• TSX +144.53 as oil prices rebounded and gave a boost to energy shares, while financials rose on news of U.S. aid for insurers.
• DOW +47.55
• Dollar +.03c to 80.82USD
• Oil +$.23 to $49.38US per barrel.
• Gold +$2.60 to $885.90USD per ounce
• Canadian 5 yr bond yields -.04bps to 1.82 four weeks ago it was 1.87
• http://www.financialpost.com/markets/market_data/money-yields-can_us.html
Housing starts post surprise jump Financial Post
OTTAWA - Home construction rose unexpectedly in March, led by Ontario and Quebec, Canada Mortgage and Housing Corporation said Wednesday.
There were 154,700 housing starts on an annualized basis during the month, up from a revised 136,100 units in February, the government agency said.
Many economists had expected housing starts to dip to 130,000 units in March.
"Higher multiple starts in Ontario and Quebec were the main contributors to the rise in new construction activity in March," said Bob Dugan, CMHC's chief economist.
"While the multiples segment experienced the largest increase, the overall boost in starts was broad based, encompassing the singles segment as well."
Urban housing starts were up 17% to 127,900 units in March, the agency said. Urban multiple starts rose 28.3% to 81,500 and urban single starts were 1.3% higher at 46,400.
Construction of urban units rose by an annualized 35% in Ontario and 23.3% in Quebec. Meanwhile, urban activity fell 17.3% in British Columbia, 7.9% in Atlantic Canada and by 7.5% in the Prairies.
Rural starts were flat at 26,800 units in March.
"New home construction is now at a more sustainable level after having been exceptionally strong over the past seven years, exceeding 200,000 units per year," CMHC said.
Millan Mulraine, economics strategist at TD Securities, said the report "suggests that new housing starts activity pickup aggressively in March after six consecutive monthly declines."
"However, in the grand scheme of things, the key economic fundamental factors continue to point to further weakness in Canadian housing sector activity, and as such we believe that this surprising pickup in construction activity is likely to be a one-month wonder, and expect activity to soften in the coming months," he said.
The CMHC report comes a day after TD Economic forecast average Canadian house prices to fall to about $246,000 in 2009 - down 24% from the peak of $324,000 in 2007 - while overbuilding in the residential market, particularly in the Prairies, should prevent the sector from making a quick recovery from the current downturn in sales, prices and construction.
"A glut in the housing stock means that builders will have to rein in residential construction further - particularly in the most overbuilt markets. As well, excess inventories in certain markets will prove an additional drag on home prices," it said.
The TD report said house prices have been overshooting their fundamental value by about 9% since 2005 as speculation drove up prices and encouraged overbuilding.
Thursday, April 9, 2009
Wednesday, April 8, 2009
Financial Update for April 8, 2009
TSX pulled down by oil, but gold shines
• TSX -191.42 as investors took profits from the spring rally on nervousness over first-quarter corporate earnings reports while financials groaned under the weight of a new, huge figure on the value of toxic assets on banks' balance sheets could hit $4 trillion
• DOW -186.29
• Dollar +.05c to 80.79USD
• Oil -$1.90 to $49.15US per barrel.
• Gold +$10.50 to $883.30USD per ounce
• Canadian 5 yr bond yields -.04bps to 1.86 four weeks ago it was 1.91
• http://www.financialpost.com/markets/market_data/money-yields-can_us.html
Ottawa is providing nearly $1 billion in guarantees calculated to reassure consumers and parts suppliers that do business with shaky auto companies, most notably General Motors and Chrysler.
Canadian cities need to 'stop being humble' 'Go Out And Get It'; Time to emerge from shadow of U. S.: author
Shannon Proudfoot, Canwest News Service
This recession is a "great reset" that offers Canada a chance to emerge from the shadow of its reeling southern neighbour, says a leading urban theorist.
Richard Florida, director of the Martin Prosperity Institute at the University of Toronto, says Canadian cities need to "stop being so humble" and see themselves as global models of exactly the sort of livable communities the United States desperately needs.
"Canadian cities have already achieved many of the things that Barack Obama would like to see American cities achieve," he says. "Our cities are dense, they have a middle class, they have good public schools, our people have health care, the social safety net we have enables people to adjust, we're open to immigration."
Mr. Florida has just released the Canadian edition of his latest bestseller, Who's Your City?, which is part urban study and part self-help guide to finding the right place to live.
The book's central tenet is that location is more important than ever and the world is getting "spikier," not flatter. Mr. Florida argues that global economic and creative output is increasingly driven by "mega-regions" to which he's assigned Seussian names such as Tor-Buff-Loo-Mon-Tawa (stretching from Toronto and Waterloo to Ottawa and Montreal and south to Buffalo and Rochester) and Cascadia (Vancouver down to Seattle and Portland).
"I think those are really the key strong, world-class hubs of the Canadian economy," Mr. Florida says. "Other regions like Calgary, Edmonton, Winnipeg, they're all going to do fine, but those are really the hubs. Our challenge has to be to make them stronger." Mr. Florida is probably best known for his concept that the "creative class" -- a broad category he defines as those who create for a living, whether in engineering, the arts, biotech or small business -- wields the greatest clout in today's economy.
