• 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.
Friday, December 18, 2009
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.
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