• TSX + last traded on December 24 and volume is expected to be light through the three-day week as many market players are on holiday between Christmas and New Year's.
• DOW +24.63
• Dollar +. 94.53cUS The dollar held firm near a two-month high against the yen on the view that the U.S. economy is recovering well. Oil has often eased this year as the dollar firms, making crude more costly for holders of other currencies
• Oil -$.10 to $78.67US per barrel. Oil traded flat, off a five-week high the previous session, as a firming dollar offset colder U.S. weather and concerns over political developments in Iran.
• Gold -$9.40 to $1,086.00USD per ounce
Five things that should keep you awake at night about the unfolding economy JULIAN BELTRAME, THE CANADIAN PRESS
OTTAWA - Looking into the economic crystal ball, the vast majority of private sector and institution forecasts agree that the scary global recession of last year is past and that normal times are just around the corner.
It could still go horribly wrong.
Forecasters caution that the degree of uncertainty and doubt about their baseline forecasts - or most likely scenarios - has seldom been higher.
In fact, many, including the world's central bankers, say substantial risks lurk around that beckoning corner and some are serious enough to send the whole edifice of economic stability crumbling.
Bank of Canada governor Mark Carney refers to the economic landscape as filled with "significant fragilities" which encompass everything from steady growth going forward to a second recession.
"It's a pretty dangerous economy out there," agrees TD Bank's chief economist Don Drummond.
"This should be the easiest of times to do a forecast because you are at the bottom, so you know which direction you are going to go. But I do think there's almost an unparalleled degree of uncertainty out there."
First the baseline. No matter which source is consulted, from the Bank of Canada to the U.S. Federal Reserve, the International Monetary Fund or any number of private-sector forecasters, 2010 is the year Canadians, Americans and the world get their economic mojo back.
The recession ended some time in the second half of 2009, the logic goes, and with trillions of government money still being poured into global economies, growth in 2010 appears as certain as the sun rising in the east.
Growth rates vary from country to country, but the important thing is that they are all positive. In Canada, forecasts fall in the 2.5-per-cent to three-per-cent range - not a big rebound given that last year's slump knocked $30 billion off the economy's bottom line.
But those are baseline, most-likely forecasts. Things could also turn ugly again, economists caution.
"I'd say there's an about one in five chance of a double dip recession, or a hard W as we call it," said Nariman Behravesh, chief economist with one of the world largest forecasting firm, IHS Global Insight of Lexington, Mass.
What could go wrong? From interviews with a half-dozen economists from Canada and the U.S., here are the five most dangerous pitfalls:
-Inflation: It seems absurd to worry about inflation right now. Canada's is at one per cent and the Bank of Canada says it isn't worried about it reaching its target of two per cent for another year or two.
But the world's printing presses have been busy flooding financial markets with money, and governments have been spending like drunken sailors in an effort to keep the Great Recession from becoming the second Great Depression. It worked, with a cost.
"I don't see how we can increase the money supply the way we are increasing it and avoid inflation," says James Gillies, professor emeritus at York University's Schulich School of Business.
"I can see it happening everywhere around the world, and with heavy, heavy inflation, we'll see rapidly rising interest rates," he adds. Gillies believes that will bring the recovery to a grinding halt, possibly as early as the end of 2010.
Other economists also worry about inflation, but say it will take longer to exert itself. The end result is the same, however.
High inflation triggers a policy response from central banks in the form of high interest rates, which causes businesses to stop borrowing and consumers to stop buying. That's how the recessions of the early 1980s and 1990s started.
-Policy-makers get it wrong: The flip side to real inflation is that the fear of inflation will cause governments and central banks to stop stimulating the economy too soon.
The growth that currently exists in many economies, particularly those of the U.S. and Europe, is due to unprecedented levels of government spending, bank and industry bailouts, super-low interest rates and money market liquidity infusions.
Nobody knows for sure when the private sector economy will be ready to stand on its own two feet and how it will react when the public sector crutches are removed, as G20 leaders are already discussing.
"They can make a mistake on both sides. They can withdraw the stimulus too early and we get something like a double-dip... as soon as late next year," said Douglas Porter, deputy chief economist with the Bank of Montreal.
"The other side is they leave the stimulus too long and we end up with an inflation."
Drummond says deciding when to exit from stimulus will require almost "surgical precision."
The trouble is, governments and central banks have never attempted the surgery before, which is cold comfort to the patient.
-The United States economy suffers a repeat pratfall: America is going great guns now, but again that's based on temporary government largesse and the need to refill empty warehouses.
That doesn't mean anyone will buy the products once the inventories are replenished.
Scotiabank vice-president of economics Derek Holt says he believes the U.S. economy will slow to about two per cent growth in the latter half of next year, and if the inventory restock is too aggressive, a double-dip is not out of the question.
"What could happen is we go through a temporary growth spurt and then it's the Emperor has no clothes all over again and the consumer is exposed," Holt explained.
Behravesh also calls the U.S. consumer the biggest wild card for the next year or two. Households may come to the realization that the wealth hit they took when their home values collapsed is permanent, and continuing high unemployment may spook them into hibernation.
For Canada, a second collapse in U.S. consumption will devastate the export sector, the auto industry in particular, and derail the recovery, Holt said.
-Global imbalances: Buyer economies like the U.S. are transferring unsustainable amounts of wealth to seller economies like China, which become the world's pre-eminent creditors, until a reckoning comes and the indebted nations can no longer borrow.
The recession was supposed to help resolve the problem, and to some extent it has. U.S. exports have risen and imports have fallen, which is one reason Canada fell into a slump.
But the U.S. still imports way more than it exports, and Drummond says Washington's response to the recession has added a second front to the imbalance.
"Those global imbalances are worse now than they were before," he said. "The U.S. consumer did fall back, but the U.S. government more than filled the vacuum. U.S. debt is even higher than it was two years ago."
Many industrialized countries have mortgaged their futures. Japan's debt to gross domestic product now stands at 227 per cent; Italy at 120 per cent, the U.S. and the United Kingdom are at 94 per cent, Germany and France at 83 per cent.
-Financial market shock: The collapse of Wall Street investment house Lehman Brothers is credited, or blamed, for being the final straw that broke the global economy's back last September.
Nothing of that magnitude has occurred since, although Dubai World's surprise request for a standstill on payments of about US$50 billion briefly sent shivers through overseas stock markets in late November.
Dubai proved a false alarm. But Peter Morici, the former chief economist at the U.S. International Trade Commission, says there are enough ghosts in the closets of the U.S. financial sector to keep policy-makers awake at night.
"The banks are back to their old tricks, at any point in time the banks here can be counted on to cook up some kind of scheme that will collapse on them," he said.
One danger signal starting to emerge revolves around the troubled U.S. commercial real estate market, which could spark another round of losses for banks in 2010. Most economists, however, say it won't be as serious as the 2007 subprime mortgage meltdown in residential real estate, but financial institutions are also less able to withstand shocks now.
Most of the risks identified by economists would emerge, if they do, from beyond Canada's borders, particularly in the U.S., economists say. But that is also how the 2008-2009 recession happened, they point out.
"Canada's exposure to the U.S. economy has diminished a little bit from what it was in the past, but you guys will still get clobbered if we go down the tubes," noted Behravesh.
Tuesday, December 29, 2009
Thursday, December 24, 2009
Financial Update For Dec. 24, 2009
• TSX +30.72 thanks to higher mining stocks. The TSX closes at 1pm today.
• DOW +1.51 amid another economic report showing that consumer spending and incomes rose last month. The U.S. Commerce Department says consumer spending jumped 0.5 per cent in November, while incomes gained 0.4 per cent.
• Dollar +.85c to 95.38cUS to the strongest level in almost 3 weeks amid speculation an accelerating economic recovery will prompt the central bank to raise interest rates sooner than it expected.
• Oil +$2.27 to $76.67US per barrel.
• Gold +$7.30 to $1,093.93USD per ounce
•
Stimulus and housing give economy one-two punch
The Canadian economy strung together back-to-back months of growth for the first time in almost two years, but economists warn that consumers and government stimulus have been "carrying the ball" by fuelling a booming real-estate market that is ultimately unsustainable.
Canada's economy grew a modest 0.2% in October, the latest figures from Statistics Canada show. That followed a 0.4% increase in September.
Stewart Hall, economist with HSBC Securities Canada, said the country's real-estate market has been a major factor, fuelling spending in everything from renovations to new furnishings and even new cars to go in new garages.
"Financial, insurance and real estate have continued to be that pillar of strength, consistently showing growth through much of this economic recession," he said. "And we know that is the housing market, a reflection of the remarkable strength in the existing-home sales market."
October figures from Statistics Canada show a 7.2% rise in existing-home sales activity from real-estate agents and brokers. However, construction activity was up only 0.1%.
Meanwhile, after posting a 1% rise in September, the key manufacturing category fell flat in October.
One area that outperformed was utilities, which grew 2.4% during the month as temperatures returned to seasonal levels after a mild September.
"The housing market has been the big surprise for 2009," Mr. Hall said. He warned that consumers are taking on more and more debt due to record-low interest rates, and banks are happy to lend that money out.
"You hear [Bank of Canada governor Mark] Carney say both borrowers and lenders need to act prudently. Well, of course they do. But the history of the past few years shows telling people to behave themselves just doesn't work," he said.
Supporting domestic demand will continue to be an area of concern in 2010 as the downturn itself was caused by a collapse in external demand, namely from the United States.
"We lost a lot of external demand and it's unreasonable to think we can recover that from domestic sources for an extended period of time," Mr. Hall said.
Douglas Porter, deputy chief economist with BMO Capital Markets, said economists were disappointed in the overall numbers because results from manufacturing, retail and wholesale trade all came in short of preliminary reports. The difference was likely due in part to businesses burning off their existing inventories.
"It's unusual for all three to be moving in the opposite direction," he said. "But we shouldn't be too down on the number. It's gratifying to see two months in a row of growth for the first time since late 2007."
While there was growth month over month, the economy was still 3.2% smaller than it was in October 2008. The latest figures marked the 12th straight month that economy was weaker than it was in the year-earlier period.
Economists will now watch to see if the economy closed out the year as expected, bouncing back from the fairly shaking base built in September and October and accelerating into a full-fledged recovery in 2010.
Alex Koustas of Scotia Economics released a provincial outlook for 2010, highlighting an expected rebound in Ontario, a slowdown in Quebec and commodities producers in Western Canada benefiting the most from strengthening global markets.
"That Canada escaped from the global slump fairly quickly is reflective of our relatively healthy household balance sheets and stable financial system," he said in a report. "However, the modest pace of the recovery highlights the ongoing trade and competitive hurdles that need to be overcome in order to return to stronger growth."
Scotia expects British Columbia to lead the way with GDP growth of 3% in 2010, on the back of the Vancouver Winter Olympics and improving coal prices.
The Atlantic provinces will see the least growth, with Prince Edward Island bringing up the rear at +1.9%.
Quebec will underperform, growing only 2.2% on uncertainty in forestry and aerospace while Ontario's manufacturing will lead a comeback to 2.7% GDP gains.
• DOW +1.51 amid another economic report showing that consumer spending and incomes rose last month. The U.S. Commerce Department says consumer spending jumped 0.5 per cent in November, while incomes gained 0.4 per cent.
• Dollar +.85c to 95.38cUS to the strongest level in almost 3 weeks amid speculation an accelerating economic recovery will prompt the central bank to raise interest rates sooner than it expected.
• Oil +$2.27 to $76.67US per barrel.
• Gold +$7.30 to $1,093.93USD per ounce
•
Stimulus and housing give economy one-two punch
The Canadian economy strung together back-to-back months of growth for the first time in almost two years, but economists warn that consumers and government stimulus have been "carrying the ball" by fuelling a booming real-estate market that is ultimately unsustainable.
Canada's economy grew a modest 0.2% in October, the latest figures from Statistics Canada show. That followed a 0.4% increase in September.
Stewart Hall, economist with HSBC Securities Canada, said the country's real-estate market has been a major factor, fuelling spending in everything from renovations to new furnishings and even new cars to go in new garages.
"Financial, insurance and real estate have continued to be that pillar of strength, consistently showing growth through much of this economic recession," he said. "And we know that is the housing market, a reflection of the remarkable strength in the existing-home sales market."
October figures from Statistics Canada show a 7.2% rise in existing-home sales activity from real-estate agents and brokers. However, construction activity was up only 0.1%.
Meanwhile, after posting a 1% rise in September, the key manufacturing category fell flat in October.
One area that outperformed was utilities, which grew 2.4% during the month as temperatures returned to seasonal levels after a mild September.
"The housing market has been the big surprise for 2009," Mr. Hall said. He warned that consumers are taking on more and more debt due to record-low interest rates, and banks are happy to lend that money out.
"You hear [Bank of Canada governor Mark] Carney say both borrowers and lenders need to act prudently. Well, of course they do. But the history of the past few years shows telling people to behave themselves just doesn't work," he said.
Supporting domestic demand will continue to be an area of concern in 2010 as the downturn itself was caused by a collapse in external demand, namely from the United States.
"We lost a lot of external demand and it's unreasonable to think we can recover that from domestic sources for an extended period of time," Mr. Hall said.
Douglas Porter, deputy chief economist with BMO Capital Markets, said economists were disappointed in the overall numbers because results from manufacturing, retail and wholesale trade all came in short of preliminary reports. The difference was likely due in part to businesses burning off their existing inventories.
"It's unusual for all three to be moving in the opposite direction," he said. "But we shouldn't be too down on the number. It's gratifying to see two months in a row of growth for the first time since late 2007."
While there was growth month over month, the economy was still 3.2% smaller than it was in October 2008. The latest figures marked the 12th straight month that economy was weaker than it was in the year-earlier period.
Economists will now watch to see if the economy closed out the year as expected, bouncing back from the fairly shaking base built in September and October and accelerating into a full-fledged recovery in 2010.
Alex Koustas of Scotia Economics released a provincial outlook for 2010, highlighting an expected rebound in Ontario, a slowdown in Quebec and commodities producers in Western Canada benefiting the most from strengthening global markets.
"That Canada escaped from the global slump fairly quickly is reflective of our relatively healthy household balance sheets and stable financial system," he said in a report. "However, the modest pace of the recovery highlights the ongoing trade and competitive hurdles that need to be overcome in order to return to stronger growth."
Scotia expects British Columbia to lead the way with GDP growth of 3% in 2010, on the back of the Vancouver Winter Olympics and improving coal prices.
The Atlantic provinces will see the least growth, with Prince Edward Island bringing up the rear at +1.9%.
Quebec will underperform, growing only 2.2% on uncertainty in forestry and aerospace while Ontario's manufacturing will lead a comeback to 2.7% GDP gains.
Monday, December 21, 2009
Financial Update For Dec. 21, 2009
• TSX -9.66 Stock markets are expected to remain volatile in the shortened trading week ahead of Christmas, as investors clean up their books before the start of the new year.
• DOW +20.63
• Dollar +.38c to 93.81cUS
• Oil +$.71 to $73.36US per barrel. the Iraqi government said that an oil well had been taken over by a group of armed Iranians, which sent the prices up slightly in the final hours of trading.
• Gold +$4.00 to $1,110.80USD per ounce
• On the economic front, Canadian retail sales numbers for October will be released on Monday, with consensus forecasts predicting a 0.8 per cent rise month-over-month.
• On Wednesday, Canadian real GDP numbers for October will be released with consensus predictions targeting a modest 0.3 per cent gain for the month, on stronger manufacturing and housing market activity.
• Also, U.S. personal income and consumer spending will be released on Wednesday, and is expected to show that personal consumption was up 0.8 per cent for November, despite the economy
Canadian housing market sound, fears of consumer debt exaggerated: economists
December 18, 2009
Julian Beltrame, THE CANADIAN PRESS
The Canadian Press, 2009
OTTAWA - Canada's hot housing market received a clean bill of health from a major Canadian bank Friday, dismissing concerns voiced by the Bank of Canada that consumers may be taking on too much debt.
In a report on house and stock market rallies, economists with CIBC World Markets argue that the central bank's concerns are exaggerated, even though the bank was justified in raising them.
"Canada is not doomed to see a U.S.-style housing and mortgage blow-up," wrote CIBC's chief economist, Avery Shenfeld.
"The lessons for the U.S. were not that an extended period of low rates caused a mortgage and housing blow-up. It was a massive failure to supervise the worst excess of the American mortgage market that caused the trouble."
Last week, the Bank of Canada called record household debt the top risk facing the country's financial system, a warning repeated in Toronto earlier this week by the central bank's governor, Mark Carney.
The central bank did note that the risk to Canada's banking system was small, but worried that when interest rates rise to normal levels, up to 10 per cent of households could face difficulties in meeting monthly payment requirements.
Fresh data released Friday showed that spending by Canadian households averaged $71,360 last year, two per cent more than in 2007, with shelter representing about 20 per cent of the load.
Others have also expressed concern about consumer debt levels. In a note Friday, Bank of Montreal economist Sal Guatieri said at current rates the debt burdens being piled on by Canadians could reach American and British levels "just before they keeled over."
CIBC's Shenfeld and Benjamin Tal say their analysis shows that there is basis for the concern, but there are also critical factors that make the Canadian situation different.
By their calculation, the current $350,000 average selling price for a home in Canada is about seven per cent too high.
But they also say that with housing starts on the rise, thereby increasing the supply, the price of housing in Canada will moderate, not collapse.
And Canadian households are not exposed as their southern neighbours were to a market collapse.
Some have substantial equity in their homes and could downsize. Others, about 40 per cent of mortgage holders, have high debt payments because they are making accelerated pay-downs on principal, which they could suspend.