Ottawa is perceived as a "sleepy government town," but research for the new book revealed it's in fact home to the highest proportion of creative-class workers in Canada, he writes, with 43% of workers in creative fields of some kind -- a higher percentage than New York, London or San Francisco.
Singles should take note of the finding that Calgary and Edmonton are home to thousands more single men than women, while Toronto boasts 22,500 more unattached women. Several remote northern communities scored high on the singles ranking because there are so many singles there and lots of bars and restaurants per capita in which they can meet, says Kevin Stolarick, research director for the Martin Prosperity Institute.
"Whitehorse, Yellowknife and Iqaluit tended to do just phenomenally for singles," he says, adding, "We can't tell everybody to move to Iqaluit --it's not going to work."
Overall, Canada is a more urban country than the United States, Mr. Florida says -- something that seems "bizarre" given our massive land mass. Eighty per cent of the Canadian population lives on 2% of the land, he says, and while the five biggest American cities account for 23% of the country's economic output, Canada's five major centres crank out 53% of this nation's GDP, he says.
"I think the fact that we have weathered this recession well and we don't have a financial crisis and our banks are stable gives us an opportunity now to really reposition ourselves," says Mr. Florida, who relocated to Toronto a year and a half ago from Washington, D. C. "I think that Canada's cities have some of the biggest upsides in this economic reset."
He advocates linking Canada's mega-regions by high-speed rail that will transform them into long-distance suburbs of each other. Creative-class workers are most "buffered" from the recession fallout, he says, but Canada also needs to create more and better service industry jobs because they're not as susceptible to outsourcing as manufacturing jobs.
"I think we owe it to the Windsors of the world, who have lost their core industries or are rapidly losing them, to connect them to new growth centres," he says. "So instead of Windsor being a connection to Detroit, it really needs to be connected to a more growing, thriving area like Toronto."
This economic crisis will put a halt to the "brain drain" of Canada's best and brightest seeking opportunities in the United States, he predicts, and may soon shift to a "brain circulation" that will see many return home.
"I do think the era of Canadians going elsewhere to find their fame and fortune is over," he says. "Canada's big cities are at that moment now and we just have to take advantage of it and we have to stop being so humble, we have to go out and get it."
Average home price will fall to $246,000 in '09 Alia McMullen, Financial Post
Canadian house prices have further to fall, while overbuilding in the residential market, particularly in the Prairies, will prevent the sector from making a quick recovery from the current downturn in sales, prices and construction, according to a report by TD Economics.
TD economists expect the average Canadian house price to fall to about $246,000 in 2009, down 24% from the peak of $324,000 in 2007. As of February, the average nation-wide house price stood at $282,000, down 13% from its peak.
The report, released Tuesday, found house prices had been overshooting their fundamental value by about 9% since 2005 as speculation drove up prices and encouraged overbuilding.
"Declines in prices are now returning to fundamental-justified values. We estimate this process to be roughly half done, both in terms of time and value adjustments," the report said.
Now, as housing prices correct, the economists believe the excess supply of housing in the market will continue to weigh on the sector throughout 2009. However, Canada will avoid a U.S.-style housing crash because the oversupply of housing is much smaller.
TD estimates the overhang of residential homes in the Canadian market is equal to about three month's supply, compared to about 10 months in the United States. As a result of the overhang combined with low prices, housing construction would likely remain 20% below its potential level and fall to 125,000 in 2009 and increase slightly to 135,000 in 2010. In September 2007, new homes were being constructed at a seasonally adjusted annualized rate of 273,000.
"A glut in the housing stock means that builders will have to rein in residential construction further -- particularly in the most overbuilt markets. As well, excess inventories in certain markets will prove an additional drag on home prices," it said.
TD said Calgary and Edmonton had accumulated "worrisome" inventories of unsold single family homes, while the overhang of supply in Saskatoon's was at a historical high. Montreal also had a growing inventory of unsold condos and apartments. Toronto and Vancouver have so far avoided a major oversupply in inventories, however the large number of condos under construction in both cities raised the possibility of mounting oversupply this year.
Meanwhile, lower interest rates and house prices have helped housing become slightly more affordable Mortgage payments cost the consumer about 34% of an average household income in 2007, compared with 22% in 2000. This rate is predicted to have fallen to 32% in 2008.
• TSX -191.42 as investors took profits from the spring rally on nervousness over first-quarter corporate earnings reports while financials groaned under the weight of a new, huge figure on the value of toxic assets on banks' balance sheets could hit $4 trillion
• DOW -186.29
• Dollar +.05c to 80.79USD
• Oil -$1.90 to $49.15US per barrel.
• Gold +$10.50 to $883.30USD per ounce
• Canadian 5 yr bond yields -.04bps to 1.86 four weeks ago it was 1.91
• http://www.financialpost.com/markets/market_data/money-yields-can_us.html
Ottawa is providing nearly $1 billion in guarantees calculated to reassure consumers and parts suppliers that do business with shaky auto companies, most notably General Motors and Chrysler.
