September 2011 Canadian Economic Fundamentals

[Ally]

Canada's job market loses momentum




OTTAWA ` There were 5,500 fewer people employed in Canada last month, Statistics Canada said Friday.




The unemployment rate rose to 7.3% from 7.2%.




Economists polled by Bloomberg had expected job gains of 21,500 and an unchanged unemployment rate.





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[Ally]

Economy riding out choppy global waters: RBC





Expect the Canadian economy to turn in slightly less robust growth in 2011, thanks to a contraction in the second quarter combined with softer growth in the EU and the US, but it will pick up in 2012, according to RBC Economics.



RBC downgraded its forecast for the Canadian economy in its latest Economic Outlook, which projects growth to be 2.4% this year, down 0.8% from the June forecast.




`Financial market volatility certainly took a toll on business and consumer confidence this summer. Our expectation that the global economy will avert another downturn, however, should temper the slide we`ve been seeing in the equity markets and in commodity prices,` said Craig Wright, senior vice-president and chief economist at RBC.





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[Ally]

Risk of recession very real: Economists





Canada could become the first developed economy to stumble back into recession as businesses pull back on investment and inventory accumulation in the third quarter, Bank of Nova Scotia economists said on Tuesday.





Scotia Capital economists Derek Holt and Karen Cordes Woods said that while they don't forecast a return to recession, Canadian businesses have lost momentum in equipment investment in recent quarters, which could create a drag on growth in the third quarter. That makes the risk of another recession very real, they said.




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[Ally]

Could Canada's economy be first to stumble?




Scotia Capital economists Derek Holt and Karen Cordes Woods said that while they don't forecast a return to recession, Canadian businesses have lost momentum in equipment investment in recent quarters, which could create a drag on growth in the third quarter. That makes the risk of another recession very real, they said.




"A reasonable scenario could well have the economy facing another contraction this quarter that cannot for a minute be ruled out," Holt and Cordes Wood wrote in a note Tuesday morning.




Their outlook follows a surprise contraction in the Canadian economy in the second quarter, when GDP shrank 0.4 per cent. That left Canada as only one of two G7 countries (the other being earthquake-ravaged Japan) that saw their economies contract in Q2.





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[Ally]

Canada's economic growth expected to slow down, says RBC Economics



Canada's economic growth will slow to 2.4 per cent this year, RBC Economics said Monday, marking a 0.8 percentage point downgrade from its June forecast.





The bank reduced its forecast for the Canadian economy after a "mild contraction" in the second quarter and softer growth in the U.S. and eurozone economies.





"Financial market volatility certainly took a toll on business and consumer confidence this summer," chief economist Craig Wright said in a report.





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[Ally]

Lack of affordable housing and efficient transit barriers of success to immigrants and the economy





The lack of affordable housing and access to efficient public transit and community services are significant barriers to the success of new immigrants and the Canadian economy, says the Federation of Canadian Municipalities (FCM) in a report on CanadaÂs immigration system.



"To keep its economy strong, Canada needs an immigration strategy that meets growing on-the-ground challenges and gives cities and communities a seat at the table," said FCM president Berry Vrbanovic. "Without a decent place to live, an affordable and reliable way to get to and from work, and access to front-line community services immigrants will continue to fall behind and Canada will not meet its economic and social objectives."





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[Ally]

And the winner in the Keystone feud is...jobs and security




The hottest environmental trigger point in North America today isn`t the melting Arctic ice or the disappearing polar bear. It`s the Keystone XL oil pipeline project, which, if it gets the go-ahead, will pipe bitumen from Alberta`s oil sands (or tar sands, depending on your point of view) to refineries in Texas.





Al Gore opposes it, of course, along with Bishop Desmond Tutu and The New York Times. Last month, a long list of environmental/Hollywood celebrities, including Naomi Klein, Bill McKibben, Margot Kidder, and Daryl Hannah, begged for the privilege of being arrested at protest demonstrations outside the White House. On Sept. 26, protesters will gather on Parliament Hill for another day of action.





