September 2010 Canadian Economic Fundamentals
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Housing will be banks` next sore spot
Canada`s housing market was a key source of strength that shielded the banks from the financial crisis but a flurry of recent warnings about a market bubble is raising concerns the vast mortgage holdings on bank balance sheets is about to become a millstone.
The Canadian Centre for Policy Alternatives Tuesday released a study arguing that the red-hot residential real estate market in Toronto, Vancouver, Calgary and other cities is "an accident waiting to happen."
"Canada is experiencing, for the first time in the last 30 years, a synchronized housing bubble," said the report by David Macdonald.
The warning comes after a report from the Organization for Economic Co-operation and Development argued that bloated debt levels of Canadian households are a threat to the economy.
The Canadian Association of Accredited Mortgage Professionals estimated earlier this year that about 357,000 mortgage holders are already struggling to make their payments and may not be able to afford higher rates.
Not everyone is quite so gloomy. However, on balance experts say the market is headed for a correction, the only question being how low prices will fall.
Read the full article here.
Canada`s housing market was a key source of strength that shielded the banks from the financial crisis but a flurry of recent warnings about a market bubble is raising concerns the vast mortgage holdings on bank balance sheets is about to become a millstone.
The Canadian Centre for Policy Alternatives Tuesday released a study arguing that the red-hot residential real estate market in Toronto, Vancouver, Calgary and other cities is "an accident waiting to happen."
"Canada is experiencing, for the first time in the last 30 years, a synchronized housing bubble," said the report by David Macdonald.
The warning comes after a report from the Organization for Economic Co-operation and Development argued that bloated debt levels of Canadian households are a threat to the economy.
The Canadian Association of Accredited Mortgage Professionals estimated earlier this year that about 357,000 mortgage holders are already struggling to make their payments and may not be able to afford higher rates.
Not everyone is quite so gloomy. However, on balance experts say the market is headed for a correction, the only question being how low prices will fall.
Read the full article here.
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Housing bust ahead? One study says yes, one says no
It seems to be the topic du jour: is Canada facing a U.S.-style housing bust, or not?
Two reports issued this week offer conflicting views.
The left-leaning Canadian Centre for Policy Alternatives says yes, while the right-leaning C.D. Howe Institute says no.
Each takes a radically different route to arrive at its preferred conclusion. But like many housing studies, both use selective data and have limited value.
The CCPA report examines house prices in Canada`s six largest cities -- Toronto, Montreal, Ottawa, Edmonton, Calgary and Vancouver -- over the past 30 years.
Between 1980 and 2000, it says, prices ranged between $50,000 and $80,000 (in inflation-adjusted 1980 dollars), or three to four times annual median incomes.
But after 2001, it notes, prices soared across the country, and now sit at levels as high as 11.3 times Canadians` annual incomes. (It doesn`t identify which city, but I assume it`s Vancouver.)
Read the full article here.
It seems to be the topic du jour: is Canada facing a U.S.-style housing bust, or not?
Two reports issued this week offer conflicting views.
The left-leaning Canadian Centre for Policy Alternatives says yes, while the right-leaning C.D. Howe Institute says no.
Each takes a radically different route to arrive at its preferred conclusion. But like many housing studies, both use selective data and have limited value.
The CCPA report examines house prices in Canada`s six largest cities -- Toronto, Montreal, Ottawa, Edmonton, Calgary and Vancouver -- over the past 30 years.
Between 1980 and 2000, it says, prices ranged between $50,000 and $80,000 (in inflation-adjusted 1980 dollars), or three to four times annual median incomes.
But after 2001, it notes, prices soared across the country, and now sit at levels as high as 11.3 times Canadians` annual incomes. (It doesn`t identify which city, but I assume it`s Vancouver.)
Read the full article here.
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BMO cuts mortgage rate to spur home buying
Bank of Montreal has chopped its benchmark five-year mortgage rate, aggressively throwing its weight behind what many are calling an increasingly wobbly housing market.
"It`s a great time to buy a home," Martin Nel, a senior BMO official, said in news release announcing the change. He added that people who take advantage of the offer will benefit.
"If ever there was a time to buy, it is now," Mr. Nel said.
The move which takes effect Thursday brings the bank`s key five-year rate to 3.59%, down from 3.79%, making it one of the lowest five-year rates ever offered by a Canadian bank, says industry newsletter Canadian Mortgage Trends.
But some experts are already scratching their heads because of the aggressive tone of the announcement as well as the timing, given the recent spate of warnings about the uncertain state of the market, including one earlier this week from the Canadian Centre for Policy alternatives predicting an imminent collapse.
When the big banks make mortgage rate changes they generally just disclose the new numbers without commenting on housing market conditions. If pressed, bank officials are usually quick to explain that the change in these consumer lending rates are merely a function of fluctuations in their own borrowing costs.
Read the full article here.