They note that while mortgage interest rates average about 4.4 per cent, payments as a share of after-tax income are higher - at the level they would be if rates were effectively six per cent.
And "history suggests many will jump into fixed mortgages" once variable rates come under upward pressure.
"The Bank of Canada was justified in raising these concerns, but once you get into the details, some of those threats don't appear quite as ominous," Shenfeld explained in an interview.
The CIBC economists agree with Carney that interest rates will rise, likely starting in the second half of next year, but "we don't see that as endangering a bubble either in the mortgage market or the equity market."
In a separate analysis, Shenfeld, Peter Buchanan and Krishen Rangasamy, all of CIBC, judged that the equity markets in Toronto still have room to grow even if some analysts believe stocks are overpriced already.
And they predict the Canadian dollar will average $1.05 US next year.
• DOW +20.63
• Dollar +.38c to 93.81cUS
• Oil +$.71 to $73.36US per barrel. the Iraqi government said that an oil well had been taken over by a group of armed Iranians, which sent the prices up slightly in the final hours of trading.
• Gold +$4.00 to $1,110.80USD per ounce
• On the economic front, Canadian retail sales numbers for October will be released on Monday, with consensus forecasts predicting a 0.8 per cent rise month-over-month.
• On Wednesday, Canadian real GDP numbers for October will be released with consensus predictions targeting a modest 0.3 per cent gain for the month, on stronger manufacturing and housing market activity.
• Also, U.S. personal income and consumer spending will be released on Wednesday, and is expected to show that personal consumption was up 0.8 per cent for November, despite the economy
Canadian housing market sound, fears of consumer debt exaggerated: economists
December 18, 2009
Julian Beltrame, THE CANADIAN PRESS
The Canadian Press, 2009
OTTAWA - Canada's hot housing market received a clean bill of health from a major Canadian bank Friday, dismissing concerns voiced by the Bank of Canada that consumers may be taking on too much debt.
In a report on house and stock market rallies, economists with CIBC World Markets argue that the central bank's concerns are exaggerated, even though the bank was justified in raising them.
"Canada is not doomed to see a U.S.-style housing and mortgage blow-up," wrote CIBC's chief economist, Avery Shenfeld.
"The lessons for the U.S. were not that an extended period of low rates caused a mortgage and housing blow-up. It was a massive failure to supervise the worst excess of the American mortgage market that caused the trouble."
Last week, the Bank of Canada called record household debt the top risk facing the country's financial system, a warning repeated in Toronto earlier this week by the central bank's governor, Mark Carney.
The central bank did note that the risk to Canada's banking system was small, but worried that when interest rates rise to normal levels, up to 10 per cent of households could face difficulties in meeting monthly payment requirements.
Fresh data released Friday showed that spending by Canadian households averaged $71,360 last year, two per cent more than in 2007, with shelter representing about 20 per cent of the load.
Others have also expressed concern about consumer debt levels. In a note Friday, Bank of Montreal economist Sal Guatieri said at current rates the debt burdens being piled on by Canadians could reach American and British levels "just before they keeled over."
CIBC's Shenfeld and Benjamin Tal say their analysis shows that there is basis for the concern, but there are also critical factors that make the Canadian situation different.
By their calculation, the current $350,000 average selling price for a home in Canada is about seven per cent too high.
But they also say that with housing starts on the rise, thereby increasing the supply, the price of housing in Canada will moderate, not collapse.
And Canadian households are not exposed as their southern neighbours were to a market collapse.
Some have substantial equity in their homes and could downsize. Others, about 40 per cent of mortgage holders, have high debt payments because they are making accelerated pay-downs on principal, which they could suspend.
They note that while mortgage interest rates average about 4.4 per cent, payments as a share of after-tax income are higher - at the level they would be if rates were effectively six per cent.
And "history suggests many will jump into fixed mortgages" once variable rates come under upward pressure.
"The Bank of Canada was justified in raising these concerns, but once you get into the details, some of those threats don't appear quite as ominous," Shenfeld explained in an interview.
The CIBC economists agree with Carney that interest rates will rise, likely starting in the second half of next year, but "we don't see that as endangering a bubble either in the mortgage market or the equity market."
In a separate analysis, Shenfeld, Peter Buchanan and Krishen Rangasamy, all of CIBC, judged that the equity markets in Toronto still have room to grow even if some analysts believe stocks are overpriced already.
And they predict the Canadian dollar will average $1.05 US next year.
Friday, December 18, 2009
Financial Update For Dec. 18, 2009
• TSX -163.98
• DOW -132.86
• Dollar -.87c to 93.43cUS
• Oil -$.01 to $72.65US per barrel.
• Gold -$28.90 to $1,106.80USD per ounce
New survey finds Canadians spending more this holiday season than last year TORONTO — Canadian shoppers are opening their wallets a lot wider this year than last despite concerns over the economy, according to a new survey that tallies retail sales.
Moneris Solutions Corp., a debit and credit card payments processor, says its figures show sales are up sharply leading into the last weekend before Christmas. The Moneris survey, released today, tracks national sales in the final five weekends of the pre-holiday season. It says that in the first weekend of December, shoppers spent five per cent more overall, with department stores the clear winner as their sales shot up 12.8 per cent.
Clothing stores saw a 5.4 per cent increase in sales in the Dec. 4-6 weekend, while drugstores reported a 3.8 per cent increase. Last weekend, Dec. 11-13, it was the turn of apparel retailers as they rang in an 11.4 per cent increase in sales amid an overall six per cent jump compared with 2008.
“As the Canadian economy begins a trend toward recovery, the increase in pre-holiday spending is a clear indication of renewed consumer confidence,” said David Ades, Moneris’ senior vice-president, sales and marketing.
“Canadians are clearly more optimistic about the future this year than they were during this time last year, and retailers are capitalizing on this by using creative marketing tactics to draw them in early and often,” Ades said.
With both debit and credit card options in their wallets, consumers had been showing a slight preference for debit cards earlier this year.
“(But) credit card transactions saw a resurgence as the economy recovered,” Moneris said in a news release.
The 2009 pre-holiday spending data compared national retail sales over the past five weekends with the same period last year. The data covers all merchant categories and tallies the dollar value as well as the number of transactions made on Moneris debit and credit card terminals across the country.
The Canadian Press
Rates not expected to rise as consumer prices rise Canadian Press OTTAWA – Canadians are again starting to pay more for most things they consume as the inflation rate jumped to one per cent in November, the second straight month prices have risen sharply.
While higher gasoline prices were mostly to blame, Statistics Canada said the advance was broad-based. Prices rose in seven of eight major components tracked by the agency, and in all 10 provinces.
As well, the month-to-month index was higher with prices rising 0.5 per cent from October.
The last two months have seen a complete reversal in the inflation story in Canada, which previously was one of falling prices and negative inflation.
But a rapid decline in gas prices from record highs in July 2008 has reversed the trend, the agency said.
“Prices at the pump are now exerting upward pressure on the Consumer Price Index after an extended period in which they were the main contributors to year-over-year declines in overall consumer prices,” the agency explained.
In November, gas prices were 14.1 per cent higher than at the same time last year and 13.1 per cent lower in October from the previous year.
Other components pushing prices higher were food, transportation, household operations, and furniture and equipment.
In addition, consumers paid 7.8 per cent more for car insurance and 3.2 per cent more for health and personal care.
Meanwhile, the cost of passenger vehicles fell six per cent, and shelter costs declined 1.7 per cent as natural gas prices were almost 30 per cent lower this year than last. The mortgage interest costs were also well below last year by four per cent.
Overall, the trend of inflation is unlikely to worry the Bank of Canada as most price increases remain tame. Food, which had been a major driver of price increases, gained only 1.7 per cent in November, the smallest increase since April 2008.
Core inflation, which the central bank closely tracks because it represents underlying inflation pressures, was actually lower in November at 1.5 per cent, compared to 1.8 per cent in October. That is still well below the central bank’s two-per-cent target.
Regionally, the largest increases in annual inflation occurred in New Brunswick, with a 2.2-per-cent rise. The rate rose 1.9 per cent in Prince Edward Island, and by 1.7 per cent in both Nova Scotia and Quebec.
• DOW -132.86
• Dollar -.87c to 93.43cUS
• Oil -$.01 to $72.65US per barrel.
• Gold -$28.90 to $1,106.80USD per ounce
New survey finds Canadians spending more this holiday season than last year TORONTO — Canadian shoppers are opening their wallets a lot wider this year than last despite concerns over the economy, according to a new survey that tallies retail sales.
Moneris Solutions Corp., a debit and credit card payments processor, says its figures show sales are up sharply leading into the last weekend before Christmas. The Moneris survey, released today, tracks national sales in the final five weekends of the pre-holiday season. It says that in the first weekend of December, shoppers spent five per cent more overall, with department stores the clear winner as their sales shot up 12.8 per cent.
Clothing stores saw a 5.4 per cent increase in sales in the Dec. 4-6 weekend, while drugstores reported a 3.8 per cent increase. Last weekend, Dec. 11-13, it was the turn of apparel retailers as they rang in an 11.4 per cent increase in sales amid an overall six per cent jump compared with 2008.
“As the Canadian economy begins a trend toward recovery, the increase in pre-holiday spending is a clear indication of renewed consumer confidence,” said David Ades, Moneris’ senior vice-president, sales and marketing.
“Canadians are clearly more optimistic about the future this year than they were during this time last year, and retailers are capitalizing on this by using creative marketing tactics to draw them in early and often,” Ades said.
With both debit and credit card options in their wallets, consumers had been showing a slight preference for debit cards earlier this year.
“(But) credit card transactions saw a resurgence as the economy recovered,” Moneris said in a news release.
The 2009 pre-holiday spending data compared national retail sales over the past five weekends with the same period last year. The data covers all merchant categories and tallies the dollar value as well as the number of transactions made on Moneris debit and credit card terminals across the country.
The Canadian Press
Rates not expected to rise as consumer prices rise Canadian Press OTTAWA – Canadians are again starting to pay more for most things they consume as the inflation rate jumped to one per cent in November, the second straight month prices have risen sharply.
While higher gasoline prices were mostly to blame, Statistics Canada said the advance was broad-based. Prices rose in seven of eight major components tracked by the agency, and in all 10 provinces.
As well, the month-to-month index was higher with prices rising 0.5 per cent from October.
The last two months have seen a complete reversal in the inflation story in Canada, which previously was one of falling prices and negative inflation.
But a rapid decline in gas prices from record highs in July 2008 has reversed the trend, the agency said.
“Prices at the pump are now exerting upward pressure on the Consumer Price Index after an extended period in which they were the main contributors to year-over-year declines in overall consumer prices,” the agency explained.
In November, gas prices were 14.1 per cent higher than at the same time last year and 13.1 per cent lower in October from the previous year.
Other components pushing prices higher were food, transportation, household operations, and furniture and equipment.
In addition, consumers paid 7.8 per cent more for car insurance and 3.2 per cent more for health and personal care.
Meanwhile, the cost of passenger vehicles fell six per cent, and shelter costs declined 1.7 per cent as natural gas prices were almost 30 per cent lower this year than last. The mortgage interest costs were also well below last year by four per cent.
Overall, the trend of inflation is unlikely to worry the Bank of Canada as most price increases remain tame. Food, which had been a major driver of price increases, gained only 1.7 per cent in November, the smallest increase since April 2008.
Core inflation, which the central bank closely tracks because it represents underlying inflation pressures, was actually lower in November at 1.5 per cent, compared to 1.8 per cent in October. That is still well below the central bank’s two-per-cent target.
Regionally, the largest increases in annual inflation occurred in New Brunswick, with a 2.2-per-cent rise. The rate rose 1.9 per cent in Prince Edward Island, and by 1.7 per cent in both Nova Scotia and Quebec.
Thursday, December 17, 2009
Financial Update For Dec. 17, 2009
• TSX +96.02
• DOW -10.88
• Dollar +.08c to 94.30cUS
• Oil +$0.25 to $72.91US per barrel.
• Gold +$4.40 to $1,140.60USD per ounce
The bond yield was up 0.03% to 2.60%, dropping the Spread to 1.39%.
Be ‘vigilant,' Carney warns on debt
‘When risks are still manageable is precisely the best time to act,' Bank of Canada Governor urges borrowers and lenders
Jeremy Torobin
Ottawa — Globe and Mail Update Published on Wednesday, Dec. 16, 2009 12:58PM EST Last updated on Wednesday, Dec. 16, 2009 5:24PM EST
Bank of Canada Governor Mark Carney again warned Canadians Wednesday not to borrow more than they will be able to handle when ultra-low interest rates
“When risks are still manageable is precisely the best time to act,” Mr. Carney said in the text of a speech he was delivering to a business audience in Toronto. “We must be vigilant, and all parties must fulfill their responsibilities.”
While saying lenders should “actively monitor risk” and not take “false comfort” from mortgage insurance and the past health of household credit, Mr. Carney implored Canadians to “ensure that in the future, when the recovery takes hold and extraordinary measures are unwound, they can still service their debts.”
Mr. Carney's remarks expand on the central bank's semi-annual review of the financial system
That review used a “stress test” to show rising interest rates
And as the Canadian economy – which resumed growth in the third quarter on the strength of domestic spending – picks up steam, Mr. Carney warned that Canadians may save too little and borrow too much.
Nonetheless, he hinted that he would not seek to rush a return to higher borrowing costs to rein in spending and that monetary tightening won't come until inflation is closer to the bank's 2 per cent target.
“Whatever happens, the bank's monetary policy reaction to consumer behaviour will always be driven by its implications – taken in conjunction with all other relevant factors – for inflation over the medium-term horizon,” he said.
The central bank has made a conditional commitment to keep interest rates on hold until at least the middle of next year.
With the Bank of Canada's benchmark policy rate at a record low 0.25 per cent since April, cheap mortgage rates, and fiscal incentives such as allowing first-time home buyers to use more of their registered retirement savings as a down payment, have fuelled buying in the housing market and elsewhere in the economy.
In the speech, Mr. Carney pointed to the U.S. subprime mortgage collapse and the subsequent meltdown of that country's financial system to remind Canadians that growing debt burdens, even if confined to a small slice of the population, can cause problems for the whole economy.
“A shock to economic conditions could be transmitted to the broader financial system through deterioration in the credit quality of loans to households,” Mr. Carney said. “In such an event, increased loan-loss provisions and reduced quality of the remaining loans could lead to tighter credit conditions more broadly.” He also repeated much of the data from his report last Thursday, including the fact that personal bankruptcies in Canada rose this year to the highest level since 1991. In his remarks, he also noted that even as real consumer credit, including home equity lines of credit, declined during the recessions of the early 1980s and 1990s, it's up 7 per cent in the past year.
In his report last week, Mr. Carney said household debt remains “a key vulnerability over time,” and in the stress test model the central bank assumed that the ratio of debt to income would rise from 1.42, or 1.42 per cent, in the second quarter of this year, to 1.60, or 1.60 per cent, by mid-2012.
To illustrate the point that Canadians' debt could become a bigger risk once policy makers lift the main interest rate, the bank showed the proportion of households with debt-service ratios higher than 40 per cent of income would rise to 8.5 per cent by the second quarter of 2012, assuming the central bank's rate is 3.2 per cent. That share would climb to 9.6 per cent assuming the central bank's rate is 4.5 per cent. The proportion of households with more than 40 per cent debt-service costs was 6.1 per cent over the past decade and peaked at 7.4 per cent in 2000.
The central bank's report said Canadian banks currently have more than enough capital on hand to absorb potential losses, suggesting that even the worst-case scenario in the stress test would fall short of risking a collapse of the financial system.
Addressing the personal savings rate, Mr. Carney said a savings rate at current levels, or slightly lower, is what the central bank is projecting as part of a consumer-led recovery.
When asked about the potential for a bubble in the housing market he reiterated that the central bank's core focus remains fixed on inflation. “Monetary policy in Canada doesn't target specific assets or asset prices,” he said. “It will be set to achieve the 2 per cent [inflation] target.”
• DOW -10.88
• Dollar +.08c to 94.30cUS
• Oil +$0.25 to $72.91US per barrel.
• Gold +$4.40 to $1,140.60USD per ounce
The bond yield was up 0.03% to 2.60%, dropping the Spread to 1.39%.
Be ‘vigilant,' Carney warns on debt
‘When risks are still manageable is precisely the best time to act,' Bank of Canada Governor urges borrowers and lenders
Jeremy Torobin
Ottawa — Globe and Mail Update Published on Wednesday, Dec. 16, 2009 12:58PM EST Last updated on Wednesday, Dec. 16, 2009 5:24PM EST
Bank of Canada Governor Mark Carney again warned Canadians Wednesday not to borrow more than they will be able to handle when ultra-low interest rates
“When risks are still manageable is precisely the best time to act,” Mr. Carney said in the text of a speech he was delivering to a business audience in Toronto. “We must be vigilant, and all parties must fulfill their responsibilities.”
While saying lenders should “actively monitor risk” and not take “false comfort” from mortgage insurance and the past health of household credit, Mr. Carney implored Canadians to “ensure that in the future, when the recovery takes hold and extraordinary measures are unwound, they can still service their debts.”
Mr. Carney's remarks expand on the central bank's semi-annual review of the financial system
That review used a “stress test” to show rising interest rates
And as the Canadian economy – which resumed growth in the third quarter on the strength of domestic spending – picks up steam, Mr. Carney warned that Canadians may save too little and borrow too much.
Nonetheless, he hinted that he would not seek to rush a return to higher borrowing costs to rein in spending and that monetary tightening won't come until inflation is closer to the bank's 2 per cent target.