Ms. Klein said she didn`t originally intend to get arrested. But the speeches she heard `from the people living downstream, who are dealing with having their land spoiled, who are dealing with outbreaks of disease and cancer, [were] just so moving that I really felt the need to stand with them in solidarity.`





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[Ally]

Ottawa assures Asian countries of access to energy




Faced with political opposition to Canada`s oil sands in the U.S., the Conservative government is determined to ensure energy producers can access British Columbia ports to diversify the country`s export market to Asia.




Natural Resources Minister Joe Oliver was in California on Tuesday for a meeting of Asia-Pacific energy ministers, and was eager to assure potential customers from Asia that Canada is keen to expand energy trade with them, regardless of whether the Washington approves the controversial Keystone XL pipeline.





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[Ally]

Banks lowering some Canadian mortgage rates





Some Canadian mortgage rates are going down as of Thursday.



TD Canada Trust (TSX:TD) was the first major bank to announce a change, with its five-year closed mortgage rate falling 15 one-hundredths to 5.24 per cent.




Royal Bank (TSX:RBC) and Bank of Montreal ()TSX:BMO) will drop their five-year closed mortgage rate by 20 one-hundreds to 5.19 per cent.





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[Ally]

Canada confident in home ownership




Canadians are clearly showing signs of optimism and confidence in homeownership.




A recent study conducted by BMO Financial Group indicates 61%* of Canadians are confident current housing values will hold steady into the future.




And recent statistics released by the Canadian Real Estate Association (CREA) also confirm our housing market is positive despite ongoing uncertainty in the world economy.




According to CREA, Canada`s home sales rose 12.3% from a year ago.




The Canadian housing market has remained robust as a result of low interest rates and solid job growth.





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[Ally]

Canadian dollar sinks against U.S. dollar on weak U.S. jobs data




TORONTO - The Canadian dollar plunged closer to parity with its U.S. counterpart at midday Thursday after data showed the Canadian economy lost jobs in August.




The Canadian dollar fell 0.81 of a cent to 100.40 cents US after data showed Canada's economy shed jobs for the first time in five months in August.




That pushed the unemployment rate up to 7.3 per cent as workers in construction, transportation and warehousing struggled to find jobs.




The loss of employment was small ` 5,500 ` but it was the second consecutive month that jobs growth was virtually non-existent in Canada, a clear signal that the economy continues to struggle.




Economists had expected a 25,000 job gain.





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[Ally]

Job losses confirm economy's downturn, but no new stimulus in sight




OTTAWA - Canada's job creation engine has stalled, but the federal government is giving no hints it is preparing to intervene.




For the second month in a row, the economy created virtually no additional employment, actually losing 5,500 jobs in August. That brought the unemployment rate up a notch to 7.3 per cent, Statistics Canada reported Friday.




Economists predict it may get worse before it gets better.




"Definitely a disappointing number," said Derek Burleton of TD Bank. "I am bothered by the fact that goods sector employment has been flat for the last six months, that's not a good omen."




Burleton said with the global economy slowing, Canada could see its unemployment rate rise to 7.5 per cent or higher by the end of the year.





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[Ally]

Keystone pipeline will mean more jobs - for Americans




U.S. President Barack Obama will soon announce his decision about the controversial Keystone XL pipeline. Opposition to the pipeline has been growing. We have seen celebrities seeking arrest in front of the White House this summer, and an open letter to Obama from Nobel laureates, including the Dalai Lama. Opposition to the pipeline has been based almost entirely on environmental grounds, from protecting the Ogallala aquifer to ending the use of "dirty oil."




Proponents of the line counter with economic arguments, citing potential investment and jobs in both the U.S. and Canada. Thus we see a classic "jobs vs. the environment" argument being played out in both countries.




But do the economic arguments of the pipeline proponents stand up? Will the pipeline, which will dramatically increase the export of raw bitumen from Alberta to the U.S., bring significant new investment and jobs? The answer is, "Yes and no."