Bank of Montreal has chopped its benchmark five-year mortgage rate, aggressively throwing its weight behind what many are calling an increasingly wobbly housing market.
"It`s a great time to buy a home," Martin Nel, a senior BMO official, said in news release announcing the change. He added that people who take advantage of the offer will benefit.
"If ever there was a time to buy, it is now," Mr. Nel said.
The move which takes effect Thursday brings the bank`s key five-year rate to 3.59%, down from 3.79%, making it one of the lowest five-year rates ever offered by a Canadian bank, says industry newsletter Canadian Mortgage Trends.
But some experts are already scratching their heads because of the aggressive tone of the announcement as well as the timing, given the recent spate of warnings about the uncertain state of the market, including one earlier this week from the Canadian Centre for Policy alternatives predicting an imminent collapse.
When the big banks make mortgage rate changes they generally just disclose the new numbers without commenting on housing market conditions. If pressed, bank officials are usually quick to explain that the change in these consumer lending rates are merely a function of fluctuations in their own borrowing costs.
Read the full article here.
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Bank of Canada raises key rate despite slow growth
OTTAWA — The Bank of Canada raised its benchmark interest rate Wednesday by 25 basis points to one per cent, arguing financial conditions remain "exceptionally stimulative" even in the face of a slowing — but still growing — economy.
In its accompanying statement, the central bank acknowledged the economic recovery in Canada would be "slightly more gradual" than envisaged it its most-recent economic outlook, due to sluggish private-sector demand in the United States. However, it said domestic demand was expected to be "solid" and business investment to advance "strongly" —powered by "accommodative" credit conditions that have eased further in recent weeks due to sharp declines in bond yields.
The Canadian dollar rose to 95.98 cents U.S. following the rate decision, up from Tuesday`s close of 95.42 cents U.S.
The statement provided no suggestion the central bank was set to keep rates on hold for an indefinite period, as some analysts now expect.
"As a result of monetary policy measures taken since April, financial conditions in Canada have tightened modestly but remain exceptionally stimulative," the central bank said.
Read the full article here.
OTTAWA — The Bank of Canada raised its benchmark interest rate Wednesday by 25 basis points to one per cent, arguing financial conditions remain "exceptionally stimulative" even in the face of a slowing — but still growing — economy.
In its accompanying statement, the central bank acknowledged the economic recovery in Canada would be "slightly more gradual" than envisaged it its most-recent economic outlook, due to sluggish private-sector demand in the United States. However, it said domestic demand was expected to be "solid" and business investment to advance "strongly" —powered by "accommodative" credit conditions that have eased further in recent weeks due to sharp declines in bond yields.
The Canadian dollar rose to 95.98 cents U.S. following the rate decision, up from Tuesday`s close of 95.42 cents U.S.
The statement provided no suggestion the central bank was set to keep rates on hold for an indefinite period, as some analysts now expect.
"As a result of monetary policy measures taken since April, financial conditions in Canada have tightened modestly but remain exceptionally stimulative," the central bank said.
Read the full article here.
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BoC urged to hold rate after GDP disappoints
OTTAWA — The Canadian economy grew at a slower-than-expected 2% annualized rate in the second quarter, Statistics Canada reported Tuesday, as a cooler housing market and slower government spending offset strong gains in business investment.
The result was enough for a chief economist at one of Canada`s big banks to call on the Bank of Canada to refrain from a rate hike at its upcoming meeting next week.
The final result for the three-month period ended June 30 badly missed market expectations of a 2.5% annualized gain. Further, it was a percentage point below the Bank of Canada`s most-recent forecast, which envisaged 3% expansion in the quarter.
Plus, the federal data-collecting agency revised downward growth recorded in the first quarter, to 5.8% from 6.1%. As a result, GDP output is now roughly 0.1% below the peak recorded prior to the onset of the global financial crisis.
"With inflation, and now growth, both running below the central bank`s expected path, there`s reasonable doubt surrounding whether [the central bank] will still proceed with a further rate hike in September," said Avery Shenfeld, chief economist of CIBC World Markets. In previous commentaries, he said he believed the central bank would raise its benchmark rate 25 basis points, to 1%, at its upcoming Sept. 8 decision.
Read the full article here.
OTTAWA — The Canadian economy grew at a slower-than-expected 2% annualized rate in the second quarter, Statistics Canada reported Tuesday, as a cooler housing market and slower government spending offset strong gains in business investment.
The result was enough for a chief economist at one of Canada`s big banks to call on the Bank of Canada to refrain from a rate hike at its upcoming meeting next week.
The final result for the three-month period ended June 30 badly missed market expectations of a 2.5% annualized gain. Further, it was a percentage point below the Bank of Canada`s most-recent forecast, which envisaged 3% expansion in the quarter.