“Whatever happens, the bank's monetary policy reaction to consumer behaviour will always be driven by its implications – taken in conjunction with all other relevant factors – for inflation over the medium-term horizon,” he said.
The central bank has made a conditional commitment to keep interest rates on hold until at least the middle of next year.
With the Bank of Canada's benchmark policy rate at a record low 0.25 per cent since April, cheap mortgage rates, and fiscal incentives such as allowing first-time home buyers to use more of their registered retirement savings as a down payment, have fuelled buying in the housing market and elsewhere in the economy.
In the speech, Mr. Carney pointed to the U.S. subprime mortgage collapse and the subsequent meltdown of that country's financial system to remind Canadians that growing debt burdens, even if confined to a small slice of the population, can cause problems for the whole economy.
“A shock to economic conditions could be transmitted to the broader financial system through deterioration in the credit quality of loans to households,” Mr. Carney said. “In such an event, increased loan-loss provisions and reduced quality of the remaining loans could lead to tighter credit conditions more broadly.” He also repeated much of the data from his report last Thursday, including the fact that personal bankruptcies in Canada rose this year to the highest level since 1991. In his remarks, he also noted that even as real consumer credit, including home equity lines of credit, declined during the recessions of the early 1980s and 1990s, it's up 7 per cent in the past year.
In his report last week, Mr. Carney said household debt remains “a key vulnerability over time,” and in the stress test model the central bank assumed that the ratio of debt to income would rise from 1.42, or 1.42 per cent, in the second quarter of this year, to 1.60, or 1.60 per cent, by mid-2012.
To illustrate the point that Canadians' debt could become a bigger risk once policy makers lift the main interest rate, the bank showed the proportion of households with debt-service ratios higher than 40 per cent of income would rise to 8.5 per cent by the second quarter of 2012, assuming the central bank's rate is 3.2 per cent. That share would climb to 9.6 per cent assuming the central bank's rate is 4.5 per cent. The proportion of households with more than 40 per cent debt-service costs was 6.1 per cent over the past decade and peaked at 7.4 per cent in 2000.
The central bank's report said Canadian banks currently have more than enough capital on hand to absorb potential losses, suggesting that even the worst-case scenario in the stress test would fall short of risking a collapse of the financial system.
Addressing the personal savings rate, Mr. Carney said a savings rate at current levels, or slightly lower, is what the central bank is projecting as part of a consumer-led recovery.
When asked about the potential for a bubble in the housing market he reiterated that the central bank's core focus remains fixed on inflation. “Monetary policy in Canada doesn't target specific assets or asset prices,” he said. “It will be set to achieve the 2 per cent [inflation] target.”
Wednesday, December 16, 2009
Financial Update For Dec. 16, 2009
• TSX -4.6
• DOW -49.05
• Dollar +.05c to 94.23cUS
• Oil $.36 to $69.51US per barrel.
• Gold +$3.90 to $1,123.40USD per ounce
Real Estate
Housing market has big cracks
It is probably a real estate bubble that will eventually burst - two years after the rest of the world
Barrie McKenna
Published on Tuesday, Dec. 15, 2009 12:00AM EST Last updated on Tuesday, Dec. 15, 2009 9:30AM EST
One of the enduring mysteries of the Great Recession is how Canada largely escaped the crushing home price correction that hit virtually every other Western country.
After a brief setback in 2008, Canadian prices resumed their upward climb. The average price of a house is up a remarkable 21 per cent in the past 12 months, reaching a new record of $341,079 in October.
Fresh numbers on home sales are due out today.
In the hottest markets, such as Vancouver, buying fever is back, marked by bidding wars and overnight campouts to buy condos.
Compare that with the United States, where housing prices are down roughly 30 per cent from their peak. Even in Europe, values are off an average of 6 per cent.
The contrast is startling, and quite frankly, defies logic.
It isn't as if Canada was immune to the worst recession since the Second World War. The economy contracted, stocks tumbled, unemployment jumped more than two percentage points to 8.5 per cent, 321,000 jobs were destroyed and personal income fell.
There are two possible explanations for the anomaly. One is that Canada has coated itself in armour, aided by brilliant monetary stewardship at the Bank of Canada, prudent lending by banks and just the right dose of stimulus from the Harper government.
Or, more probably, it's not a protective coating at all, but a real estate bubble that will eventually burst - two years after the rest of the world.
Arguing for the armour case in a new report for the Federal Reserve Bank of Cleveland, University of Western Ontario economist James MacGee says the main reason Canada's housing market hasn't gone bust is because of much sounder lending practices. An explosion of subprime and high-risk mortgages, rather than merely low interest rates, was the primary reason that U.S. prices boomed and then collapsed, according to Prof. MacGee.
The result is that Americans took on too much debt, relative to the both the value of their homes and their incomes. That left them highly vulnerable. They bought homes they couldn't afford, leading to an inevitable spike in delinquencies and tumbling prices.
In Canada, that didn't happen. Prof. MacGee said risky lending was held in check because banks did less securitization of mortgages. Also, stricter capital requirements and tighter mortgage insurance rules discouraged subprime lending.
The result is that mortgage delinquency rates in Canada and the United States, which had been comparable roughly up until 2006, began to diverge: They spiked in the U.S., but held steady in Canada.
Prof. MacGee acknowledges the possibility that he's wrong, and that Canada could face a correction some time in 2010. But he said that if it happens, it's likely to be more of a "housing market slowdown, rather than a bust."
There is another camp. A small, but growing minority of experts are now warning of a more severe real estate bust in Canada. Last week, Bank of Canada Governor Mark Carney said excessive household debt poses the biggest threat to the recovery.
And in a recent Globe and Mail column, economist David Rosenberg
Canadians should pay attention. Mr. Rosenberg, a former Merrill Lynch economist, was among the first on Wall Street to warn of a housing-led recession in the United States. He knows what a housing correction looks like.
Homes are now less affordable in Canada than they've even been, relative to income.
So while it's true that Canada's banks are financially sound, it's less clear that homeowners are being similarly prudent.
Too many appear to be blindly following Americans down a path of excessive debt, enticed by low rates. The ratio of mortgage debt to household incomes in Canada recently hit a record 70 per cent, up from 65 per cent a year ago. And 40 per cent of home buyers are opting for short-term, variable-rate mortgages, which will eventually ratchet up, leaving some owners in deep financial trouble.
Canadian authorities have seen the U.S. movie; they helped fuel the hot market in Canada, and presumably they know how to cool it. The Bank of Canada would raise its key interest rate and Canada Mortgage and Housing Corp. would wind down its purchases of insured mortgages from commercial banks.
• DOW -49.05
• Dollar +.05c to 94.23cUS
• Oil $.36 to $69.51US per barrel.
• Gold +$3.90 to $1,123.40USD per ounce
Real Estate
Housing market has big cracks
It is probably a real estate bubble that will eventually burst - two years after the rest of the world
Barrie McKenna
Published on Tuesday, Dec. 15, 2009 12:00AM EST Last updated on Tuesday, Dec. 15, 2009 9:30AM EST
One of the enduring mysteries of the Great Recession is how Canada largely escaped the crushing home price correction that hit virtually every other Western country.
After a brief setback in 2008, Canadian prices resumed their upward climb. The average price of a house is up a remarkable 21 per cent in the past 12 months, reaching a new record of $341,079 in October.
Fresh numbers on home sales are due out today.
In the hottest markets, such as Vancouver, buying fever is back, marked by bidding wars and overnight campouts to buy condos.
Compare that with the United States, where housing prices are down roughly 30 per cent from their peak. Even in Europe, values are off an average of 6 per cent.
The contrast is startling, and quite frankly, defies logic.
It isn't as if Canada was immune to the worst recession since the Second World War. The economy contracted, stocks tumbled, unemployment jumped more than two percentage points to 8.5 per cent, 321,000 jobs were destroyed and personal income fell.
There are two possible explanations for the anomaly. One is that Canada has coated itself in armour, aided by brilliant monetary stewardship at the Bank of Canada, prudent lending by banks and just the right dose of stimulus from the Harper government.
Or, more probably, it's not a protective coating at all, but a real estate bubble that will eventually burst - two years after the rest of the world.
Arguing for the armour case in a new report for the Federal Reserve Bank of Cleveland, University of Western Ontario economist James MacGee says the main reason Canada's housing market hasn't gone bust is because of much sounder lending practices. An explosion of subprime and high-risk mortgages, rather than merely low interest rates, was the primary reason that U.S. prices boomed and then collapsed, according to Prof. MacGee.
The result is that Americans took on too much debt, relative to the both the value of their homes and their incomes. That left them highly vulnerable. They bought homes they couldn't afford, leading to an inevitable spike in delinquencies and tumbling prices.
In Canada, that didn't happen. Prof. MacGee said risky lending was held in check because banks did less securitization of mortgages. Also, stricter capital requirements and tighter mortgage insurance rules discouraged subprime lending.
The result is that mortgage delinquency rates in Canada and the United States, which had been comparable roughly up until 2006, began to diverge: They spiked in the U.S., but held steady in Canada.
Prof. MacGee acknowledges the possibility that he's wrong, and that Canada could face a correction some time in 2010. But he said that if it happens, it's likely to be more of a "housing market slowdown, rather than a bust."
There is another camp. A small, but growing minority of experts are now warning of a more severe real estate bust in Canada. Last week, Bank of Canada Governor Mark Carney said excessive household debt poses the biggest threat to the recovery.
And in a recent Globe and Mail column, economist David Rosenberg
Canadians should pay attention. Mr. Rosenberg, a former Merrill Lynch economist, was among the first on Wall Street to warn of a housing-led recession in the United States. He knows what a housing correction looks like.
Homes are now less affordable in Canada than they've even been, relative to income.
So while it's true that Canada's banks are financially sound, it's less clear that homeowners are being similarly prudent.
Too many appear to be blindly following Americans down a path of excessive debt, enticed by low rates. The ratio of mortgage debt to household incomes in Canada recently hit a record 70 per cent, up from 65 per cent a year ago. And 40 per cent of home buyers are opting for short-term, variable-rate mortgages, which will eventually ratchet up, leaving some owners in deep financial trouble.
Canadian authorities have seen the U.S. movie; they helped fuel the hot market in Canada, and presumably they know how to cool it. The Bank of Canada would raise its key interest rate and Canada Mortgage and Housing Corp. would wind down its purchases of insured mortgages from commercial banks.
Monday, December 14, 2009
Financial Update For Dec. 14, 2009
TSX -40.64
• DOW +65.67
• Dollar -.85c to 94.35cUS
• Oil -$.67 to $69.87US per barrel.
• Gold -$6.30 to $1,119.50USD per ounce
Positive economic growth likely in 2010 and 2011, says RBC Economics
The Canadian Press - After a challenging year, the economy is set for a recovery in 2010, according to a new forecast by RBC Economics.
It says although the economy contracted at an average of 2.5 per cent this year, the stage is set for positive growth in 2010. RBC predicts real gross domestic product will rise by 2.6 per cent next and will continue to expand in 2011, at a 3.9 per cent clip. The report suggests the peak of stimulus spending will occur in 2010, with improving credit conditions fuelling growth next year and in 2011.
In addition, consumer spending is projected to increase by 2.3 per cent next year before accelerating to 2.7 per cent in 2011.
However, the bank says the jobless rate is expected to remain high at about 8.7 per cent in 2010 before falling to 7.8 per cent in 2011.
"With the financial crisis behind us and the U.S. economy on the mend, Canada's economic growth is expected to rise steadily throughout the next year," said Craig Wright, RBC senior vice-president and chief economist.
"While challenges remain, a peak in stimulus and infrastructure spending across the federal, provincial and municipal governments, along with low interest rates, should result in a sustained recovery."
Flaherty notes stimulus money flowing as recovery kicks in
By Nelson Wyatt
MONTREAL — Federal stimulus projects are starting to snowball just as the economy is recovering from the global financial meltdown, Finance Minister Jim Flaherty said Friday.
Flaherty says cash will flow faster in 2010 for federally funded construction projects, now that numerous engineering studies and environmental assessments are being completed.
“They are snowballing, if I can put it that way,” he said in Quebec City.
“They are gathering momentum as we go forward, as engineering studies are done, as environmental assessments are done. So there’ll be a lot of cash flow next year into the Canadian economy.”
Earlier this year, in the depths of the recession, Ottawa earmarked billions for infrastructure projects.
The opposition spent months warning that the money wasn’t going out quickly enough, while the government made procedural changes to speed up the delivery process.
The Liberals say Flaherty’s comments now prove the stimulus process encountered hiccups.
“He’s admitting that we were right all along,” Liberal critic John McCallum said in an interview. “Very little of the money has gotten out.”
He drew parallels with the government’s treatment of allegations of prisoner abuse in Afghanistan.
“This is a dishonest government,” McCallum said. “They told Canadians lies about (Afghanistan) detainees and about the infrastructure money.
“And then when irrefutable facts came out to demonstrate these were lies, they spin the story in a different way. In both cases, the facts now show that they were not telling the truth on infrastructure just as they were not telling the truth on detainees.”
He said it would have been possible to get the money out faster if the government had followed a Liberal plan to transfer gas taxes directly to municipalities, who would have been able to move ahead with already approved projects.
The finance minister, meanwhile, said there are encouraging signs that the recession is petering out.
“We have seen improvements in business confidence, certainly. We are seeing an increase — some increases — in private-sector investment, although we are not comfortable yet that we’re at a place where we can stop the stimulus measures,” Flaherty told a news conference.
“The job situation has also stabilized in the last several months, which is always encouraging.”
Dale Orr, a Toronto-based economic consultant, said Flaherty had “put a bit of flesh” on earlier statements which left the impression projects were going forward and there was immediate economic growth.
“The starting point for a lot of these programs is exactly what he’s now mentioning,” Orr said.
Douglas Porter, deputy chief economist with BMO Capital Markets, said Flaherty seemed to be sticking to his message “that there isn’t going to be a whole lot of new measures next year.
“In fact, next year’s budget may be extremely thin.”
Porter said one of the biggest criticisms of fiscal policy is that by the time the problem is identified and the money starts to be spent, the economy has already started to recover.
“This may well be a case where the maximum effect of the fiscal stimulus actually hits after the economy has started to emerge from recession.”
• DOW +65.67
• Dollar -.85c to 94.35cUS
• Oil -$.67 to $69.87US per barrel.
• Gold -$6.30 to $1,119.50USD per ounce
Positive economic growth likely in 2010 and 2011, says RBC Economics
The Canadian Press - After a challenging year, the economy is set for a recovery in 2010, according to a new forecast by RBC Economics.
It says although the economy contracted at an average of 2.5 per cent this year, the stage is set for positive growth in 2010. RBC predicts real gross domestic product will rise by 2.6 per cent next and will continue to expand in 2011, at a 3.9 per cent clip. The report suggests the peak of stimulus spending will occur in 2010, with improving credit conditions fuelling growth next year and in 2011.
In addition, consumer spending is projected to increase by 2.3 per cent next year before accelerating to 2.7 per cent in 2011.
However, the bank says the jobless rate is expected to remain high at about 8.7 per cent in 2010 before falling to 7.8 per cent in 2011.
"With the financial crisis behind us and the U.S. economy on the mend, Canada's economic growth is expected to rise steadily throughout the next year," said Craig Wright, RBC senior vice-president and chief economist.
"While challenges remain, a peak in stimulus and infrastructure spending across the federal, provincial and municipal governments, along with low interest rates, should result in a sustained recovery."
Flaherty notes stimulus money flowing as recovery kicks in
By Nelson Wyatt
MONTREAL — Federal stimulus projects are starting to snowball just as the economy is recovering from the global financial meltdown, Finance Minister Jim Flaherty said Friday.
Flaherty says cash will flow faster in 2010 for federally funded construction projects, now that numerous engineering studies and environmental assessments are being completed.
“They are snowballing, if I can put it that way,” he said in Quebec City.
“They are gathering momentum as we go forward, as engineering studies are done, as environmental assessments are done. So there’ll be a lot of cash flow next year into the Canadian economy.”
Earlier this year, in the depths of the recession, Ottawa earmarked billions for infrastructure projects.
The opposition spent months warning that the money wasn’t going out quickly enough, while the government made procedural changes to speed up the delivery process.
The Liberals say Flaherty’s comments now prove the stimulus process encountered hiccups.
“He’s admitting that we were right all along,” Liberal critic John McCallum said in an interview. “Very little of the money has gotten out.”
He drew parallels with the government’s treatment of allegations of prisoner abuse in Afghanistan.
“This is a dishonest government,” McCallum said. “They told Canadians lies about (Afghanistan) detainees and about the infrastructure money.
“And then when irrefutable facts came out to demonstrate these were lies, they spin the story in a different way. In both cases, the facts now show that they were not telling the truth on infrastructure just as they were not telling the truth on detainees.”
He said it would have been possible to get the money out faster if the government had followed a Liberal plan to transfer gas taxes directly to municipalities, who would have been able to move ahead with already approved projects.
The finance minister, meanwhile, said there are encouraging signs that the recession is petering out.
“We have seen improvements in business confidence, certainly. We are seeing an increase — some increases — in private-sector investment, although we are not comfortable yet that we’re at a place where we can stop the stimulus measures,” Flaherty told a news conference.
“The job situation has also stabilized in the last several months, which is always encouraging.”
Dale Orr, a Toronto-based economic consultant, said Flaherty had “put a bit of flesh” on earlier statements which left the impression projects were going forward and there was immediate economic growth.
“The starting point for a lot of these programs is exactly what he’s now mentioning,” Orr said.
Douglas Porter, deputy chief economist with BMO Capital Markets, said Flaherty seemed to be sticking to his message “that there isn’t going to be a whole lot of new measures next year.