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[Ally]

Stumbling loonie tumbles lower





The Canadian dollar closed below par for the first time since January and Canada's benchmark stock index fell below 12,000 for the first time since the market meltdown in August following a statement Wednesday from the U.S. Federal Reserve Open Market Committee that cited "significant downside risks" to its economic outlook.




The Fed also announced that it would implement a so-called "twist" operation, buying $400 billion of long-term debt and selling short-term debt in an effort to keep interest rates low - specifically, longer-term mortgages, in order to stimulate the housing market and thus reduce the unemployment rate.






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[Ally]

Flaherty says 'some progress,' but not there yet




WASHINGTON - Canada is urgently calling on Europe to "overwhelm" their problems with a massive bailout of their big banks as a necessary first step to prevent a new recession barely two years after the last one.




Finance Minister Jim Flaherty ended the first of two days of meetings with his G20 counterparts in Washington devoted to the growing crisis, pretty much as he began them, expressing frustration with European leaders.




The European representatives at the international meetings have said they are prepared to go ahead with a June 21 emergency fund to deal with the debt crisis and are prepared to be "flexible" as to its size, but cautioned that not all in the 17-nation eurozone club have approved the proposal.




Flaherty said he shared the "frustration" with the slowness of the process, and urged Europe to get on with it.


He called on them to announce a facility similar to the near trillion dollar bailout Washington put in place at the end of 2008 to save their banks from going the way of Lehman Brothers.





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[Ally]

Regulator warns banks on mortgages





Canada's financial regulator is hiking its scrutiny of residential mortgages held by banks, a tacit acknowledgement of the heightened dangers around surging consumer debt.




The Office of the Superintendent of Financial Institutions is "stepping in to increase the monitoring" of home loans and lines of credit secured by real estate, said the head of the organization.




While recent moves by the federal government to tighten the rules around home loans have helped reduce the growth of mortgage lending, Julie Dickson told reporters in Toronto on Monday that the issue remains a significant concern.




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[Ally]

Will Keystone XL help or hurt the economy?



As if the hundreds of police and protesters gathered on Parliament Hill on Monday weren't proof enough, the stakes associated with TransCanada Corp.'s proposed Keystone XL pipeline are high.





Aside from the environmental concerns -- and there are many -- jobs on both sides of border hinge on the Obama administration's upcoming decision on whether to approve the controversial $7-billion pipeline that will funnel raw bitumen from the oilsands to the U.S. Gulf Coast.





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[Ally]

Where are Canadian interest rates heading?




One could wax on about how grim the United States (US) economy is, but Mark Carney put it succinctly:




`The (U.S.) housing market remains a mess, the consumer is weak, and government actions can be expected to reduce growth`The U.S. economy is close to stall speed``




That sort of thing puts Canada in a quandary. When the American economy is in the toilet, the Canadian economy is usually on the rim, ready to fall in.




The American Federal Reserve (Fed) itself admits that the U.S. is facing "significant downside risks` and 3 out of 4 Canadian exports go to the States.





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[Ally]

Slay the deficit, or stimulate the economy?




Slay the deficit or prepare to give the economy a boost?




Federal finance minister Jim Flaherty, Bank of Canada governor Mark Carney, and Prime Minister Stephen Harper met privately this week to weigh those options.




Meanwhile, economists painted a bleak picture of the economy in pre-budget consultations before the House of Commons finance committee: the continuing debt crisis in the eurozone and the faltering recovery in the U.S. are threatening to drag the global economy into recession.





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[Ally]

Economy grows, recession fears ease




The domestic economy eked out 0.3-per-cent growth in July, Statistics Canada said Friday, all but confirming that the country did not slip into recession in the third quarter despite a storm of threats from abroad.




The gain in gross domestic product matched economists` expectations and followed a 0.2-per-cent increase in the previous month, as the economy started growing again after shrinking on an annual basis in the second quarter.





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