Plus, the federal data-collecting agency revised downward growth recorded in the first quarter, to 5.8% from 6.1%. As a result, GDP output is now roughly 0.1% below the peak recorded prior to the onset of the global financial crisis.
"With inflation, and now growth, both running below the central bank`s expected path, there`s reasonable doubt surrounding whether [the central bank] will still proceed with a further rate hike in September," said Avery Shenfeld, chief economist of CIBC World Markets. In previous commentaries, he said he believed the central bank would raise its benchmark rate 25 basis points, to 1%, at its upcoming Sept. 8 decision.
Read the full article here.
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Bank of Canada raises rates, future direction unclear
OTTAWA — If the idea was to stump the markets on what`s ahead for the Bank of Canada, then governor Mark Carney succeeded Wednesday with a rate statement that gave both hawks and doves something to gnaw on.
The central bank raised its benchmark rate by another 25 basis points to one per cent. Some felt it might leave rates unchanged, given the shoddy U.S. economic data of late and evidence of a slowdown in Canada.
The country`s major commercial banks quickly followed suit, also raising their prime lending rates by a quarter-point to three per cent.
What happens next is anybody`s guess, as the accompanying statement provided little direct guidance. It was, according to economists at Laurentian Bank Securities, "deliberately ambiguous," as it highlighted slower growth and exceptionally easy credit conditions in almost the same breath.
Economists` interpretations of the central bank`s statement were all over the map, with some suggesting it signalled a long pause ahead. Others, however, warned of another rate hike as soon as October.
Read the full article here.
OTTAWA — If the idea was to stump the markets on what`s ahead for the Bank of Canada, then governor Mark Carney succeeded Wednesday with a rate statement that gave both hawks and doves something to gnaw on.
The central bank raised its benchmark rate by another 25 basis points to one per cent. Some felt it might leave rates unchanged, given the shoddy U.S. economic data of late and evidence of a slowdown in Canada.
The country`s major commercial banks quickly followed suit, also raising their prime lending rates by a quarter-point to three per cent.
What happens next is anybody`s guess, as the accompanying statement provided little direct guidance. It was, according to economists at Laurentian Bank Securities, "deliberately ambiguous," as it highlighted slower growth and exceptionally easy credit conditions in almost the same breath.
Economists` interpretations of the central bank`s statement were all over the map, with some suggesting it signalled a long pause ahead. Others, however, warned of another rate hike as soon as October.
Read the full article here.
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Canada`s GDP to be weak through 2010, OECD days
OTTAWA — Although Canada led in economic growth in the first quarter of 2010, the nation`s economy has slipped far behind the robust growth seen in Europe in recent months and will continue to be moderate in the second half of the year, according to the Organization for Economic Co-operation and Development`s Interim Economic Assessment released Thursday.
While Canada`s gross domestic product led the Group of Seven major economies in the first quarter of 2010 with annualized quarter-on-quarter GDP of 5.8 per cent, in the second quarter, its GDP fell to just two per cent, far below Germany`s nine per cent growth and the U.K.`s 4.9 per cent. The United States saw 3.7 per cent growth for the first quarter of 2010 and just 1.6 per cent growth in the second quarter.
"The uncertainty is caused by a combination of both positive and negative factors," OECD Chief Economist Pier Carlo Padoan said in the release. "But it is unlikely that we are heading into another downturn."
However, the OECD stressed overall recovery may be slowing faster than previously anticipated. Growth in G7 nations is expected to be around 1.5 per cent on an annualized basis in the second half of 2010 compared with the previous estimate in the OECD`s May Economic Outlook of about 1.75 per cent. "The loss of momentum in the recovery is temporary although uncertainty has increased," the report said.
Read the full article here.
OTTAWA — Although Canada led in economic growth in the first quarter of 2010, the nation`s economy has slipped far behind the robust growth seen in Europe in recent months and will continue to be moderate in the second half of the year, according to the Organization for Economic Co-operation and Development`s Interim Economic Assessment released Thursday.
While Canada`s gross domestic product led the Group of Seven major economies in the first quarter of 2010 with annualized quarter-on-quarter GDP of 5.8 per cent, in the second quarter, its GDP fell to just two per cent, far below Germany`s nine per cent growth and the U.K.`s 4.9 per cent. The United States saw 3.7 per cent growth for the first quarter of 2010 and just 1.6 per cent growth in the second quarter.
"The uncertainty is caused by a combination of both positive and negative factors," OECD Chief Economist Pier Carlo Padoan said in the release. "But it is unlikely that we are heading into another downturn."
However, the OECD stressed overall recovery may be slowing faster than previously anticipated. Growth in G7 nations is expected to be around 1.5 per cent on an annualized basis in the second half of 2010 compared with the previous estimate in the OECD`s May Economic Outlook of about 1.75 per cent. "The loss of momentum in the recovery is temporary although uncertainty has increased," the report said.
Read the full article here.