“In fact, next year’s budget may be extremely thin.”
Porter said one of the biggest criticisms of fiscal policy is that by the time the problem is identified and the money starts to be spent, the economy has already started to recover.
“This may well be a case where the maximum effect of the fiscal stimulus actually hits after the economy has started to emerge from recession.”
Friday, December 11, 2009
Financial Update For Dec. 11, 2009
• TSX +75.35 following the release of some encouraging economic data.
• DOW +68.78 as investors sorted through a bevy of reports on jobs, housing, net worth and the deficit
• Dollar +.37c to 95.21cUS
• Oil -$.13c to $70.48US per barrel.
• Gold +$6.00 to $1,126.00USD per ounce
U.S. trade deficit narrows as exports surge to highest level in nearly a year; oil imports dip
Martin Crutsinger, The Associated Press WASHINGTON - The U.S. trade deficit unexpectedly narrowed in October as exports from the United States surged to the highest level in nearly a year.
The U.S. Commerce Department said Thursday that the American trade deficit with the rest of the world fell to US$32.9 billion in October, 7.6 per cent below a revised September deficit of $35.7 billion.
Economists had expected the October U.S. trade deficit to increase to $36.8 billion and, in fact, there was an increased U.S. trade deficits with Canada and China - two of the country's biggest trading partners. Statistics Canada reported from Ottawa that exports to the United States grew 3.6 per cent while imports fell 3.1 per cent. As a result, the U.S. trade deficit with Canada jumped 30.8 per cent to US$2 billion, the U.S. Commerce Department reported from Washington
Bank of Canada concerned about government, household debt
By Julian Beltrame, The Canadian Press
OTTAWA - Mounting governmental and household debt are posing new risks to the stability of financial systems, the Bank of Canada said Thursday in its most recent analysis.
The central bank's semi-annual "Financial System Review" finds that overall conditions have improved in the short term since it last reported in June.
But it adds that record-high debt by Canadian households pose an elevated medium-term risk if a second financial or economic shock were to materialize.
Bank of Canada governor Mark Carney has warned in the past about Canadians getting in over their heads with large mortgage commitments that don't appear problematic given today's low interest rates.
The bank repeats the warning in its systems review, stressing that rates aren't going to remain at historic lows forever and mortgage payments will rise.
This is both a potential problem for households and banks, the report states.
"When borrowing funds, especially in the form of mortgages, households need to assess their ability to service these debt obligations over their entire maturity, taking into account likely changes in both income and interest rates," the report stresses.
And the bank says lenders, such as the chartered banks, should be careful about extending mortgage loans even if they are insured.
That's because a borrower's default on mortgages would impact other loans.
The Bank of Canada notes that its review of potential risks is not intended as a prediction of what is likely to occur, but an early warning system of potential risks.
In this regard, one risk that is emerging is massive debt being taken on by governments throughout the world as they try to cope with the fall-out the deep recession.
The deteriorating fiscal positions leaves many governments vulnerable to future economic shocks, in that they are left with fewer resources.
The bank adds that the ability of governments to address current account imbalances - one of the believed root causes of the global downturn - would be hindered by the debt overload.
Although Canada remains in a fiscally strong position in relation to many other economies, with a debt-to-gross domestic product ratio projected to peak at about 35 per cent, it too would be impacted by the problems of others.
"Our financial system would be affected indirectly," the bank says, "since higher borrowing costs facing those countries with large financing needs would mute the global recovery."
"In addition, disorderly fluctuations in exchange rates could cause financial stress for Canadian businesses, financial institutions, and households."
The central bank says the outlook for the global economy has improved since June, but cautions that growth "is nonetheless likely to remain subdued for some time."
This makes global economies more vulnerable to any new shock that may emerge, the bank states.
• DOW +68.78 as investors sorted through a bevy of reports on jobs, housing, net worth and the deficit
• Dollar +.37c to 95.21cUS
• Oil -$.13c to $70.48US per barrel.
• Gold +$6.00 to $1,126.00USD per ounce
U.S. trade deficit narrows as exports surge to highest level in nearly a year; oil imports dip
Martin Crutsinger, The Associated Press WASHINGTON - The U.S. trade deficit unexpectedly narrowed in October as exports from the United States surged to the highest level in nearly a year.
The U.S. Commerce Department said Thursday that the American trade deficit with the rest of the world fell to US$32.9 billion in October, 7.6 per cent below a revised September deficit of $35.7 billion.
Economists had expected the October U.S. trade deficit to increase to $36.8 billion and, in fact, there was an increased U.S. trade deficits with Canada and China - two of the country's biggest trading partners. Statistics Canada reported from Ottawa that exports to the United States grew 3.6 per cent while imports fell 3.1 per cent. As a result, the U.S. trade deficit with Canada jumped 30.8 per cent to US$2 billion, the U.S. Commerce Department reported from Washington
Bank of Canada concerned about government, household debt
By Julian Beltrame, The Canadian Press
OTTAWA - Mounting governmental and household debt are posing new risks to the stability of financial systems, the Bank of Canada said Thursday in its most recent analysis.
The central bank's semi-annual "Financial System Review" finds that overall conditions have improved in the short term since it last reported in June.
But it adds that record-high debt by Canadian households pose an elevated medium-term risk if a second financial or economic shock were to materialize.
Bank of Canada governor Mark Carney has warned in the past about Canadians getting in over their heads with large mortgage commitments that don't appear problematic given today's low interest rates.
The bank repeats the warning in its systems review, stressing that rates aren't going to remain at historic lows forever and mortgage payments will rise.
This is both a potential problem for households and banks, the report states.
"When borrowing funds, especially in the form of mortgages, households need to assess their ability to service these debt obligations over their entire maturity, taking into account likely changes in both income and interest rates," the report stresses.
And the bank says lenders, such as the chartered banks, should be careful about extending mortgage loans even if they are insured.
That's because a borrower's default on mortgages would impact other loans.
The Bank of Canada notes that its review of potential risks is not intended as a prediction of what is likely to occur, but an early warning system of potential risks.
In this regard, one risk that is emerging is massive debt being taken on by governments throughout the world as they try to cope with the fall-out the deep recession.
The deteriorating fiscal positions leaves many governments vulnerable to future economic shocks, in that they are left with fewer resources.
The bank adds that the ability of governments to address current account imbalances - one of the believed root causes of the global downturn - would be hindered by the debt overload.
Although Canada remains in a fiscally strong position in relation to many other economies, with a debt-to-gross domestic product ratio projected to peak at about 35 per cent, it too would be impacted by the problems of others.
"Our financial system would be affected indirectly," the bank says, "since higher borrowing costs facing those countries with large financing needs would mute the global recovery."
"In addition, disorderly fluctuations in exchange rates could cause financial stress for Canadian businesses, financial institutions, and households."
The central bank says the outlook for the global economy has improved since June, but cautions that growth "is nonetheless likely to remain subdued for some time."
This makes global economies more vulnerable to any new shock that may emerge, the bank states.
Thursday, December 10, 2009
Financial Update For Dec. 10, 2009
• TSX +10.29rallied late in the day as financial shares pared losses after initially dropping on debt concerns, while a weaker U.S. dollar spurred mining shares higher.
• DOW +51.08
• Dollar +.84c to 94.83cUS
• Oil -$1.95c to $70.67US per barrel.
• Gold -$22.50 to $1,120.50USD per ounce
Ontario passes bill to create HST
The Canadian Press
Legislation to create a single 13 per cent sales tax in Ontario passed third and final reading Wednesday despite strong objections and delaying tactics by the Opposition.
Finance Minister Dwight Duncan told the legislature that blending the five per cent GST with the provincial tax will lower costs for businesses, allowing them to lower prices for consumers and hire more staff.
“Doing nothing is not an option (and) the status quo is just absolutely the wrong thing,” Duncan said in third reading debate.
“This package will create jobs.”
The government estimates the HST will help create almost 600,000 jobs in Ontario over the next decade.
In an interview from Mumbai, India, Premier Dalton McGuinty said he is convinced the HST is critical to help reposition Ontario as it comes out of a recession in which the province lost hundreds of thousands of jobs.
“I think people understand in their heart of hearts that our world has changed and the old world is not coming back,” said Mr. McGuinty.
“There are a number of things that we need to do to adjust to the new reality and secure a better future for our families, and one of those is to put in place a modern, competitive tax system.”
The opposition parties failed to convince the government to hold public hearings on the HST bill across the province, and accused the Liberals of being afraid to face a voter backlash against the new tax.
The Liberals used their majority “to ram through the HST bill as quickly as possible and with little debate as possible,” said NDP Leader Andrea Horwath.
The Progressive Conservatives reluctantly admitted defeat after weeks of trying to block the HST, including a 44-hour occupation of the legislature by two Tories, asking for frequent votes to delay proceedings, and repeatedly calling Mr. McGuinty a liar.
“When the Liberals walked out of committee hearings, they hammered home their contempt of those in this chamber, and in the public, who dared to get in the way of their rush to whatever is left in our wallets,” Opposition critic Lisa MacLeod told the legislature.
“Some may talk about antics, they may disparage stunts and they may even dismiss this fight against the HST, for them I feel regret.”
The legislation also includes cuts to corporate and income taxes that take effect Jan. 1, and one-time rebates of up to $1,000 for some families to offset the impact of the HST, which takes effect July 1.
The Tories call the HST a greedy tax grab and complain it will apply to many items exempt from the PST, including gasoline, home heating fuel and cable TV bills.
British Columbia is also set to merge its provincial sales tax with the GST on July 1, something Quebec, New Brunswick, Nova Scotia and Newfoundland and Labrador have already done.
British bankers' pain may be Canada's gain
John Greenwood, Financial Post with files from Reuters
A tax on banker bonuses introduced by the U.K. government has been sharply criticized by financial industry officials, but observers say it could help bolster Canada's position as a global financial services centre.
"Tax is a very blunt instrument to use," said Rick Waugh, chief executive of the Bank of Nova Scotia and a senior official with the Institute of International Finance, a leading lobby group for global banks.
Speaking to reporters in Washington, Mr. Waugh said the tax could have the unintended consequence of making banks in less regulated jurisdictions more competitive.
Under the U.K. rule, any bank that pays a 2009 bonus of more than 25,000 pounds will pay a 50% tax on the money.
Because companies will pay the tax rather than employees, it will have a direct impact on corporate profitability.
Business leaders in Britain worry that it will further weaken U.K. banks, which received more than a trillion pounds of bailout money, much of which has yet to be paid back.
"They are killing the golden goose that is the financial system," Neil Jones, head of European hedge-fund sales in London at Mizuho Corporate Bank Ltd. told Bloomberg. "This is unprecedented. We expect to see a further exodus of financial institutions abroad to more tax-friendly environments."
Nearly all the major Canadian banks have operations in London but observers say Royal Bank of Canada will likely be most affected due to its substantial presence.
A spokesman for RBC declined to comment.
Meanwhile, some observers speculate the new tax could strengthen Canadian firms by making them more competitive compared with their U.K. peers.
"Absolutely, it will help," said Don Drummond, chief economist at TD Bank Financial Group. According to Mr. Drummond, the tax is another in a series of measures being taken by major economies around the world in the wake of the financial crisis.
They are partly aimed at putting limits on the way banks operate, but with public debt growing explosively in so many countries, such levies are increasingly seen as a way for governments to bail themselves out of their financial troubles -- which is why observers such as Mr. Drummond predict we will see more of them.
The United States and Britain "have much more serious fiscal problems than Canada does and they don't have an awful lot of options and those seem to be the areas that they are going to lean towards."
Unlike most other major countries, Canada did not have to bail out its banks and insurance companies, because they mostly didn't get caught up in subprime investments. Canadian banking regulations are among the toughest in the world, and many analysts believe financial institutions in this country will only be modestly affected by the introduction of new global regulation.
Canada's major banks and insurers recently joined forces to work toward building Toronto as a major global financial centre, as a way to take advantage of the strong position of the country's financial system.
Mr. Drummond said the U.K. bonus tax and other measures like it will make Canada "more attractive to high priced talent."
• DOW +51.08
• Dollar +.84c to 94.83cUS
• Oil -$1.95c to $70.67US per barrel.
• Gold -$22.50 to $1,120.50USD per ounce
Ontario passes bill to create HST
The Canadian Press
Legislation to create a single 13 per cent sales tax in Ontario passed third and final reading Wednesday despite strong objections and delaying tactics by the Opposition.
Finance Minister Dwight Duncan told the legislature that blending the five per cent GST with the provincial tax will lower costs for businesses, allowing them to lower prices for consumers and hire more staff.
“Doing nothing is not an option (and) the status quo is just absolutely the wrong thing,” Duncan said in third reading debate.
“This package will create jobs.”
The government estimates the HST will help create almost 600,000 jobs in Ontario over the next decade.
In an interview from Mumbai, India, Premier Dalton McGuinty said he is convinced the HST is critical to help reposition Ontario as it comes out of a recession in which the province lost hundreds of thousands of jobs.
“I think people understand in their heart of hearts that our world has changed and the old world is not coming back,” said Mr. McGuinty.
“There are a number of things that we need to do to adjust to the new reality and secure a better future for our families, and one of those is to put in place a modern, competitive tax system.”
The opposition parties failed to convince the government to hold public hearings on the HST bill across the province, and accused the Liberals of being afraid to face a voter backlash against the new tax.
The Liberals used their majority “to ram through the HST bill as quickly as possible and with little debate as possible,” said NDP Leader Andrea Horwath.
The Progressive Conservatives reluctantly admitted defeat after weeks of trying to block the HST, including a 44-hour occupation of the legislature by two Tories, asking for frequent votes to delay proceedings, and repeatedly calling Mr. McGuinty a liar.
“When the Liberals walked out of committee hearings, they hammered home their contempt of those in this chamber, and in the public, who dared to get in the way of their rush to whatever is left in our wallets,” Opposition critic Lisa MacLeod told the legislature.
“Some may talk about antics, they may disparage stunts and they may even dismiss this fight against the HST, for them I feel regret.”
The legislation also includes cuts to corporate and income taxes that take effect Jan. 1, and one-time rebates of up to $1,000 for some families to offset the impact of the HST, which takes effect July 1.
The Tories call the HST a greedy tax grab and complain it will apply to many items exempt from the PST, including gasoline, home heating fuel and cable TV bills.
British Columbia is also set to merge its provincial sales tax with the GST on July 1, something Quebec, New Brunswick, Nova Scotia and Newfoundland and Labrador have already done.
British bankers' pain may be Canada's gain
John Greenwood, Financial Post with files from Reuters
A tax on banker bonuses introduced by the U.K. government has been sharply criticized by financial industry officials, but observers say it could help bolster Canada's position as a global financial services centre.
"Tax is a very blunt instrument to use," said Rick Waugh, chief executive of the Bank of Nova Scotia and a senior official with the Institute of International Finance, a leading lobby group for global banks.
Speaking to reporters in Washington, Mr. Waugh said the tax could have the unintended consequence of making banks in less regulated jurisdictions more competitive.
Under the U.K. rule, any bank that pays a 2009 bonus of more than 25,000 pounds will pay a 50% tax on the money.
Because companies will pay the tax rather than employees, it will have a direct impact on corporate profitability.
Business leaders in Britain worry that it will further weaken U.K. banks, which received more than a trillion pounds of bailout money, much of which has yet to be paid back.
"They are killing the golden goose that is the financial system," Neil Jones, head of European hedge-fund sales in London at Mizuho Corporate Bank Ltd. told Bloomberg. "This is unprecedented. We expect to see a further exodus of financial institutions abroad to more tax-friendly environments."
Nearly all the major Canadian banks have operations in London but observers say Royal Bank of Canada will likely be most affected due to its substantial presence.
A spokesman for RBC declined to comment.
Meanwhile, some observers speculate the new tax could strengthen Canadian firms by making them more competitive compared with their U.K. peers.
"Absolutely, it will help," said Don Drummond, chief economist at TD Bank Financial Group. According to Mr. Drummond, the tax is another in a series of measures being taken by major economies around the world in the wake of the financial crisis.
They are partly aimed at putting limits on the way banks operate, but with public debt growing explosively in so many countries, such levies are increasingly seen as a way for governments to bail themselves out of their financial troubles -- which is why observers such as Mr. Drummond predict we will see more of them.
The United States and Britain "have much more serious fiscal problems than Canada does and they don't have an awful lot of options and those seem to be the areas that they are going to lean towards."
Unlike most other major countries, Canada did not have to bail out its banks and insurance companies, because they mostly didn't get caught up in subprime investments. Canadian banking regulations are among the toughest in the world, and many analysts believe financial institutions in this country will only be modestly affected by the introduction of new global regulation.
Canada's major banks and insurers recently joined forces to work toward building Toronto as a major global financial centre, as a way to take advantage of the strong position of the country's financial system.
Mr. Drummond said the U.K. bonus tax and other measures like it will make Canada "more attractive to high priced talent."
Wednesday, December 9, 2009
Financial Update For Dec. 9, 2009
• TSX -120.70 slid to its lowest level in more than a week as a drop in commodity prices shook the resource-heavy index. The TSX is still up 52% from the 5-year low it fell to in March.
• DOW -1.04.14
• Dollar -.99c to 93.99cUS
• Oil -$1.31c to $72.62US per barrel.
• Gold -$20.60 to $1,143.00USD per ounce bullion extended its decline from last week's record high due to a stronger greenback, which dents gold's appeal and makes dollar-priced commodities more expensive for holders of other currencies.
