetings went smoothly, and Dolynny`s commerce degree and accounting background made the critical financial due diligence easier.

He was able to use his own cash from a previous tow truck venture with his father, and in February 2008 he became the owner of Davies Management and Realty.

Read the full article here.

 

[Ally]

`Don`t obsess` about the short-term: Carney

OTTAWA -- Mark Carney, the Bank of Canada governor, said Wednesday Canadians must look beyond the short-term economic softening and focus on longer-term concerns such as boosting productivity growth and capping growth in household indebtedness.

The governor`s comments emerged after the release of the central bank`s latest economic outlook, which indicated economic growth in Canada lagged the United States in the third quarter. The outlook said it anticipated annualized growth of just 1.6% for the three-month period ended Sept. 30 -- a big revision from its previously anticipated 2.8% expansion for the quarter. Meanwhile, it said it estimated the U.S. economy expanded 2.3% in the comparable time period.

The anticipated 1.6% annualized gain is the result of a string of weaker-than-expected economic indicators, from retail sales to job losses. And due to big downward revisions in its growth outlook, the central bank decided on Tuesday to leave its policy rate unchanged at 1%.

"Don`t obsess about the third quarter," Mr. Carney told reporters at a media conference in Ottawa, when asked about how Canadian growth lagged U.S. GDP expansion. "What we need to focus on in Canada is on the medium term -- getting productivity up, getting investment in place, making sure household balance sheets are in a sustainable position. And from the bank`s perspective, ensuring sure inflation remains low, stable and predictable."

Read the full article here.

 

[Ally]

Canadians spending more than they earn: TD

Canadians are carrying far too much debt relative to what they earn, and the problem is only going to get worse if low interest rates are maintained over the next few years, a report warned Wednesday.

Craig Alexander, chief economist with TD Bank, estimates that about 6.5 per cent of Canadian households are financially vulnerable, with families paying as much as 40 per cent of their income to service debt.

"Canadian personal indebtedness has become excessive," Alexander said in the TD Economics report.

"The relentless rise in household debt in Canada, both in absolute terms and relative to personal disposable income, is a growing cause for concern."

Read the full article here.

 

[Ally]

House prices on healthy rise: Royal LePage

OTTAWA — Canada`s housing market, while no longer red-hot, remains on steady ground, according to a report by Royal LePage.

The real estate services firm said Tuesday that home prices in the third quarter of this year saw growth of less than five per cent, year-over-year, "which is historically typical of balanced real estate markets."

The average price of a Canadian bungalow in the three-month period ending in September was $324,531, up 4.6 per cent from a year earlier, Royal LePage said. The average two-storey was up 4.4 per cent to $360,329, and the rate for a condominium rose 3.9 per cent to $226,481.

Phil Soper, chief executive of Royal LePage Real Estate Services, said while annual price growth was slightly lower than five per cent in the last quarter, it`s basically in line with that level when factoring in a lower rate of inflation.

In the early part of this year and latter part of 2009, double-digit price growth, year-to-year, was the norm. The Canadian Real Estate Association recorded a surge of more than 20 per cent in October 2009.

These strong gains, as the economy was rebounding from recession while enjoying historically low interest rates, had some fearing Canada was experiencing a housing bubble.

Read the full article here.

 

[Ally]

Energy costs drive inflation rate to 1.9%

OTTAWA — Canada`s inflation rate rose in September, driven largely by higher energy costs.

Annual inflation was running at 1.9 per cent last month, according to Statistics Canada`s consumer-price index released Friday.

That followed a gain of 1.7 per cent in August, and was in line with economist expectations for September.

Much of the gain came from energy prices, which were 5.6 per cent higher than a year earlier. This included gasoline costs, which were up 3.1 per cent, and electricity, which was 7.7 per cent more expensive.

Overall inflation, on a year-to-year basis, has been on the rise in recent months after going as low as one per cent in June. The Bank of Canada`s target inflation rate is two per cent cent. Higher energy prices in comparison to a year earlier have been a major component of inflation for a few months now, with this element seeing a five per cent rise in August.

Core inflation, which strips out volatile items such as energy and certain foods — and even the new harmonized sales taxes in British Columbia and Ontario — was 1.5 per cent last month. Economists expected the core rate to be 1.6 per cent, which it was in August. This measure, which is closely monitored by the central bank for underlying trends, has fallen from as much as 2.1 per cent in February.

Read the full article here.

 

[Ally]

Job market demonstrates signs of cautions recovery: Experts

VANCOUVER — New data Thursday from Statistics Canada showed promising signs of economic recovery in British Columbia and across the country, but experts said the hard work of finding a job is not over yet for many people.

"There`s definitely an uptick in the market, but I would not say it is extraordinary in the sense that it`s not a hot job market by any means," said Sandra Miles, president of Vancouver-based recruitment firm Miles Employment Group Ltd.

According to the government figures, B.C. has recorded three consecutive monthly declines in the number of people claiming Employment Insurance benefits in June, July and August.

Since peaking in June 2009, the number of EI beneficiaries in the province has fallen by 15,400 or 16.4 per cent to 78,800.

Nationally, 671,200 people received regular EI benefits in August, virtually unchanged from July.

However, the number has eased to levels recorded in March after rising slightly during the second quarter of the year.

Read the full article here.