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Fear of Housing Bubble seems overblown
One of the country`s leading economics think-tanks, the Conference Board of Canada, has become the latest entrant in the long-running debate over Canadian housing prices. Its take: no bubble.
This contrasts sharply with a report last week from the Canadian Centre for Policy Alternatives, which said Canada`s "housing bubble" is "an accident waiting to happen."
Back at the Conference Board, economist Mario Lefebvre acknowledges that home sales have fallen sharply this year, but points out that this is hardly a sign of distress after a period when sales were far too high to be sustainable. Instead, he concludes, it`s just a return to normal.
More important, on the price front, "there`s been no decline to talk about," Lefebvre said.
Prices rose in July from June in 19 of 28 Canadian cities and all 28 had prices that were above year-ago levels.
That`s not to say that prices will keep rising.
Lefebvre expects to see a "pause" in price growth for most cities in the next year or so as Canada`s economic growth slows. And prices could edge down by two to four per cent in the hottest western markets, like Vancouver, Calgary, Edmonton, Regina and Saskatoon. But that`s hardly a bust.
Read the full article here.
One of the country`s leading economics think-tanks, the Conference Board of Canada, has become the latest entrant in the long-running debate over Canadian housing prices. Its take: no bubble.
This contrasts sharply with a report last week from the Canadian Centre for Policy Alternatives, which said Canada`s "housing bubble" is "an accident waiting to happen."
Back at the Conference Board, economist Mario Lefebvre acknowledges that home sales have fallen sharply this year, but points out that this is hardly a sign of distress after a period when sales were far too high to be sustainable. Instead, he concludes, it`s just a return to normal.
More important, on the price front, "there`s been no decline to talk about," Lefebvre said.
Prices rose in July from June in 19 of 28 Canadian cities and all 28 had prices that were above year-ago levels.
That`s not to say that prices will keep rising.
Lefebvre expects to see a "pause" in price growth for most cities in the next year or so as Canada`s economic growth slows. And prices could edge down by two to four per cent in the hottest western markets, like Vancouver, Calgary, Edmonton, Regina and Saskatoon. But that`s hardly a bust.
Read the full article here.
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Canada adds 36,000 jobs in August
OTTAWA — The Canadian economy created a better-than-expected 35,800 new jobs in August after a surprising loss of positions the previous month, Statistics Canada reported Friday.
Meanwhile, the unemployment rate edged up 0.1 percentage points to 8.1 per cent as more people entered the labour force, the federal agency said.
Most economists had expected around 30,000 jobs would be created in August.
The number of full-time jobs rose by 79,900, while part-time employment declined by 44,100. The biggest gains were in Quebec, Saskatchewan and Newfoundland and Labrador, the agency said.
The job creation in August follows a surprise loss of 9,300 positions a month earlier. But many economists have pointed out that July`s figures were heavily influenced by a decline of 65,000 education jobs just as the school year ended.
Read the full article here.
OTTAWA — The Canadian economy created a better-than-expected 35,800 new jobs in August after a surprising loss of positions the previous month, Statistics Canada reported Friday.
Meanwhile, the unemployment rate edged up 0.1 percentage points to 8.1 per cent as more people entered the labour force, the federal agency said.
Most economists had expected around 30,000 jobs would be created in August.
The number of full-time jobs rose by 79,900, while part-time employment declined by 44,100. The biggest gains were in Quebec, Saskatchewan and Newfoundland and Labrador, the agency said.
The job creation in August follows a surprise loss of 9,300 positions a month earlier. But many economists have pointed out that July`s figures were heavily influenced by a decline of 65,000 education jobs just as the school year ended.
Read the full article here.
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Experts predict slow economic rebound
The world is the midst of a "multi-speed" economic recovery where more advanced economies struggle to post positive growth and emerging economies carry on with barely a tap on the brakes.
Delegates to the 20th economic roundtable on the economy at Spruce Meadows Thursday heard a blue-ribbon international panel predict years of stifled or no growth in the United States and other western nations, while emerging economies boom, held back only by slower export levels to the U.S. and Europe.
Canada, they noted, has largely escaped the worst of the slowdown and is rebounding slowly but surely, while keeping a weather eye on the unpredictable economy south of border.
"The main thing I want to say is that this isn`t what I normally think of as an economic recovery," said Paul Volcker, former chairman of the U.S. Federal Reserve and chairman of U.S. President Barack Obama`s economic recovery advisory board.
Read the full article here.
The world is the midst of a "multi-speed" economic recovery where more advanced economies struggle to post positive growth and emerging economies carry on with barely a tap on the brakes.
Delegates to the 20th economic roundtable on the economy at Spruce Meadows Thursday heard a blue-ribbon international panel predict years of stifled or no growth in the United States and other western nations, while emerging economies boom, held back only by slower export levels to the U.S. and Europe.