•
Bank of Canada expected to hike interest rates in mid-2010
Email the author
TORONTO — The Bank of Canada repeated its pledge Tuesday to keep interests rates at historic lows until the middle of next year to stimulate growth and a sense of stability in the midst of a slow economic recovery.
But, economists are calling for rate hikes as much as a full percentage point or more later next year, and say the bank’s commitment to keep its key rates at 0.25 per cent creates a false sense of security in borrowers who have taken on debts larger than they could normally afford.
The C.D. Howe Institute’s 12-member monetary policy council’s median target for the overnight rate was for one per cent in the second half of 2010.
The council said the central bank should give a strong signal that when the overnight rate moves up, it may be quick and large. They also suggested the bank rein in the housing market by raising the required down payment on government-insured mortgages.
C.D. Howe president and CEO William Robson says a rapid rise in interest rates expected late next year could prove devastating for homeowners who have not evaluated their ability to carry their mortgage at a higher interest rate.
The central bank announced Tuesday the global economy has been slightly more positive than it was at the time of the bank’s October pronouncement, but added “significant fragilities remain.”
The economy grew less than analysts expected in the third quarter and inflation has been slightly higher than the central bank expected.
Diana Petramala, an economist at TD Bank, said as long as those fragilities remain, the Bank of Canada will not be swayed to move quickly with interest rate hikes.
She said TD believes there is more risk associated with the combination of a mild U.S. recovery and strengthening Canadian dollar than the central bank has outlined.
Petramala said the bank’s projection for three per cent growth in 2010 is slightly more optimistic than TD’s forecast of 2.7 per cent growth, adding that she believes the Bank of Canada’s first rate hike will not come until the fourth quarter of next year.
Dawn Desjardins, assistant chief economist at RBC Economics, said still volatile markets and global market uncertainties suggest a significant change to the central bank’s policy is premature.
Given the still-fragile global economy, she said, Canada’s growth rate in 2010 will likely fall short of those recorded during the early stages of past recoveries.
Desjardins added that if the economy continues to build momentum by next summer, the bank will likely hike the rate by one percentage point for the second half of next year.
Michael Gregory, a senior economist at BMO Capital Markets, said there was a faintly more hawkish tone in the bank’s announcement.
“The combination of higher-than-projected global growth and domestic core inflation is a shade more hawkish no matter what prism you’re looking through,” he said.
“The bank is on hold until the end of June, but come next Canada Day the bank will be hoisting its hawkish colours amid all the Canadian flags.”
The Canadian Press
• DOW -1.04.14
• Dollar -.99c to 93.99cUS
• Oil -$1.31c to $72.62US per barrel.
• Gold -$20.60 to $1,143.00USD per ounce bullion extended its decline from last week's record high due to a stronger greenback, which dents gold's appeal and makes dollar-priced commodities more expensive for holders of other currencies.
•
Bank of Canada expected to hike interest rates in mid-2010
Email the author
TORONTO — The Bank of Canada repeated its pledge Tuesday to keep interests rates at historic lows until the middle of next year to stimulate growth and a sense of stability in the midst of a slow economic recovery.
But, economists are calling for rate hikes as much as a full percentage point or more later next year, and say the bank’s commitment to keep its key rates at 0.25 per cent creates a false sense of security in borrowers who have taken on debts larger than they could normally afford.
The C.D. Howe Institute’s 12-member monetary policy council’s median target for the overnight rate was for one per cent in the second half of 2010.
The council said the central bank should give a strong signal that when the overnight rate moves up, it may be quick and large. They also suggested the bank rein in the housing market by raising the required down payment on government-insured mortgages.
C.D. Howe president and CEO William Robson says a rapid rise in interest rates expected late next year could prove devastating for homeowners who have not evaluated their ability to carry their mortgage at a higher interest rate.
The central bank announced Tuesday the global economy has been slightly more positive than it was at the time of the bank’s October pronouncement, but added “significant fragilities remain.”
The economy grew less than analysts expected in the third quarter and inflation has been slightly higher than the central bank expected.
Diana Petramala, an economist at TD Bank, said as long as those fragilities remain, the Bank of Canada will not be swayed to move quickly with interest rate hikes.
She said TD believes there is more risk associated with the combination of a mild U.S. recovery and strengthening Canadian dollar than the central bank has outlined.
Petramala said the bank’s projection for three per cent growth in 2010 is slightly more optimistic than TD’s forecast of 2.7 per cent growth, adding that she believes the Bank of Canada’s first rate hike will not come until the fourth quarter of next year.
Dawn Desjardins, assistant chief economist at RBC Economics, said still volatile markets and global market uncertainties suggest a significant change to the central bank’s policy is premature.
Given the still-fragile global economy, she said, Canada’s growth rate in 2010 will likely fall short of those recorded during the early stages of past recoveries.
Desjardins added that if the economy continues to build momentum by next summer, the bank will likely hike the rate by one percentage point for the second half of next year.
Michael Gregory, a senior economist at BMO Capital Markets, said there was a faintly more hawkish tone in the bank’s announcement.
“The combination of higher-than-projected global growth and domestic core inflation is a shade more hawkish no matter what prism you’re looking through,” he said.
“The bank is on hold until the end of June, but come next Canada Day the bank will be hoisting its hawkish colours amid all the Canadian flags.”
The Canadian Press
Tuesday, December 8, 2009
Financial Update For Dec. 8, 2009
Economic recovery is 'solidly entrenched': BoC
Paul Vieira, Financial Post
OTTAWA -- After months of uncertainty, the economic recovery now appears to be "solidly entrenched," the Bank of Canada said Tuesday, indicating its forecast for growth should unfold as envisaged.
Still, in its latest interest rate announcement, the central bank reiterated, as expected, its conditional commitment to keep its key policy rate at a record low 0.25% until June 2010 as inflation is still not expected to hit its preferred 2% target until the second half of 2011.
Recent data – from retail sales to a stunningly strong jobs report for November -- have painted a mostly cheer picture of the Canadian economy, analysts say, even though third-quarter GDP growth of 0.4% annualized came in well below the central bank's 2% expectation.
Since the central bank's latest economic forecast in October, "global economic developments have been slightly more positive and the global outlook has improved modestly," the bank's governing council said in its statement, adding though that "significant fragilities" remain.
The central bank said the composition of economic growth is unfolding as expected, highlighted by a shift toward stronger domestic demand and less reliance on exports.
"The main drivers and the profile of the projected recovery in Canada remain consistent with the bank's [outlook]," it added. "The bank continues to expect economic growth to become more solidly entrenched over the projection period and inflation to return to the 2% target in the second half of 2011."
According to the central bank's outlook, Canada is expected to grow 3.3% this quarter, followed by expansion of 3% next year and 3.3% in 2011. Predictions for strong growth gained steam late last week when data indicated the Canadian economy added 79,000 jobs in November.
Further, the central bank on Tuesday played down the impact of the stronger dollar, even though it acknowledged it remained a key risk to its forecast, and "could act as a significant further drag" on growth and inflation. The stronger loonie, which has advanced as much as 25% this year against its U.S. counterpart, led to a surge in imports in the third quarter – resulting in net exports acting as a drag on the economy of roughly 5.3 percentage points.
Since the last rate announcement, however, the dollar has on average traded a couple of cents below the central bank's working assumption of a US96¢ loonie.
Most analysts were looking for any change in nuance in the bank's statement – in particular a hint or two that it might move before its conditional pledge to keep rates at a record low until June 2010 given the surge in domestic consumption as households take advantage of record low borrowing costs.
Instead, the central bank reiterated that its target rate of 0.25% "can be expected" to remain intact until the end of the second quarter of next year. The pledge is conditional on inflation hitting the 2% target in the third quarter of 2011, as the bank expects.
The last time the bank raised its key policy rate, to 4.5%, was in July of 2007 – and shortly afterward the first signs of the credit crisis emerged.
Some economists, such as Ryan Brecht of Action Economics, expect the central bank to begin hiking its policy rate, and aggressively, starting in the second half of next year.
In a note released Tuesday morning, Mr. Brecht, the firm's senior North American economist, said he envisaged the Bank of Canada raising its target rate by 175 basis points before December of 2010, for a policy rate of 2%, or "more normal levels." Still, that would be below the 3% level in September of 2008, when Lehman Bros. collapsed, or the 4.5% peak hit more than two years ago.
Financial Post
Paul Vieira, Financial Post
OTTAWA -- After months of uncertainty, the economic recovery now appears to be "solidly entrenched," the Bank of Canada said Tuesday, indicating its forecast for growth should unfold as envisaged.
Still, in its latest interest rate announcement, the central bank reiterated, as expected, its conditional commitment to keep its key policy rate at a record low 0.25% until June 2010 as inflation is still not expected to hit its preferred 2% target until the second half of 2011.
Recent data – from retail sales to a stunningly strong jobs report for November -- have painted a mostly cheer picture of the Canadian economy, analysts say, even though third-quarter GDP growth of 0.4% annualized came in well below the central bank's 2% expectation.
Since the central bank's latest economic forecast in October, "global economic developments have been slightly more positive and the global outlook has improved modestly," the bank's governing council said in its statement, adding though that "significant fragilities" remain.
The central bank said the composition of economic growth is unfolding as expected, highlighted by a shift toward stronger domestic demand and less reliance on exports.
"The main drivers and the profile of the projected recovery in Canada remain consistent with the bank's [outlook]," it added. "The bank continues to expect economic growth to become more solidly entrenched over the projection period and inflation to return to the 2% target in the second half of 2011."
According to the central bank's outlook, Canada is expected to grow 3.3% this quarter, followed by expansion of 3% next year and 3.3% in 2011. Predictions for strong growth gained steam late last week when data indicated the Canadian economy added 79,000 jobs in November.
Further, the central bank on Tuesday played down the impact of the stronger dollar, even though it acknowledged it remained a key risk to its forecast, and "could act as a significant further drag" on growth and inflation. The stronger loonie, which has advanced as much as 25% this year against its U.S. counterpart, led to a surge in imports in the third quarter – resulting in net exports acting as a drag on the economy of roughly 5.3 percentage points.
Since the last rate announcement, however, the dollar has on average traded a couple of cents below the central bank's working assumption of a US96¢ loonie.
Most analysts were looking for any change in nuance in the bank's statement – in particular a hint or two that it might move before its conditional pledge to keep rates at a record low until June 2010 given the surge in domestic consumption as households take advantage of record low borrowing costs.
Instead, the central bank reiterated that its target rate of 0.25% "can be expected" to remain intact until the end of the second quarter of next year. The pledge is conditional on inflation hitting the 2% target in the third quarter of 2011, as the bank expects.
The last time the bank raised its key policy rate, to 4.5%, was in July of 2007 – and shortly afterward the first signs of the credit crisis emerged.
Some economists, such as Ryan Brecht of Action Economics, expect the central bank to begin hiking its policy rate, and aggressively, starting in the second half of next year.
In a note released Tuesday morning, Mr. Brecht, the firm's senior North American economist, said he envisaged the Bank of Canada raising its target rate by 175 basis points before December of 2010, for a policy rate of 2%, or "more normal levels." Still, that would be below the 3% level in September of 2008, when Lehman Bros. collapsed, or the 4.5% peak hit more than two years ago.
Financial Post
Financial Update For Dec. 8, 2009
• TSX -21.17 as weighty energy shares fell alongside weaker oil prices
• DOW -1.21 a choppy session impacted by a strong dollar, falling oil and gold prices and comments from Fed Chairman Ben Bernanke that cooled higher interest rate worries.
• Dollar +.45c to 94.98cUS
• Oil -$1.54c to $73.93US per barrel.
• Gold -$5.50 to $1,164.00USD per ounce
"The economic assessment is likely to continue referencing improving conditions and expectations for more," said Eric Lascelles, chief economics and rates strategist with TD Securities. "While it is most likely that the Bank of Canada will reiterate its view that the risks to the inflation outlook are roughly balanced, we highlight the possibility that the risks themselves could be discussed more explicitly with reference both to the Canadian dollar's drag and the possibility of additional strength from domestic demand and housing."
Since the last rate announcement, the dollar has traded below the US96¢ level – or the value the central bank assumed the dollar would be trading at in its most recent Monetary Policy Report.
The jobs data certainly kicked off a fresh round of interest rate speculation, with more bullish analysts believing the Bank of Canada will move before its June 2010 deadline – a conditional date it set based on inflation meeting expectations. The central bank sets its key rate in the hope of generating inflation of 2%.
In its outlook released last week, the C.D. Howe Institute's monetary policy council suggested the central bank needed to emphasize its rate commitment is not set in stone.
"While some members thought the Bank of Canada should follow that course even at the cost of a larger-than-otherwise increase in the overnight rate after June, others thought that the bank needed to re-emphasize the conditional nature of the commitment, and the possibility that changed circumstances would warrant an earlier rise," said the council, made up of private-sector economists and academics.
• DOW -1.21 a choppy session impacted by a strong dollar, falling oil and gold prices and comments from Fed Chairman Ben Bernanke that cooled higher interest rate worries.
• Dollar +.45c to 94.98cUS
• Oil -$1.54c to $73.93US per barrel.
• Gold -$5.50 to $1,164.00USD per ounce
"The economic assessment is likely to continue referencing improving conditions and expectations for more," said Eric Lascelles, chief economics and rates strategist with TD Securities. "While it is most likely that the Bank of Canada will reiterate its view that the risks to the inflation outlook are roughly balanced, we highlight the possibility that the risks themselves could be discussed more explicitly with reference both to the Canadian dollar's drag and the possibility of additional strength from domestic demand and housing."
Since the last rate announcement, the dollar has traded below the US96¢ level – or the value the central bank assumed the dollar would be trading at in its most recent Monetary Policy Report.
The jobs data certainly kicked off a fresh round of interest rate speculation, with more bullish analysts believing the Bank of Canada will move before its June 2010 deadline – a conditional date it set based on inflation meeting expectations. The central bank sets its key rate in the hope of generating inflation of 2%.
In its outlook released last week, the C.D. Howe Institute's monetary policy council suggested the central bank needed to emphasize its rate commitment is not set in stone.
"While some members thought the Bank of Canada should follow that course even at the cost of a larger-than-otherwise increase in the overnight rate after June, others thought that the bank needed to re-emphasize the conditional nature of the commitment, and the possibility that changed circumstances would warrant an earlier rise," said the council, made up of private-sector economists and academics.
Monday, December 7, 2009
Financial Update For Dec. 7, 2009
Canada’s jobless rate falls
• TSX -125.75
• DOW +22.75
• Dollar -.28c to 94.53cUS
• Oil -$.99c to $75.47US per barrel.
• Gold -$4.80 to $1,169.00USD per ounce
Bank of Canada to keep rates low, uphold outlook
By Louise Egan OTTAWA (Reuters) - The Bank of Canada is widely expected to keep its hands off interest rates on Tuesday, holding them at near zero and committing to do so until at least July, despite growing evidence the economy is kicking back to life.
Canada’s unemployment rate falls to 8.5 per cent as 79,000 jobs created in November
OTTAWA — Canada’s economy swelled by 79,000 jobs last month, much better than many economists had expected, as the number of people with full-time and part-time jobs increased in November while the number of self-employed fell.
Statistics Canada reported Friday that Canada’s unemployment rate fell to 8.5 per cent in November, down one-tenth of a point from October.
The number of people with full-time jobs increased by 39,000 in November, the third straight month of increases, while part-time employment increased by 40,000, following declines in October and September.
“Simply put, this was an inexplicably strong report, and points to a very strong pick-up in Canadian labour market activity in November,” Millan Mulraine of TD Securities wrote in a note to investors.
“However, we consider this pace of job growth to be unsustainable, and believe that it is inconsistent with the current pace of economic recovery in Canada.”
While analysts generally welcomed the national job numbers, they did so with a few caveats.
“This is a generally solid report but with three flies in the ointment that cause concern,” Scotia Capital’s Derek Holt and Karen Cordes said in a note to investors.
They said their first concern is that total hours worked declined by 0.3 per cent. “More bodies are being hired, but at reduced aggregate hours worked. It’s hours worked that drive paycheques, such that the consumer cash flow implications are far less impressive than the job count.”
They were also concerned about many job gains being in the education sector.
“StatsCan has admitted that they have had difficulty with abnormal seasonal adjustments in this component over recent months,” they wrote. “We don’t trust this component and caution on future revisions and or disappointing base effects to the December jobs reading a month from now.”
Holt and Cordes were also concerned about weak productivity.
Self-employment also fell in November by 32,000 jobs. That’s potentially a good sign for the economy, since economists tend to discount self-employment gains in a weak economy as mostly involuntary, the result of enterprising Canadians starting their own businesses when they can’t find regular work.
Statistics Canada says employment is now down 321,000 jobs, or 1.9 per cent, since October 2008.
The agency also noted that hourly wages were 2.3 per cent higher than a year ago, the lowest year-over-year growth since March 2007.
Employment growth were spread across the country, with the biggest gains in Ontario, Quebec and Alberta.
Most gains were among women between the ages of 25 and 54, and men aged 55 and over.
Statistics Canada notes that between October 2008 and March 2009, employment fell in almost all industries, especially in manufacturing and construction. But since March, the manufacturing sector has slowly stemmed its hemorrhaging of jobs, while employment has picked up in construction and some service industries.
“Almost all the employment growth in November was attributable to the strength of the service sector (plus 73,000), especially educational services,” the agency said in a note.
“With November’s increase, employment in the service sector is back at its October 2008 level, while employment in the goods sector remains well below (minus 324,000) where it was at that time.”
Regionally, Ontario’s unemployment rate remained unchanged from the previous month at 9.3 per cent, even though the province’s economy grew by 27,000 jobs in November.