Canada, they noted, has largely escaped the worst of the slowdown and is rebounding slowly but surely, while keeping a weather eye on the unpredictable economy south of border.
"The main thing I want to say is that this isn`t what I normally think of as an economic recovery," said Paul Volcker, former chairman of the U.S. Federal Reserve and chairman of U.S. President Barack Obama`s economic recovery advisory board.
Read the full article here.
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Job creation tepid in lacklustre economy
Canadian employers have boosted payrolls in seven of eight months this year, but cracks are starting to show in the country`s job creation.
The economy churned out 35,800 jobs last month, but the gains stemmed from a seasonal rebound in the hiring of teachers. Without the bump in education, the economy would have shed about 32,000 positions as the key private sector cut jobs for the second month in a row.
The jobless rate, meanwhile, ticked up to 8.1 per cent from 8 per cent as more job-seekers entered the work force.
The lacklustre employment picture in August followed employment losses in July, showing hiring has slowed sharply after an average monthly increase of 51,000 jobs in the first six months of the year. And fading government stimulus, a cooling housing market
, tapped-out consumers and public sector cost-cutting suggest future hiring will remain muted, with the jobless rate likely to stick around the 8-per-cent mark, economists said.
"It`s going to be a tough slog from a job creation perspective over the next three to six months," said Derek Burleton, deputy chief economist at Toronto-Dominion Bank. "It all fits into our view that despite the nice rebound in output and employment in the early stages of the recovery, it`s going to be a very slow improvement in economic conditions."
Read the full article here.
Canadian employers have boosted payrolls in seven of eight months this year, but cracks are starting to show in the country`s job creation.
The economy churned out 35,800 jobs last month, but the gains stemmed from a seasonal rebound in the hiring of teachers. Without the bump in education, the economy would have shed about 32,000 positions as the key private sector cut jobs for the second month in a row.
The jobless rate, meanwhile, ticked up to 8.1 per cent from 8 per cent as more job-seekers entered the work force.
The lacklustre employment picture in August followed employment losses in July, showing hiring has slowed sharply after an average monthly increase of 51,000 jobs in the first six months of the year. And fading government stimulus, a cooling housing market
, tapped-out consumers and public sector cost-cutting suggest future hiring will remain muted, with the jobless rate likely to stick around the 8-per-cent mark, economists said."It`s going to be a tough slog from a job creation perspective over the next three to six months," said Derek Burleton, deputy chief economist at Toronto-Dominion Bank. "It all fits into our view that despite the nice rebound in output and employment in the early stages of the recovery, it`s going to be a very slow improvement in economic conditions."
Read the full article here.
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Saskatchewan to lead Canada in economic growth in 2010: RBC forecast
REGINA — Saskatchewan is set to lead the country with an economic growth rate of 6.3 per cent in 2010 — led by a huge increase in potash production, according to Canada`s largest bank.
"It`s pretty upbeat, " said Paul Ferley, the Royal Bank of Canada`s assistant chief economist in an interview on Friday, adding that it`s important to view these figures in the context of what happened in 2009, when potash prices and, especially, production, took "a fairly significant drop."
Now, the economic indications are that "it`s reversing and it`s reversing quite strongly," Ferley said.
"There`s a good chance that we`ll see a good bounce in growth in the province this year."
The RBC`s 6.3-per-cent prediction is all the more impressive in light of what it predicted for Saskatchewan back early this summer. Its June forecast called for only a 3.8-per-cent growth in real gross domestic product (GDP) this year, following a 5.4-per-cent contraction last year that also was linked to changes in potash production and price.
Potash production skyrocketed by 130 per cent in the first five months of the year, which is expected to make up for weakness in the oil and natural gas production sectors, said the RBC Economics provincial outlook released Friday.
Read the full article here.
REGINA — Saskatchewan is set to lead the country with an economic growth rate of 6.3 per cent in 2010 — led by a huge increase in potash production, according to Canada`s largest bank.
"It`s pretty upbeat, " said Paul Ferley, the Royal Bank of Canada`s assistant chief economist in an interview on Friday, adding that it`s important to view these figures in the context of what happened in 2009, when potash prices and, especially, production, took "a fairly significant drop."
Now, the economic indications are that "it`s reversing and it`s reversing quite strongly," Ferley said.
"There`s a good chance that we`ll see a good bounce in growth in the province this year."
The RBC`s 6.3-per-cent prediction is all the more impressive in light of what it predicted for Saskatchewan back early this summer. Its June forecast called for only a 3.8-per-cent growth in real gross domestic product (GDP) this year, following a 5.4-per-cent contraction last year that also was linked to changes in potash production and price.
Potash production skyrocketed by 130 per cent in the first five months of the year, which is expected to make up for weakness in the oil and natural gas production sectors, said the RBC Economics provincial outlook released Friday.
Read the full article here.
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OSFI loosens reins on Canadian banks
Onerous restrictions on Canada`s banks put in place by Ottawa in the wake of the global financial crisis were removed late Monday, a decision which could quickly become a boon for investors across the country.
Canadian banks are now free to pursue dividend increases, share buybacks and major acquisitions after the country`s chief financial services watchdog, following a global overhaul of bank capital levels agreed to over the weekend, lifted exceptional restrictions Monday night.
The Office of the Superintendent of Financial Institutions [OSFI] said Monday "it will no longer require the increased conservatism in capital management" which was forced on Canadian banks following the biggest financial crisis since the Great Depression.
The move emerges after the so-called Basel Group of banking supervisors struck a deal on capital rules designed to prevent another financial crisis from emerging. Observers said Canadian banks should have little difficulty meeting the new, tougher requirements.
Canada`s banks, rated the soundest in the world by the World Economic Forum for three straight years, are sitting on billions of dollars of spare cash. Only a fraction of this hoard would be needed to meet earlier rules on how much capital a bank needs on hand to back up its investments. One analyst, Peter Rozenberg of UBS, has estimated the big banks could have $40-billion in excess cash by the end of 2012.
Given their conservative lending standards and rock solid balance sheets, it is almost certain the Canadian banks will be able to send some of the huge pile of capital back to their shareholders, said Mario Mendonca, an analyst at Canaccord Genuity.
Read the full article here.
Onerous restrictions on Canada`s banks put in place by Ottawa in the wake of the global financial crisis were removed late Monday, a decision which could quickly become a boon for investors across the country.
Canadian banks are now free to pursue dividend increases, share buybacks and major acquisitions after the country`s chief financial services watchdog, following a global overhaul of bank capital levels agreed to over the weekend, lifted exceptional restrictions Monday night.
The Office of the Superintendent of Financial Institutions [OSFI] said Monday "it will no longer require the increased conservatism in capital management" which was forced on Canadian banks following the biggest financial crisis since the Great Depression.
The move emerges after the so-called Basel Group of banking supervisors struck a deal on capital rules designed to prevent another financial crisis from emerging. Observers said Canadian banks should have little difficulty meeting the new, tougher requirements.
Canada`s banks, rated the soundest in the world by the World Economic Forum for three straight years, are sitting on billions of dollars of spare cash. Only a fraction of this hoard would be needed to meet earlier rules on how much capital a bank needs on hand to back up its investments. One analyst, Peter Rozenberg of UBS, has estimated the big banks could have $40-billion in excess cash by the end of 2012.
Given their conservative lending standards and rock solid balance sheets, it is almost certain the Canadian banks will be able to send some of the huge pile of capital back to their shareholders, said Mario Mendonca, an analyst at Canaccord Genuity.
Read the full article here.
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Existing home sales rise for the first time since March: CREA
OTTAWA — Existing home sales rose 4.1 per cent in August from the previous month, the first monthly increase since March, the Canadian Real Estate Association said Wednesday.
Activity via the multiple listing service was up most in Ontario and British Columbia, and accounted for most of August`s advance, the national realtor organization said.
Seasonally adjusted sales activity increased or remained stable in more than half of all local markets, it said.
For the remainder of the year, however, CREA said it expects sales to slow.
"Activity rose sharply over the second half of 2009 and reached levels that are unlikely to be matched in the final four months of 2010, so year-to-date comparisons are forecast to turn down in the coming months," the report said.
The group also cautioned against further tightening of mortgage regulations, saying rising interest rates and a projected slowdown in job growth are already primed to slow the housing market.
Read the full article here.
OTTAWA — Existing home sales rose 4.1 per cent in August from the previous month, the first monthly increase since March, the Canadian Real Estate Association said Wednesday.
Activity via the multiple listing service was up most in Ontario and British Columbia, and accounted for most of August`s advance, the national realtor organization said.
Seasonally adjusted sales activity increased or remained stable in more than half of all local markets, it said.
For the remainder of the year, however, CREA said it expects sales to slow.
"Activity rose sharply over the second half of 2009 and reached levels that are unlikely to be matched in the final four months of 2010, so year-to-date comparisons are forecast to turn down in the coming months," the report said.
The group also cautioned against further tightening of mortgage regulations, saying rising interest rates and a projected slowdown in job growth are already primed to slow the housing market.
Read the full article here.
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Time to tighten the purse strings, says Flaherty
OTTAWA — Finance Minister Jim Flaherty said Friday it is time to proceed with fiscal restraint as the global economy is in a recovery mode, although modest, and not stuck in a recession.
"We need to carry on this way, and stay with our exit strategies to get us out of this temporary, extraordinary stimulus," he said in an interview with the Financial Post.
Economies are growing modestly in advanced economies, and advancing at a healthy pace in emerging markets, he noted.