In Quebec, gains of 21,000 jobs pulled the province’s unemployment rate down four-tenths of a point to 8.1 per cent. The province has lost jobs more slowly than other provinces during the economic downturn.
Alberta’s employment rose by 13,000 last month, the biggest gain in more than a year. British Columbia’s economy also continues to grow.
Manitoba’s economy remained stable, as it has throughout the downturn, and Newfoundland and Labrador also saw employment increase by 2,700 jobs in November.
Benjamin Reitzes of BMO Capital Markets Economics says the November job numbers should boost the Bank of Canada’s confidence in the economy following soft economic growth in the third quarter of the year and weak October figures.
“The solid November report offsets the prior month’s disappointing drop,” he said.
“The average 18,000 gain over the past two months probably best characterizes the state of Canada’s job market, and points to an economy emerging from recession.”
The Canadian Press
• TSX -125.75
• DOW +22.75
• Dollar -.28c to 94.53cUS
• Oil -$.99c to $75.47US per barrel.
• Gold -$4.80 to $1,169.00USD per ounce
Bank of Canada to keep rates low, uphold outlook
By Louise Egan OTTAWA (Reuters) - The Bank of Canada is widely expected to keep its hands off interest rates on Tuesday, holding them at near zero and committing to do so until at least July, despite growing evidence the economy is kicking back to life.
Canada’s unemployment rate falls to 8.5 per cent as 79,000 jobs created in November
OTTAWA — Canada’s economy swelled by 79,000 jobs last month, much better than many economists had expected, as the number of people with full-time and part-time jobs increased in November while the number of self-employed fell.
Statistics Canada reported Friday that Canada’s unemployment rate fell to 8.5 per cent in November, down one-tenth of a point from October.
The number of people with full-time jobs increased by 39,000 in November, the third straight month of increases, while part-time employment increased by 40,000, following declines in October and September.
“Simply put, this was an inexplicably strong report, and points to a very strong pick-up in Canadian labour market activity in November,” Millan Mulraine of TD Securities wrote in a note to investors.
“However, we consider this pace of job growth to be unsustainable, and believe that it is inconsistent with the current pace of economic recovery in Canada.”
While analysts generally welcomed the national job numbers, they did so with a few caveats.
“This is a generally solid report but with three flies in the ointment that cause concern,” Scotia Capital’s Derek Holt and Karen Cordes said in a note to investors.
They said their first concern is that total hours worked declined by 0.3 per cent. “More bodies are being hired, but at reduced aggregate hours worked. It’s hours worked that drive paycheques, such that the consumer cash flow implications are far less impressive than the job count.”
They were also concerned about many job gains being in the education sector.
“StatsCan has admitted that they have had difficulty with abnormal seasonal adjustments in this component over recent months,” they wrote. “We don’t trust this component and caution on future revisions and or disappointing base effects to the December jobs reading a month from now.”
Holt and Cordes were also concerned about weak productivity.
Self-employment also fell in November by 32,000 jobs. That’s potentially a good sign for the economy, since economists tend to discount self-employment gains in a weak economy as mostly involuntary, the result of enterprising Canadians starting their own businesses when they can’t find regular work.
Statistics Canada says employment is now down 321,000 jobs, or 1.9 per cent, since October 2008.
The agency also noted that hourly wages were 2.3 per cent higher than a year ago, the lowest year-over-year growth since March 2007.
Employment growth were spread across the country, with the biggest gains in Ontario, Quebec and Alberta.
Most gains were among women between the ages of 25 and 54, and men aged 55 and over.
Statistics Canada notes that between October 2008 and March 2009, employment fell in almost all industries, especially in manufacturing and construction. But since March, the manufacturing sector has slowly stemmed its hemorrhaging of jobs, while employment has picked up in construction and some service industries.
“Almost all the employment growth in November was attributable to the strength of the service sector (plus 73,000), especially educational services,” the agency said in a note.
“With November’s increase, employment in the service sector is back at its October 2008 level, while employment in the goods sector remains well below (minus 324,000) where it was at that time.”
Regionally, Ontario’s unemployment rate remained unchanged from the previous month at 9.3 per cent, even though the province’s economy grew by 27,000 jobs in November.
In Quebec, gains of 21,000 jobs pulled the province’s unemployment rate down four-tenths of a point to 8.1 per cent. The province has lost jobs more slowly than other provinces during the economic downturn.
Alberta’s employment rose by 13,000 last month, the biggest gain in more than a year. British Columbia’s economy also continues to grow.
Manitoba’s economy remained stable, as it has throughout the downturn, and Newfoundland and Labrador also saw employment increase by 2,700 jobs in November.
Benjamin Reitzes of BMO Capital Markets Economics says the November job numbers should boost the Bank of Canada’s confidence in the economy following soft economic growth in the third quarter of the year and weak October figures.
“The solid November report offsets the prior month’s disappointing drop,” he said.
“The average 18,000 gain over the past two months probably best characterizes the state of Canada’s job market, and points to an economy emerging from recession.”
The Canadian Press
Thursday, December 3, 2009
Financial Update For Dec. 3, 2009
• TSX +72,41 Canada is due to report November employment data on Friday, and the report is expected to show a gain of 15,000 jobs.
• DOW -18.90 Employment data showing U.S. private employers shed 169,000 jobs in Nov was worse than forecast, though lower than Oct's numbers. But it raised investor worries that the broader U.S. employment report for Nov on Friday might be weak.
• Dollar -.32c to 95.22cUS tracking a downward swing in the price of oil as investors cooled their heels ahead of week end employment reports.
• Oil -$1.77 to $76.60US per barrel.
• Gold +$12.90 to $1,200.00USD per ounce
• DOW -18.90 Employment data showing U.S. private employers shed 169,000 jobs in Nov was worse than forecast, though lower than Oct's numbers. But it raised investor worries that the broader U.S. employment report for Nov on Friday might be weak.
• Dollar -.32c to 95.22cUS tracking a downward swing in the price of oil as investors cooled their heels ahead of week end employment reports.
• Oil -$1.77 to $76.60US per barrel.
• Gold +$12.90 to $1,200.00USD per ounce
Wednesday, December 2, 2009
Financial Update For Dec. 2, 2009
• TSX +260.12 to 11,707.32 surged to its highest close this year boosted by record gold prices, receding credit problems in Dubai and a trio of rebounding US economic reports. Canadian Federal Finance Minister Jim Flaherty also expressed optimism the nation will see improved economic growth in 2010.
• DOW +126.74 on better-than-expected economic readings on construction spending and pending home sales
• Dollar +.81c to 95.54cUS as the Russian Central Bank commented it will buy Canadian dollars in a bid to diversify its currency reserves
• Oil +$1.09 to $78.37US per barrel.
• Gold +$18.00 to $1,199.10USD per ounce this 5.28% jump sets another all time high for the price of gold
Nearly all stimulus funds 'committed': Harper
David Akin, Canwest News Service
BEIJING -- Prime Minister Stephen Harper stepped off a 20-hour plane ride from Ottawa to Beijing Wednesday afternoon and the first thing he did on Chinese soil was unveil his government's economic action plan back in Canada.
In a downtown hotel here, Mr. Harper said that $28-billion in federal stimulus funds or 97% of what was allocated for the current budget year has now been "committed." More than 12,000 infrastructure projects across the country have been approved and, of those, work on 8,000 has begun. The government says it has created or preserved more than 220,000 jobs, exceeding the target set in the January budget of 190,000 jobs. And all that in just 250 days since the budget passed the House of Commons.
But many in the House of Commons, thousands of kilometres and 13 time zones away, will dispute the prime minister's claims and quarrel with his odd choice of delivering the news to Canadians while he's in China.
"It was a parliamentary resolution that insisted on a report in December," Mr. Harper said in answer to his choice of location. "If you look at the schedule the timing didn't permit me to do this before or after this trip
Transmitted by CNW Group on : December 1, 2009 05:00
Ontarians the biggest spenders in the country this holiday season, according to RBC Canadian Consumer Outlook
Half of Ontarians are still planning to spend less this holiday season
TORONTO, Dec. 1 /CNW/ - RBC today established a new monthly benchmark index - the most comprehensive consumer index in Canada - describing Canadian consumers' assessment of the economy and their personal financial situation. The inaugural RBC Canadian Consumer Outlook report found that, on average, Ontarians expect to spend the most in the country on holiday purchases, including gifts, decorations and entertaining, which total $1,646, compared to the national average of $1,218. However, one half (47 per cent) of Ontarians plan to spend less this year than last year and one in five of them (16 per cent) will not buy any gifts at all.
"Although Ontarians are concerned about jobs, their optimism about a recovery over the next year may be helping to dispel concerns about holiday spending," said Jennifer Tory, regional president, Greater Toronto Region, RBC. "We're finding that clients are coming to us more often for financial advice and solutions to achieve their goals."
The report also measures Canadians' perception of current conditions compared to three months ago, as well as short term (three month) prospects for their personal finances, their job anxiety and a number of other factors. Provincial highlights include:
- Job Anxiety: Job anxiety in Ontario is high at 29 per cent (tied with
B.C.), and sits at two points above the national average of 27 per
cent.
- Personal Financial Situation (Overall): Four in ten Ontarians (40 per
cent) think that their personal financial situation is worse than it
was three months ago, virtually on par with the national average (39
per cent). Similarly, more than one in four Ontarians (27 per cent)
think that their personal financial situation will improve in the
next three months, the same rate as seen nationally. They also
reflect the national mood in being more optimistic in the longer
term, with nearly four in ten Ontarians (38 per cent) expecting their
personal economic situation to improve over the next year.
"Talk of the U.S. economy emerging from recession and strengthening asset markets are boosting sentiment after a very poor first half of the year," said Dawn Desjardins, assistant chief economist, RBC.
• DOW +126.74 on better-than-expected economic readings on construction spending and pending home sales
• Dollar +.81c to 95.54cUS as the Russian Central Bank commented it will buy Canadian dollars in a bid to diversify its currency reserves
• Oil +$1.09 to $78.37US per barrel.
• Gold +$18.00 to $1,199.10USD per ounce this 5.28% jump sets another all time high for the price of gold
Nearly all stimulus funds 'committed': Harper
David Akin, Canwest News Service
BEIJING -- Prime Minister Stephen Harper stepped off a 20-hour plane ride from Ottawa to Beijing Wednesday afternoon and the first thing he did on Chinese soil was unveil his government's economic action plan back in Canada.
In a downtown hotel here, Mr. Harper said that $28-billion in federal stimulus funds or 97% of what was allocated for the current budget year has now been "committed." More than 12,000 infrastructure projects across the country have been approved and, of those, work on 8,000 has begun. The government says it has created or preserved more than 220,000 jobs, exceeding the target set in the January budget of 190,000 jobs. And all that in just 250 days since the budget passed the House of Commons.
But many in the House of Commons, thousands of kilometres and 13 time zones away, will dispute the prime minister's claims and quarrel with his odd choice of delivering the news to Canadians while he's in China.
"It was a parliamentary resolution that insisted on a report in December," Mr. Harper said in answer to his choice of location. "If you look at the schedule the timing didn't permit me to do this before or after this trip
Transmitted by CNW Group on : December 1, 2009 05:00
Ontarians the biggest spenders in the country this holiday season, according to RBC Canadian Consumer Outlook
Half of Ontarians are still planning to spend less this holiday season
TORONTO, Dec. 1 /CNW/ - RBC today established a new monthly benchmark index - the most comprehensive consumer index in Canada - describing Canadian consumers' assessment of the economy and their personal financial situation. The inaugural RBC Canadian Consumer Outlook report found that, on average, Ontarians expect to spend the most in the country on holiday purchases, including gifts, decorations and entertaining, which total $1,646, compared to the national average of $1,218. However, one half (47 per cent) of Ontarians plan to spend less this year than last year and one in five of them (16 per cent) will not buy any gifts at all.
"Although Ontarians are concerned about jobs, their optimism about a recovery over the next year may be helping to dispel concerns about holiday spending," said Jennifer Tory, regional president, Greater Toronto Region, RBC. "We're finding that clients are coming to us more often for financial advice and solutions to achieve their goals."
The report also measures Canadians' perception of current conditions compared to three months ago, as well as short term (three month) prospects for their personal finances, their job anxiety and a number of other factors. Provincial highlights include:
- Job Anxiety: Job anxiety in Ontario is high at 29 per cent (tied with
B.C.), and sits at two points above the national average of 27 per
cent.
- Personal Financial Situation (Overall): Four in ten Ontarians (40 per
cent) think that their personal financial situation is worse than it
was three months ago, virtually on par with the national average (39
per cent). Similarly, more than one in four Ontarians (27 per cent)
think that their personal financial situation will improve in the
next three months, the same rate as seen nationally. They also
reflect the national mood in being more optimistic in the longer
term, with nearly four in ten Ontarians (38 per cent) expecting their
personal economic situation to improve over the next year.
"Talk of the U.S. economy emerging from recession and strengthening asset markets are boosting sentiment after a very poor first half of the year," said Dawn Desjardins, assistant chief economist, RBC.
Tuesday, December 1, 2009
Financial Update For Dec. 1, 2009
• TSX -17.21 as the impact of lower gold prices for most of the session more than offset a rally by bank shares ahead of bank financial reports set to be released later this week.
• DOW +34.92
• Dollar +.52c to 94.73cUS
• Oil +$1.23 to $77.28US per barrel.
• Gold +$6.90 to $1,181.10USD per ounce
Gross domestic product sees first gain in a year in third quarter
By David Friend
TORONTO — Canada’s economy inched ahead in the third quarter, meekly heralding an end to the recession and the start of what is predicted to be slow and laborious recovery.
Statistics Canada reported Monday that real gross domestic product, an inflation-adjusted measure of the economic growth, expanded at an annualized rate of 0.4 per cent in the third quarter. That was below the Bank of Canada’s two-per-cent growth prediction for the quarter, and economist’s expectations for an annualized growth rate of 0.6 per cent, according to CIBC World Markets.
The first overall economic growth in a year marks an end to the recession, which is technically defined as at least two back-to-back quarters of contraction.
By comparison, the American economy registered growth of 2.8 per cent during the same period, Statistics Canada said, though the U.S. has been pulling itself out of a deeper recession.
“We’ve certainly been slowest out of the gate to economic recovery relative to most of the other major economies,” said Avery Shenfeld, chief economist at CIBC World Markets.
“The only plus side here, is that the third quarter ended on a strong note with a healthy GDP gain in September, and that does give us hope that we’ll see much better growth for the fourth quarter.”
Real GDP — economic growth adjusted for inflation — was up 0.4 per cent in September, the final month of the quarter, as most major industrial sectors increased their production.
Economists have latched onto that optimism as a way to build hope for a stronger recovery into next year, driven by an uptick that is expected to register in the final three months of 2009.
TD Securities Economics strategist Millan Mulraine suggested the fourth quarter could launch a “significant pickup” of about three per cent.
“Looking ahead, we think that the Canadian economy will at least outperform the U.S. economy in the near term,” he said.
“One of the things to look at next year is what happens to consumer spending. We think that additional upside could come from net trade if the pickup in the U.S. starts gathering steam.”
There was further optimism in a November survey conducted by the Canadian Manufacturers & Exporters, which showed strength in both orders and a hopeful outlook on future employment.
The survey found that 63 per cent of respondents said manufacturing orders were either the same or higher in value compared to August. On the jobs front, 79 per cent of respondents said they planned to either hold employment steady or hire new workers over the next three months, showing that some within the industry expect further momentum in their growth.
Statistics Canada said in the third quarter final domestic demand advanced 1.2 per cent, as capital investment and personal spending both increased.
Consumer spending on goods and services, one of the pillars of Canadian economic health, was up 0.8 per cent, the biggest increase since the fourth quarter of 2007 as households increased spending on durable goods 2.4 per cent, particularly on new and used motor vehicles and on furniture.
The domestic economy is looking to shake off the months of battering it suffered during a global economic meltdown that saw the failure of U.S. banks, ravaged corporate profits and hundreds of thousands of jobs lost.
Bank of Montreal deputy economist Doug Porter said the data indicates that Canada’s economy is on the mend, but the third-quarter numbers were “not exactly a clanging endorsement of the ‘end of recession’ story.”
“While the quarterly gain for the third quarter was a bit of a damp squib, this doesn’t alter the bigger picture that the Canadian economy is erratically grinding out of recession, led by broad-based gains in domestic spending,” Porter wrote in a note to clients.
“With the solid hand-off from the sturdy September result and mounting signs that the U.S. recovery is taking root, look for much more convincing evidence that the recession is over in fourth-quarter GDP results. Still, the broader picture of a relatively muted recovery remains the dominant theme.”
Among its other findings, Statistics Canada said export and import volumes both increased after many quarters of decline, suggesting that industrial activity is picking up.
The output of services-producing industries increased 0.6 per cent, with the wholesale and retail trade sectors and real-estate agents and brokers leading the way.
Goods-producing industries slipped 1.4 per cent, continuing a downward trend that started in the third quarter of 2007. Mining and oil-and-gas extraction contributed the most to the decrease as a result of temporary shutdowns. The Canadian Press
Dubai World not guaranteed by emirate; creditors also at fault, finance official says
By Barbara Surk
DUBAI, UNITED ARAB EMIRATES — The heavily indebted Dubai World is not guaranteed by the emirate’s government, a top financial official from the city state said Monday, offering little direction to anxious investors on a day when the United Arab Emirates registered a record fall on the back of Dubai’s debt mess.
On the first day of trading since news of Dubai World’s debt crunch became public, Dubai’s main stock exchange dropped more than seven per cent while the Abu Dhabi exchange fell more than eight per cent — the steepest fall in at least a year, according to brokers.