"Across the world, we are not looking at a situation of recession, as we were in late 2008 and early 2009. What we are now seeing is growth, although it is modest. But that is not a reason, it seems to me to vary from the course the (G20) agreed to," Flaherty said, in reference to the G20 agreement that compels advanced economies to halve deficits by 2013 and stabilize debt levels by 2016.
Flaherty said his intention is to stay the course and fully implement the remainder of Ottawa`s $47-billion stimulus program before March 31 of next year, when the scheme is set to expire. "The whole concept is that we want to move into the recovery period, and move out of the extraordinary stimulus period,"
Read the full article here.
OTTAWA — Finance Minister Jim Flaherty said Friday it is time to proceed with fiscal restraint as the global economy is in a recovery mode, although modest, and not stuck in a recession.
"We need to carry on this way, and stay with our exit strategies to get us out of this temporary, extraordinary stimulus," he said in an interview with the Financial Post.
Economies are growing modestly in advanced economies, and advancing at a healthy pace in emerging markets, he noted.
"Across the world, we are not looking at a situation of recession, as we were in late 2008 and early 2009. What we are now seeing is growth, although it is modest. But that is not a reason, it seems to me to vary from the course the (G20) agreed to," Flaherty said, in reference to the G20 agreement that compels advanced economies to halve deficits by 2013 and stabilize debt levels by 2016.
Flaherty said his intention is to stay the course and fully implement the remainder of Ottawa`s $47-billion stimulus program before March 31 of next year, when the scheme is set to expire. "The whole concept is that we want to move into the recovery period, and move out of the extraordinary stimulus period,"
Read the full article here.
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Finance Minister Flaherty not concerned about slumping markets, tougher mortgage rules
Federal Finance Minister Jim Flaherty said Thursday he is not concerned about slumping housing sales in some Canadian markets and has no plans to reverse mortgage restrictions imposed earlier this year.
Housing sales plunged dramatically last month in cities such as Calgary, Victoria and Greater Vancouver compared with one year ago.
But Flaherty, in Calgary to deliver a speech on Ottawa`s proposal for a national securities regulator, said he believes the housing slowdown is a sign that consumers are being more careful about financial risk-taking. He hinted the federal government wouldn`t shy away from additional mortgage restrictions, if needed.
"I, for one, am not particularly concerned about the softening we`ve seen in some markets in Canada in residential real estate," Flaherty told reporters, noting that Ottawa has twice tightened mortgage rules.
The most recent changes, which took effect in April, made it more difficult for some Canadians to qualify for a mortgage.
"This is entirely intentional, to tighten the market, so that we avoid the excesses that we`ve seen in other countries," Flaherty said. "If we have to do more, we`ll do more."
Read the full article here.
Federal Finance Minister Jim Flaherty said Thursday he is not concerned about slumping housing sales in some Canadian markets and has no plans to reverse mortgage restrictions imposed earlier this year.
Housing sales plunged dramatically last month in cities such as Calgary, Victoria and Greater Vancouver compared with one year ago.
But Flaherty, in Calgary to deliver a speech on Ottawa`s proposal for a national securities regulator, said he believes the housing slowdown is a sign that consumers are being more careful about financial risk-taking. He hinted the federal government wouldn`t shy away from additional mortgage restrictions, if needed.
"I, for one, am not particularly concerned about the softening we`ve seen in some markets in Canada in residential real estate," Flaherty told reporters, noting that Ottawa has twice tightened mortgage rules.
The most recent changes, which took effect in April, made it more difficult for some Canadians to qualify for a mortgage.
"This is entirely intentional, to tighten the market, so that we avoid the excesses that we`ve seen in other countries," Flaherty said. "If we have to do more, we`ll do more."
Read the full article here.
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- Mar 24, 2009
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- 16,743
Latin America an underdog unleashed
China and India may hog the headlines, but they aren`t the only countries that are enjoying explosive growth these days.
Check out Latin America. Three decades after a foreign debt crisis brought the region to its knees, countries like Brazil, Chile and Peru are booming.
The World Bank expects GDP growth in Latin America to top five per cent this year. That`s roughly twice the rate economists project for the U.S., where fears of a double-dip recession persist.
Thanks to strong demand for commodities such as oil, copper, iron ore, silver and food products, Latin America has undergone a dramatic transformation over the past decade, and shows no signs of slamming into reverse.
Some 60 million people in the region emerged from poverty between 2002 and 2008, the World Bank estimates. And although Latin America took a hit during the global recession, it has bounced back far more quickly than the economies of Europe or North America.
In Brazil, nearly two million new jobs were created in the first eight months of this year. That`s almost three times the number in the U.S., a country with 120 million more residents and an economy several times larger.
Read the full article here.
China and India may hog the headlines, but they aren`t the only countries that are enjoying explosive growth these days.
Check out Latin America. Three decades after a foreign debt crisis brought the region to its knees, countries like Brazil, Chile and Peru are booming.