Driving the financial avalanche was Wednesday’s announcement that conglomerate Dubai World would seek at least a six-month reprieve on its $60 billion US in debts, obligations amassed during years of a building spree that turned the desert emirate into the Middle Eastern version of Las Vegas, Wall Street and, at times, Sodom and Gomorra, all rolled into one.
If markets were looking for reassurances from Dubai that it would stand behind the conglomerate, they got none Monday.
“Dubai World was established as an independent company, it is true that the government is the owner, but given that the company has various activities and is exposed to various types of risks, the decision, since its establishment, has been that the company is not guaranteed by the (Dubai) government,” Abdulrahman al-Saleh, director general of Dubai’s Finance Department, said on Dubai TV.
“Consequently, the company’s dealing with the various parties has been on this basis,” he said.
Al-Saleh’s comments were the first public remarks by a Dubai official since Thursday, the day after the emirate’s government’s announcement about Dubai World’s request for a debt repayment postponement.
The lack of clarity or direction from the rulers of Dubai since the extent of the conglomerate’s financial ills became known has been a major source of angst for investors.
Uncertainty about what step the emirate would take next had cast a pall on world markets late last week.
Investors returned to Dubai and Abu Dhabi’s markets Monday with little news and plenty of questions. As a result, stocks took a dive.
Shares of Emaar Properties, the United Arab Emirates’ biggest developer, for example were down 9.86 per cent to 3.75 dirhams.
The overwhelming majority of companies whose shares traded Monday on the Dubai Financial Market, the city-state’s main bourse, were also deeply in the red. But the market failed to hit the 10 per cent stop-trading cap largely because a large number of company shares were not traded.
Asian markets rebounded Monday after taking a tumble late last week while European markets were down slightly.
The Associated Press
• DOW +34.92
• Dollar +.52c to 94.73cUS
• Oil +$1.23 to $77.28US per barrel.
• Gold +$6.90 to $1,181.10USD per ounce
Gross domestic product sees first gain in a year in third quarter
By David Friend
TORONTO — Canada’s economy inched ahead in the third quarter, meekly heralding an end to the recession and the start of what is predicted to be slow and laborious recovery.
Statistics Canada reported Monday that real gross domestic product, an inflation-adjusted measure of the economic growth, expanded at an annualized rate of 0.4 per cent in the third quarter. That was below the Bank of Canada’s two-per-cent growth prediction for the quarter, and economist’s expectations for an annualized growth rate of 0.6 per cent, according to CIBC World Markets.
The first overall economic growth in a year marks an end to the recession, which is technically defined as at least two back-to-back quarters of contraction.
By comparison, the American economy registered growth of 2.8 per cent during the same period, Statistics Canada said, though the U.S. has been pulling itself out of a deeper recession.
“We’ve certainly been slowest out of the gate to economic recovery relative to most of the other major economies,” said Avery Shenfeld, chief economist at CIBC World Markets.
“The only plus side here, is that the third quarter ended on a strong note with a healthy GDP gain in September, and that does give us hope that we’ll see much better growth for the fourth quarter.”
Real GDP — economic growth adjusted for inflation — was up 0.4 per cent in September, the final month of the quarter, as most major industrial sectors increased their production.
Economists have latched onto that optimism as a way to build hope for a stronger recovery into next year, driven by an uptick that is expected to register in the final three months of 2009.
TD Securities Economics strategist Millan Mulraine suggested the fourth quarter could launch a “significant pickup” of about three per cent.
“Looking ahead, we think that the Canadian economy will at least outperform the U.S. economy in the near term,” he said.
“One of the things to look at next year is what happens to consumer spending. We think that additional upside could come from net trade if the pickup in the U.S. starts gathering steam.”
There was further optimism in a November survey conducted by the Canadian Manufacturers & Exporters, which showed strength in both orders and a hopeful outlook on future employment.
The survey found that 63 per cent of respondents said manufacturing orders were either the same or higher in value compared to August. On the jobs front, 79 per cent of respondents said they planned to either hold employment steady or hire new workers over the next three months, showing that some within the industry expect further momentum in their growth.
Statistics Canada said in the third quarter final domestic demand advanced 1.2 per cent, as capital investment and personal spending both increased.
Consumer spending on goods and services, one of the pillars of Canadian economic health, was up 0.8 per cent, the biggest increase since the fourth quarter of 2007 as households increased spending on durable goods 2.4 per cent, particularly on new and used motor vehicles and on furniture.
The domestic economy is looking to shake off the months of battering it suffered during a global economic meltdown that saw the failure of U.S. banks, ravaged corporate profits and hundreds of thousands of jobs lost.
Bank of Montreal deputy economist Doug Porter said the data indicates that Canada’s economy is on the mend, but the third-quarter numbers were “not exactly a clanging endorsement of the ‘end of recession’ story.”
“While the quarterly gain for the third quarter was a bit of a damp squib, this doesn’t alter the bigger picture that the Canadian economy is erratically grinding out of recession, led by broad-based gains in domestic spending,” Porter wrote in a note to clients.
“With the solid hand-off from the sturdy September result and mounting signs that the U.S. recovery is taking root, look for much more convincing evidence that the recession is over in fourth-quarter GDP results. Still, the broader picture of a relatively muted recovery remains the dominant theme.”
Among its other findings, Statistics Canada said export and import volumes both increased after many quarters of decline, suggesting that industrial activity is picking up.
The output of services-producing industries increased 0.6 per cent, with the wholesale and retail trade sectors and real-estate agents and brokers leading the way.
Goods-producing industries slipped 1.4 per cent, continuing a downward trend that started in the third quarter of 2007. Mining and oil-and-gas extraction contributed the most to the decrease as a result of temporary shutdowns. The Canadian Press
Dubai World not guaranteed by emirate; creditors also at fault, finance official says
By Barbara Surk
DUBAI, UNITED ARAB EMIRATES — The heavily indebted Dubai World is not guaranteed by the emirate’s government, a top financial official from the city state said Monday, offering little direction to anxious investors on a day when the United Arab Emirates registered a record fall on the back of Dubai’s debt mess.
On the first day of trading since news of Dubai World’s debt crunch became public, Dubai’s main stock exchange dropped more than seven per cent while the Abu Dhabi exchange fell more than eight per cent — the steepest fall in at least a year, according to brokers.
Driving the financial avalanche was Wednesday’s announcement that conglomerate Dubai World would seek at least a six-month reprieve on its $60 billion US in debts, obligations amassed during years of a building spree that turned the desert emirate into the Middle Eastern version of Las Vegas, Wall Street and, at times, Sodom and Gomorra, all rolled into one.
If markets were looking for reassurances from Dubai that it would stand behind the conglomerate, they got none Monday.
“Dubai World was established as an independent company, it is true that the government is the owner, but given that the company has various activities and is exposed to various types of risks, the decision, since its establishment, has been that the company is not guaranteed by the (Dubai) government,” Abdulrahman al-Saleh, director general of Dubai’s Finance Department, said on Dubai TV.
“Consequently, the company’s dealing with the various parties has been on this basis,” he said.
Al-Saleh’s comments were the first public remarks by a Dubai official since Thursday, the day after the emirate’s government’s announcement about Dubai World’s request for a debt repayment postponement.
The lack of clarity or direction from the rulers of Dubai since the extent of the conglomerate’s financial ills became known has been a major source of angst for investors.
Uncertainty about what step the emirate would take next had cast a pall on world markets late last week.
Investors returned to Dubai and Abu Dhabi’s markets Monday with little news and plenty of questions. As a result, stocks took a dive.
Shares of Emaar Properties, the United Arab Emirates’ biggest developer, for example were down 9.86 per cent to 3.75 dirhams.
The overwhelming majority of companies whose shares traded Monday on the Dubai Financial Market, the city-state’s main bourse, were also deeply in the red. But the market failed to hit the 10 per cent stop-trading cap largely because a large number of company shares were not traded.
Asian markets rebounded Monday after taking a tumble late last week while European markets were down slightly.
The Associated Press
Thursday, November 26, 2009
Financial Update For Nov. 26, 2009
• TSX +97.27
• DOW +30.69
• Dollar +1.13c to 95.65cUS
• Oil +$1.94 to $77.96US per barrel.
• Gold +$21.40 to $1,186.90USD per ounce Gold prices extended their record run hitting another new all time high
•
Home ownership becomes more expensive in third quarter
Module body
By The Canadian Press
TORONTO - The cost of homeownership in Canada became more expensive in the third quarter, according to a report by RBC Economics Research.
The bank says this hasn't happened since the spring of 2008 and was due to a slight rise in mortgage rates and higher property values. The RBC index measures the proportion of pre-tax household income needed to service the costs of owning a home.
During the third quarter, the benchmark detached bungalow moved up by one per cent to 40.2 per cent and the standard townhouse rose by 0.7 per cent to 32.3 per cent.
The standard condo climbed by 0.5 per cent up to 27.6 per cent and a standard two-storey home increased 1.2 per cent to 45.8 per cent.
RBC says housing demand has outgrown supply, leading to a more competitive market and widespread increases in home values.
"With such strong momentum in the housing market and the cyclical low in mortgage rates behind us, it seems unlikely that affordability will improve in the near future," said RBC senior economist Robert Hogue.
"The housing market still faces obstacles, as mortgages have become more difficult to handle for many Canadians amid challenging labour conditions. This is likely to persist until the economic recovery is well established and job creation is sustained next year."
• DOW +30.69
• Dollar +1.13c to 95.65cUS
• Oil +$1.94 to $77.96US per barrel.
• Gold +$21.40 to $1,186.90USD per ounce Gold prices extended their record run hitting another new all time high
•
Home ownership becomes more expensive in third quarter
Module body
By The Canadian Press
TORONTO - The cost of homeownership in Canada became more expensive in the third quarter, according to a report by RBC Economics Research.
The bank says this hasn't happened since the spring of 2008 and was due to a slight rise in mortgage rates and higher property values. The RBC index measures the proportion of pre-tax household income needed to service the costs of owning a home.
During the third quarter, the benchmark detached bungalow moved up by one per cent to 40.2 per cent and the standard townhouse rose by 0.7 per cent to 32.3 per cent.
The standard condo climbed by 0.5 per cent up to 27.6 per cent and a standard two-storey home increased 1.2 per cent to 45.8 per cent.
RBC says housing demand has outgrown supply, leading to a more competitive market and widespread increases in home values.
"With such strong momentum in the housing market and the cyclical low in mortgage rates behind us, it seems unlikely that affordability will improve in the near future," said RBC senior economist Robert Hogue.
"The housing market still faces obstacles, as mortgages have become more difficult to handle for many Canadians amid challenging labour conditions. This is likely to persist until the economic recovery is well established and job creation is sustained next year."
Wednesday, November 25, 2009
Financial Update For Nov. 25, 2009
• TSX -84.39
• DOW -17.24
• Dollar -.19c to 94.52cUS
• Oil -$1.54 to $76.02US per barrel.
• Gold +$1.20 to $1,165.50USD per ounce Gold prices extended their record run hitting another new all time high
How many credit cards should you have?
by Michelle Warren, Bankrate.com
When banks introduced Canada's first credit card, Chargex, in 1968, it was designed as a convenient tool for their most valued customers. Today's creditors have a more egalitarian approach — it seems that if you have a pulse, you can have a credit card.
But why stop at one? According to Statistics Canada, there are 3.1 credit cards in circulation for every Canadian over the age of 18 — that's 74 million cards.
According to Laurie Campbell, program manager for the Credit Counselling Service of Toronto, it's not uncommon for people to carry eight or 10 cards and a debt load of $30,000 or more. "The biggest problem we see is overspending with credit cards," she says. "There is a direct correlation between debt and the amount of credit cards you have."
Canadians charged more than $170 billion to Visa and MasterCard in 2004, compared to $39 billion in 1990, according to Statistics Canada.
"People don't see it as real money and that leads to impulse spending," says Campbell. Indeed, studies show the average person spends 112 percent more on a credit card than he would if using cash.
As a result, people are living beyond their means. As many as 50 percent of credit card users don't pay their balance each month, opting instead to carry debt and pay interest ranging from a 1.9 percent introductory rate to almost 30 percent on some retail cards.
Credit flux
"We don't recommend consumers carry a balance," says Scott Hannah, executive director of the Credit Counselling Society in Vancouver, B.C. Sometimes, however, it's unavoidable when essential expenses arise, such as auto repairs. The key is recognizing the difference between a want and a need. "Easy and quick access to credit really obscures thinking," he says.
Credit has never been more accessible. With more than 600 institutions issuing Visa and MasterCard cards, add to that the retail card market (24 million in circulation), and it's easy to see why wallets are bulging with plastic. In 2003, Canadians received 191.7 million credit-card offers — about six for each person — according to market research firm Mail Monitor.
It's a competitive market and credit card companies profit from interest and user fees. These days, juggling more than one card or carrying a balance is made easier because a standard minimum monthly payment is as low as two percent, whereas it used to be 5 percent. But remember, if you owe $5,000 at 18 percent interest and pay only the minimum each month, it will take about 30 years to pay off the card (that's if you never use it again).
"People can carry a lot more debt," Hannah says. "It's easier to spend, but harder to pay back."
The perks of credit
On the flip side, credit cards are hugely convenient and by today's standards, a necessity — you can't even rent a movie without one. With more transactions taking place on the Internet, a credit card is handy for finding deals on books or flights. Some cards also have benefits, such as travel insurance, member discounts or points programs.
Retail cards, while charging interest in the 24 to 28 percent range, offer lucrative reward programs and discounts. It's OK to take advantage of such perks, but Campbell cautions there's no real benefit if you carry a balance.
"It may make sense to have a credit card for a favourite retailer," says Hannah, but not one for every store you shop at.
The magic number
Experts agree that in most cases one card is enough.
It used to be that some outlets only accepted one type of card, so it made sense to have a Visa, MasterCard and maybe an American Express, but those days are over. "If you have an all-purpose card, 99 percent of the time you're going to be able to use that card," says Campbell.
Hannah seconds the one-card rule, but he recommends keeping business expenditures separate with two cards.
Christine McDonald, a spokeswoman for the Financial Consumer Agency of Canada, says the key is "making sure you use the credit you have wisely." She warns juggling too many cards makes it harder to keep track of spending and payments and hurts your credit score.
One's credit rating is based largely on credit outstanding, but how much credit you have at your disposal is also considered. Even if there's nothing owing, just having cards can influence lenders when it comes to granting a mortgage. Several credit cards indicate the potential to get in over your head fast.
Credit cards do help establish a credit history, but Campbell says "people don't need more than one to build up their credit rating."
Choosing a card
It's important to choose the right card. As a general rule, those who carry a balance are better off paying a small annual fee for a low-interest-rate card, while those who pay in full each month may opt for a standard higher-rate card.
Cutting credit
When credit card spending is out of control, the best thing to do is cut up the cards and pay down debt. For some people it makes sense to consolidate debt with a lower-interest line of credit. Otherwise, Campbell recommends paying off the card with the highest rate of interest first. A credit counsellor can help explore the options. Once the debt is paid, contact the issuer and close the account.
Credit cards are two-faced — they're convenient and come with plenty of perks, but can lead to trouble if you overspend or juggle multiple cards. One, perhaps, two, is all most people need — anything more is playing with fire.
• DOW -17.24
• Dollar -.19c to 94.52cUS
• Oil -$1.54 to $76.02US per barrel.
• Gold +$1.20 to $1,165.50USD per ounce Gold prices extended their record run hitting another new all time high
How many credit cards should you have?
by Michelle Warren, Bankrate.com
When banks introduced Canada's first credit card, Chargex, in 1968, it was designed as a convenient tool for their most valued customers. Today's creditors have a more egalitarian approach — it seems that if you have a pulse, you can have a credit card.
But why stop at one? According to Statistics Canada, there are 3.1 credit cards in circulation for every Canadian over the age of 18 — that's 74 million cards.
According to Laurie Campbell, program manager for the Credit Counselling Service of Toronto, it's not uncommon for people to carry eight or 10 cards and a debt load of $30,000 or more. "The biggest problem we see is overspending with credit cards," she says. "There is a direct correlation between debt and the amount of credit cards you have."
Canadians charged more than $170 billion to Visa and MasterCard in 2004, compared to $39 billion in 1990, according to Statistics Canada.
"People don't see it as real money and that leads to impulse spending," says Campbell. Indeed, studies show the average person spends 112 percent more on a credit card than he would if using cash.
As a result, people are living beyond their means. As many as 50 percent of credit card users don't pay their balance each month, opting instead to carry debt and pay interest ranging from a 1.9 percent introductory rate to almost 30 percent on some retail cards.
Credit flux
"We don't recommend consumers carry a balance," says Scott Hannah, executive director of the Credit Counselling Society in Vancouver, B.C. Sometimes, however, it's unavoidable when essential expenses arise, such as auto repairs. The key is recognizing the difference between a want and a need. "Easy and quick access to credit really obscures thinking," he says.
Credit has never been more accessible. With more than 600 institutions issuing Visa and MasterCard cards, add to that the retail card market (24 million in circulation), and it's easy to see why wallets are bulging with plastic. In 2003, Canadians received 191.7 million credit-card offers — about six for each person — according to market research firm Mail Monitor.
It's a competitive market and credit card companies profit from interest and user fees. These days, juggling more than one card or carrying a balance is made easier because a standard minimum monthly payment is as low as two percent, whereas it used to be 5 percent. But remember, if you owe $5,000 at 18 percent interest and pay only the minimum each month, it will take about 30 years to pay off the card (that's if you never use it again).