The World Bank expects GDP growth in Latin America to top five per cent this year. That`s roughly twice the rate economists project for the U.S., where fears of a double-dip recession persist.
Thanks to strong demand for commodities such as oil, copper, iron ore, silver and food products, Latin America has undergone a dramatic transformation over the past decade, and shows no signs of slamming into reverse.
Some 60 million people in the region emerged from poverty between 2002 and 2008, the World Bank estimates. And although Latin America took a hit during the global recession, it has bounced back far more quickly than the economies of Europe or North America.
In Brazil, nearly two million new jobs were created in the first eight months of this year. That`s almost three times the number in the U.S., a country with 120 million more residents and an economy several times larger.
Read the full article here.
- Joined
- Mar 24, 2009
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- 16,743
Be prepared for the `Great Disappointment` of a sub-par recovery, CIBC warns
OTTAWA — CIBC has slashed its outlook for growth in Canada and the U.S., warning investors in a report Wednesday to be prepared for the "Great Disappointment" of a dismal recovery that will stretch through 2011.
The bank cut its outlook on growth in Canada to a slender 1.9 per cent in its report, while scaling back its target for the United States to a "paltry" 1.8 per cent next year.
"The Great Recession that shattered global growth in 2008-2009 is now water under the bridge but the Great Disappointment of a sub-par global recovery will be with us for a good while longer," says CIBC`s chief economist Avery Shenfeld in a wide-ranging forecast report.
Read the full article here.
OTTAWA — CIBC has slashed its outlook for growth in Canada and the U.S., warning investors in a report Wednesday to be prepared for the "Great Disappointment" of a dismal recovery that will stretch through 2011.
The bank cut its outlook on growth in Canada to a slender 1.9 per cent in its report, while scaling back its target for the United States to a "paltry" 1.8 per cent next year.
"The Great Recession that shattered global growth in 2008-2009 is now water under the bridge but the Great Disappointment of a sub-par global recovery will be with us for a good while longer," says CIBC`s chief economist Avery Shenfeld in a wide-ranging forecast report.
Read the full article here.
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Too North to Fail?
LACK OF HEALTHY INFLATION
The U.S. Federal Reserve chairman, Ben Bernanke, pictured, warned this week that deflationary pressures are growing as core inflation increased just 0.9% over the past year, below the central bank`s acceptable range between 1% and 2% per year. In Canada, core prices excluding food and energy are climbing at a rate of 1.6% on a year over year basis and remain in the lower half of the Bank of Canada`s sweet spot.
But the trend is down and in seasonally adjusted terms, the six-month trend is a mere 0.3%, the lowest pace in 25 years of data.
WEAK GROWTH
Canada`s recession was not as deep as the U.S. version and its recovery was at times more robust. However, the perception that it has vastly outperformed in the aftermath of the financial crisis is exaggerated. Since the recession ended in July 2009, the Canadian economy has grown 3.6% versus 3.3% in the United States. With the pace of economic growth in Canada slipping even faster than in the United States, many economists predict the growth gap to get smaller and the countries could changes places next year.
BOND YIELDS
Falling long-term U.S. Treasury yields have made headlines this summer, as bond markets re-evaluated the country`s slowing recovery to near double-dip levels. In Canada, government bond yields have also declined sharply since April, and just like south of the border, the 10-year variety now hovers below 3%. Even short-term yields on Canadian debt have fallen, despite three consecutive rates hikes worth 75 basis points by the Bank of Canada.
Read the full article here.
LACK OF HEALTHY INFLATION
The U.S. Federal Reserve chairman, Ben Bernanke, pictured, warned this week that deflationary pressures are growing as core inflation increased just 0.9% over the past year, below the central bank`s acceptable range between 1% and 2% per year. In Canada, core prices excluding food and energy are climbing at a rate of 1.6% on a year over year basis and remain in the lower half of the Bank of Canada`s sweet spot.
But the trend is down and in seasonally adjusted terms, the six-month trend is a mere 0.3%, the lowest pace in 25 years of data.
WEAK GROWTH
Canada`s recession was not as deep as the U.S. version and its recovery was at times more robust. However, the perception that it has vastly outperformed in the aftermath of the financial crisis is exaggerated. Since the recession ended in July 2009, the Canadian economy has grown 3.6% versus 3.3% in the United States. With the pace of economic growth in Canada slipping even faster than in the United States, many economists predict the growth gap to get smaller and the countries could changes places next year.
BOND YIELDS
Falling long-term U.S. Treasury yields have made headlines this summer, as bond markets re-evaluated the country`s slowing recovery to near double-dip levels. In Canada, government bond yields have also declined sharply since April, and just like south of the border, the 10-year variety now hovers below 3%. Even short-term yields on Canadian debt have fallen, despite three consecutive rates hikes worth 75 basis points by the Bank of Canada.
Read the full article here.