"People can carry a lot more debt," Hannah says. "It's easier to spend, but harder to pay back."
The perks of credit
On the flip side, credit cards are hugely convenient and by today's standards, a necessity — you can't even rent a movie without one. With more transactions taking place on the Internet, a credit card is handy for finding deals on books or flights. Some cards also have benefits, such as travel insurance, member discounts or points programs.
Retail cards, while charging interest in the 24 to 28 percent range, offer lucrative reward programs and discounts. It's OK to take advantage of such perks, but Campbell cautions there's no real benefit if you carry a balance.
"It may make sense to have a credit card for a favourite retailer," says Hannah, but not one for every store you shop at.
The magic number
Experts agree that in most cases one card is enough.
It used to be that some outlets only accepted one type of card, so it made sense to have a Visa, MasterCard and maybe an American Express, but those days are over. "If you have an all-purpose card, 99 percent of the time you're going to be able to use that card," says Campbell.
Hannah seconds the one-card rule, but he recommends keeping business expenditures separate with two cards.
Christine McDonald, a spokeswoman for the Financial Consumer Agency of Canada, says the key is "making sure you use the credit you have wisely." She warns juggling too many cards makes it harder to keep track of spending and payments and hurts your credit score.
One's credit rating is based largely on credit outstanding, but how much credit you have at your disposal is also considered. Even if there's nothing owing, just having cards can influence lenders when it comes to granting a mortgage. Several credit cards indicate the potential to get in over your head fast.
Credit cards do help establish a credit history, but Campbell says "people don't need more than one to build up their credit rating."
Choosing a card
It's important to choose the right card. As a general rule, those who carry a balance are better off paying a small annual fee for a low-interest-rate card, while those who pay in full each month may opt for a standard higher-rate card.
Cutting credit
When credit card spending is out of control, the best thing to do is cut up the cards and pay down debt. For some people it makes sense to consolidate debt with a lower-interest line of credit. Otherwise, Campbell recommends paying off the card with the highest rate of interest first. A credit counsellor can help explore the options. Once the debt is paid, contact the issuer and close the account.
Credit cards are two-faced — they're convenient and come with plenty of perks, but can lead to trouble if you overspend or juggle multiple cards. One, perhaps, two, is all most people need — anything more is playing with fire.
Financial Update For Nov. 24, 2009
TSX +44.69 to 11,624.02 touching its highest level in nearly 14 months as an early rally in oil prices powered energy stocks, while financials gained ground ahead of a flood of bank earnings reports.
• DOW +132.79
• Dollar +1.24c to 94.71US
• Oil +$0.09 to $77.56US per barrel.
• Gold +$5 to $1,164.70USD per ounce Gold prices extended their record run hitting a new all time high
BMO Financial Group, the first of Canada's banks to report its fourth quarter results, posted a 16% increase in profit Tuesday led by its personal and commercial banking segment.
Canadians can't shop their way to recovery, say economists
Paul Vieira, Financial Post
OTTAWA -- The robust retail data for September suggest domestic consumption was strong enough to help Canada post positive growth for the third quarter and, technically, pull the country out of a recession.
But a strong broad-based recovery - the type warranted following the depth of this recession - is not in the cards, at least for now, analysts warn, as the surging loonie and tepid U.S. household demand hold the Canadian economy back.
Consumer spending, in fact, may be the only thing going for the Canadian economy at this point - and even then it shouldn't come as much of a surprise given record-low interest rates, and the relative health of the Canadian housing and banking sectors vis-à-vis the United States.
There is certainly no denying the strength of the retail data, released Monday. Sales grew 1% month over month in September, Statistics Canada reported, following a similar, and upwardly revised, finding for August. Overall, it was the seventh monthly gain in the past nine months, and results in an annualized increase of 5.2% for the quarter. Consumer spending makes up roughly 60% of the Canadian economy.
"Right now, that's all there is" in the Canadian economy, said Carlos Leitao, chief economist at Montreal's Laurentian Bank Securities. "What is keeping the economy afloat is domestic demand. It can go for a while, but not forever. It's not sustainable."
Mr. Leitao added some of the retail surge in Canada may be due to households opting to open their wallets after fearing they were headed for a worst-case depression scenario.
However, in a note to clients, Laurentian Bank warned Canadian households continue to accumulate debt amid meagre income growth, and remain vulnerable to future economic shocks, such as sudden rate hikes or tax increases. Further concern emerged in insolvency data from last week, which suggested personal bankruptcies ramped up considerably in the third quarter - a sign that domestic consumption has its limits.
Douglas Porter, deputy chief economist at BMO Capital Markets, said some contribution from the trade-oriented sector is required to secure growth.
"We need some kind of recovery in exports and manufacturing, even if it is feeble, for a broad-based recovery. Domestic spending has been enough to end the recession. But it will not be enough to start a recovery."
For now, the September retail data, combined with gains in the month for manufacturing and wholesale sales, likely point to economic expansion for the final month of the third quarter, after July and August posted flat to negative growth. Economists, such as those at Royal Bank of Canada, now project GDP to expand anywhere from 0.5% to 1% for the three-month period ended Sept. 30 - well below most expectations for the period, including the 2% growth envisaged by the Bank of Canada.
Any hope for stronger growth won't materialize, Mr. Porter said, until there is evidence that the U.S. economy has "broken free from the shackles of its recession." The U.S. economy grew by an estimated 3.5% in the third quarter, but analysts argue the growth was "artificial" because it was spurred by government stimulus schemes, such as the cash-for-clunkers.
Meanwhile, the strong dollar, which gained more than US1¢ Monday, means manufactured goods are more expensive for U.S. consumers. But it also means lower prices for imports and that might be skewing the retail data, said Peter Hall, chief economist at Crown financier Export Development Canada. "That might be benefiting [domestic] consumption right now."
Should the Canadian dollar remain at current levels a year from now, Mr. Hall warned that could shave up to 3% from the country's bottom-line GDP. "That's pretty staggering."
• DOW +132.79
• Dollar +1.24c to 94.71US
• Oil +$0.09 to $77.56US per barrel.
• Gold +$5 to $1,164.70USD per ounce Gold prices extended their record run hitting a new all time high
BMO Financial Group, the first of Canada's banks to report its fourth quarter results, posted a 16% increase in profit Tuesday led by its personal and commercial banking segment.
Canadians can't shop their way to recovery, say economists
Paul Vieira, Financial Post
OTTAWA -- The robust retail data for September suggest domestic consumption was strong enough to help Canada post positive growth for the third quarter and, technically, pull the country out of a recession.
But a strong broad-based recovery - the type warranted following the depth of this recession - is not in the cards, at least for now, analysts warn, as the surging loonie and tepid U.S. household demand hold the Canadian economy back.
Consumer spending, in fact, may be the only thing going for the Canadian economy at this point - and even then it shouldn't come as much of a surprise given record-low interest rates, and the relative health of the Canadian housing and banking sectors vis-à-vis the United States.
There is certainly no denying the strength of the retail data, released Monday. Sales grew 1% month over month in September, Statistics Canada reported, following a similar, and upwardly revised, finding for August. Overall, it was the seventh monthly gain in the past nine months, and results in an annualized increase of 5.2% for the quarter. Consumer spending makes up roughly 60% of the Canadian economy.
"Right now, that's all there is" in the Canadian economy, said Carlos Leitao, chief economist at Montreal's Laurentian Bank Securities. "What is keeping the economy afloat is domestic demand. It can go for a while, but not forever. It's not sustainable."
Mr. Leitao added some of the retail surge in Canada may be due to households opting to open their wallets after fearing they were headed for a worst-case depression scenario.
However, in a note to clients, Laurentian Bank warned Canadian households continue to accumulate debt amid meagre income growth, and remain vulnerable to future economic shocks, such as sudden rate hikes or tax increases. Further concern emerged in insolvency data from last week, which suggested personal bankruptcies ramped up considerably in the third quarter - a sign that domestic consumption has its limits.
Douglas Porter, deputy chief economist at BMO Capital Markets, said some contribution from the trade-oriented sector is required to secure growth.
"We need some kind of recovery in exports and manufacturing, even if it is feeble, for a broad-based recovery. Domestic spending has been enough to end the recession. But it will not be enough to start a recovery."
For now, the September retail data, combined with gains in the month for manufacturing and wholesale sales, likely point to economic expansion for the final month of the third quarter, after July and August posted flat to negative growth. Economists, such as those at Royal Bank of Canada, now project GDP to expand anywhere from 0.5% to 1% for the three-month period ended Sept. 30 - well below most expectations for the period, including the 2% growth envisaged by the Bank of Canada.
Any hope for stronger growth won't materialize, Mr. Porter said, until there is evidence that the U.S. economy has "broken free from the shackles of its recession." The U.S. economy grew by an estimated 3.5% in the third quarter, but analysts argue the growth was "artificial" because it was spurred by government stimulus schemes, such as the cash-for-clunkers.
Meanwhile, the strong dollar, which gained more than US1¢ Monday, means manufactured goods are more expensive for U.S. consumers. But it also means lower prices for imports and that might be skewing the retail data, said Peter Hall, chief economist at Crown financier Export Development Canada. "That might be benefiting [domestic] consumption right now."
Should the Canadian dollar remain at current levels a year from now, Mr. Hall warned that could shave up to 3% from the country's bottom-line GDP. "That's pretty staggering."
Thursday, November 19, 2009
Financial Update for Nov. 19, 2009
• TSX +22.69(Reuters)
• DOW -11.11
• Dollar -.31c to 94.83cUS
• Oil +$.44to $79.58US per barrel.
• Gold +$1.90 to $1,140.70USD per ounce
'Everything for sale at a price'
Rick Spence, Financial Post
Maybe there are just two types of entrepreneurs: those who stand ready to sell their companies at a moment's notice, and those who think of their businesses as intensely personal achievements, fused to their skills, their self-image, and their hopes and dreams.
Both types showed up at an all-star business panel in Toronto last week organized by WXN, the Women's Executive Network, to discuss the buying and selling of businesses. The participants included two brawlers from the hit TV series, Dragons' Den, Kevin O'Leary and Robert Herjavec, and two award-winning women entrepreneurs: Teresa Cascioli, former CEO of Lakeport Brewing, and Rebecca MacDonald, founder of the fixed-price utility giant Just Energy.
The panel started off by noting how timely the topic is. "This is a phenomenal time to be in the market," said MacDonald, whose company made an acquisition just three months ago. "I have never seen more distress sales than I'm seeing today. If you've got cash, prices are low and it's time to buy."
O'Leary, who introduced himself as one of Just Energy's biggest shareholders through his O'Leary mutual funds, demonstrated his contrarian nature by questioning Mac-Donald's thesis. "Maybe those aren't distressed values," he said. "Maybe they're realistic values given today's market."
Many companies "kill shareholder value," he added, when they acquire other businesses that don't immediately boost the buyers' income statements. "What's important is free cash flow," he maintained. "If I buy my competitor's business, will I generate more cash than I had without it? That's the only question that matters."
As he often does on TV, Herjavec challenged O'Leary's assertion. The founder of computer-security company Herjavec Group said he had just closed a deal that cashes in on the same tough times Mac-Donald cited. "We bought a $15-million company with no money down, based on their own cash flow," he said. "If I had approached this guy with this deal three years ago, he would have laughed at me."
What matters, said Herjavec, isn't just cash, but whether the deal will give his company more market coverage and access to additional customers.
Having turned around troubled Lakeport Brewing of Hamilton prior to selling it to Labatt in 2007, Cascioli sided with the sellers. Her advice to entrepreneurs: "If you're selling, hold out. If you can ride out [the current downturn], you will get more money tomorrow than you'll get today."
But the fireworks really began when O'Leary advised the entrepreneurs in the audience to consider their business as being on the market at all times. "When someone wants to buy your business, sell it to them." (Assuming they're offering cash, that is. O'Leary thinks taking stock in return for your shares is like betting against your own horse.)
"Go take the cash and pursue some other opportunity," O'Leary advised. "Taking a business liquid again is a rare opportunity."
"Everything is for sale, at a price," MacDonald agreed. Her own experience shows it's smart to entertain all offers. She sold a previous business after some hardball negotiations with a foreign buyer. Imagine her delight when she got the cheque and found that while she had been thinking in dollars, her buyer had been negotiating in pounds sterling!
But again Herjavec disagreed. "I would rather invest in other companies than sell mine," he said. "I'm an operator. Starting a business from zero is hard. I don't think I want to do that again."
This time MacDonald took Herjavec on. "Kevin and I don't agree on a lot," she said. "But we agree that if you are not willing to sell your business, you don't have a business. You have a hobby."
Cascioli went even further. "If you don't want to sell your business, there's something wrong with you. If you are so passionate that you are going to stay there forever, you are devaluing your business."
Herjavec agreed that when there's an offer, you have to look at it: "You owe it to your family." But it was clear where his heart lies: "I like to build businesses. I like to grow them." Not constantly trade them in for something shinier.
Before the panel ended, O'Leary offered one more insight: Buyer beware. His former firm, The Learning Co., bought 35 companies in its successful campaign to consolidate the educational software market. In making deals, he said, "I make the assumption going in that everyone's lying to me." His rule of thumb: after he and his team estimate the value of an acquisition, based on the data available, they pore over all the documents. If they believe the company is likely to underperform their projections by 20% or less, they'll sign the deal. But if the shortfall is a nickel over 20%, they'll walk away.
In an interview after the panel, O'Leary clarified a point: "It's not really that they're lying," he said. "They're just over-optimistic about their prospects -- 100% of the time."
• DOW -11.11
• Dollar -.31c to 94.83cUS
• Oil +$.44to $79.58US per barrel.
• Gold +$1.90 to $1,140.70USD per ounce
'Everything for sale at a price'
Rick Spence, Financial Post
Maybe there are just two types of entrepreneurs: those who stand ready to sell their companies at a moment's notice, and those who think of their businesses as intensely personal achievements, fused to their skills, their self-image, and their hopes and dreams.
Both types showed up at an all-star business panel in Toronto last week organized by WXN, the Women's Executive Network, to discuss the buying and selling of businesses. The participants included two brawlers from the hit TV series, Dragons' Den, Kevin O'Leary and Robert Herjavec, and two award-winning women entrepreneurs: Teresa Cascioli, former CEO of Lakeport Brewing, and Rebecca MacDonald, founder of the fixed-price utility giant Just Energy.
The panel started off by noting how timely the topic is. "This is a phenomenal time to be in the market," said MacDonald, whose company made an acquisition just three months ago. "I have never seen more distress sales than I'm seeing today. If you've got cash, prices are low and it's time to buy."
O'Leary, who introduced himself as one of Just Energy's biggest shareholders through his O'Leary mutual funds, demonstrated his contrarian nature by questioning Mac-Donald's thesis. "Maybe those aren't distressed values," he said. "Maybe they're realistic values given today's market."
Many companies "kill shareholder value," he added, when they acquire other businesses that don't immediately boost the buyers' income statements. "What's important is free cash flow," he maintained. "If I buy my competitor's business, will I generate more cash than I had without it? That's the only question that matters."
As he often does on TV, Herjavec challenged O'Leary's assertion. The founder of computer-security company Herjavec Group said he had just closed a deal that cashes in on the same tough times Mac-Donald cited. "We bought a $15-million company with no money down, based on their own cash flow," he said. "If I had approached this guy with this deal three years ago, he would have laughed at me."
What matters, said Herjavec, isn't just cash, but whether the deal will give his company more market coverage and access to additional customers.
Having turned around troubled Lakeport Brewing of Hamilton prior to selling it to Labatt in 2007, Cascioli sided with the sellers. Her advice to entrepreneurs: "If you're selling, hold out. If you can ride out [the current downturn], you will get more money tomorrow than you'll get today."
But the fireworks really began when O'Leary advised the entrepreneurs in the audience to consider their business as being on the market at all times. "When someone wants to buy your business, sell it to them." (Assuming they're offering cash, that is. O'Leary thinks taking stock in return for your shares is like betting against your own horse.)
"Go take the cash and pursue some other opportunity," O'Leary advised. "Taking a business liquid again is a rare opportunity."
"Everything is for sale, at a price," MacDonald agreed. Her own experience shows it's smart to entertain all offers. She sold a previous business after some hardball negotiations with a foreign buyer. Imagine her delight when she got the cheque and found that while she had been thinking in dollars, her buyer had been negotiating in pounds sterling!
But again Herjavec disagreed. "I would rather invest in other companies than sell mine," he said. "I'm an operator. Starting a business from zero is hard. I don't think I want to do that again."
This time MacDonald took Herjavec on. "Kevin and I don't agree on a lot," she said. "But we agree that if you are not willing to sell your business, you don't have a business. You have a hobby."
Cascioli went even further. "If you don't want to sell your business, there's something wrong with you. If you are so passionate that you are going to stay there forever, you are devaluing your business."
Herjavec agreed that when there's an offer, you have to look at it: "You owe it to your family." But it was clear where his heart lies: "I like to build businesses. I like to grow them." Not constantly trade them in for something shinier.
Before the panel ended, O'Leary offered one more insight: Buyer beware. His former firm, The Learning Co., bought 35 companies in its successful campaign to consolidate the educational software market. In making deals, he said, "I make the assumption going in that everyone's lying to me." His rule of thumb: after he and his team estimate the value of an acquisition, based on the data available, they pore over all the documents. If they believe the company is likely to underperform their projections by 20% or less, they'll sign the deal. But if the shortfall is a nickel over 20%, they'll walk away.
In an interview after the panel, O'Leary clarified a point: "It's not really that they're lying," he said. "They're just over-optimistic about their prospects -- 100% of the time."
Subscribe to:
Posts (Atom)