Canadian cities need to 'stop being humble' 'Go Out And Get It'; Time to emerge from shadow of U. S.: author
Shannon Proudfoot, Canwest News Service
This recession is a "great reset" that offers Canada a chance to emerge from the shadow of its reeling southern neighbour, says a leading urban theorist.
Richard Florida, director of the Martin Prosperity Institute at the University of Toronto, says Canadian cities need to "stop being so humble" and see themselves as global models of exactly the sort of livable communities the United States desperately needs.
"Canadian cities have already achieved many of the things that Barack Obama would like to see American cities achieve," he says. "Our cities are dense, they have a middle class, they have good public schools, our people have health care, the social safety net we have enables people to adjust, we're open to immigration."
Mr. Florida has just released the Canadian edition of his latest bestseller, Who's Your City?, which is part urban study and part self-help guide to finding the right place to live.
The book's central tenet is that location is more important than ever and the world is getting "spikier," not flatter. Mr. Florida argues that global economic and creative output is increasingly driven by "mega-regions" to which he's assigned Seussian names such as Tor-Buff-Loo-Mon-Tawa (stretching from Toronto and Waterloo to Ottawa and Montreal and south to Buffalo and Rochester) and Cascadia (Vancouver down to Seattle and Portland).
"I think those are really the key strong, world-class hubs of the Canadian economy," Mr. Florida says. "Other regions like Calgary, Edmonton, Winnipeg, they're all going to do fine, but those are really the hubs. Our challenge has to be to make them stronger." Mr. Florida is probably best known for his concept that the "creative class" -- a broad category he defines as those who create for a living, whether in engineering, the arts, biotech or small business -- wields the greatest clout in today's economy.
Ottawa is perceived as a "sleepy government town," but research for the new book revealed it's in fact home to the highest proportion of creative-class workers in Canada, he writes, with 43% of workers in creative fields of some kind -- a higher percentage than New York, London or San Francisco.
Singles should take note of the finding that Calgary and Edmonton are home to thousands more single men than women, while Toronto boasts 22,500 more unattached women. Several remote northern communities scored high on the singles ranking because there are so many singles there and lots of bars and restaurants per capita in which they can meet, says Kevin Stolarick, research director for the Martin Prosperity Institute.
"Whitehorse, Yellowknife and Iqaluit tended to do just phenomenally for singles," he says, adding, "We can't tell everybody to move to Iqaluit --it's not going to work."
Overall, Canada is a more urban country than the United States, Mr. Florida says -- something that seems "bizarre" given our massive land mass. Eighty per cent of the Canadian population lives on 2% of the land, he says, and while the five biggest American cities account for 23% of the country's economic output, Canada's five major centres crank out 53% of this nation's GDP, he says.
"I think the fact that we have weathered this recession well and we don't have a financial crisis and our banks are stable gives us an opportunity now to really reposition ourselves," says Mr. Florida, who relocated to Toronto a year and a half ago from Washington, D. C. "I think that Canada's cities have some of the biggest upsides in this economic reset."
He advocates linking Canada's mega-regions by high-speed rail that will transform them into long-distance suburbs of each other. Creative-class workers are most "buffered" from the recession fallout, he says, but Canada also needs to create more and better service industry jobs because they're not as susceptible to outsourcing as manufacturing jobs.
"I think we owe it to the Windsors of the world, who have lost their core industries or are rapidly losing them, to connect them to new growth centres," he says. "So instead of Windsor being a connection to Detroit, it really needs to be connected to a more growing, thriving area like Toronto."
This economic crisis will put a halt to the "brain drain" of Canada's best and brightest seeking opportunities in the United States, he predicts, and may soon shift to a "brain circulation" that will see many return home.
"I do think the era of Canadians going elsewhere to find their fame and fortune is over," he says. "Canada's big cities are at that moment now and we just have to take advantage of it and we have to stop being so humble, we have to go out and get it."
Average home price will fall to $246,000 in '09 Alia McMullen, Financial Post
Canadian house prices have further to fall, while overbuilding in the residential market, particularly in the Prairies, will prevent the sector from making a quick recovery from the current downturn in sales, prices and construction, according to a report by TD Economics.
TD economists expect the average Canadian house price to fall to about $246,000 in 2009, down 24% from the peak of $324,000 in 2007. As of February, the average nation-wide house price stood at $282,000, down 13% from its peak.
The report, released Tuesday, found house prices had been overshooting their fundamental value by about 9% since 2005 as speculation drove up prices and encouraged overbuilding.
"Declines in prices are now returning to fundamental-justified values. We estimate this process to be roughly half done, both in terms of time and value adjustments," the report said.
Now, as housing prices correct, the economists believe the excess supply of housing in the market will continue to weigh on the sector throughout 2009. However, Canada will avoid a U.S.-style housing crash because the oversupply of housing is much smaller.
TD estimates the overhang of residential homes in the Canadian market is equal to about three month's supply, compared to about 10 months in the United States. As a result of the overhang combined with low prices, housing construction would likely remain 20% below its potential level and fall to 125,000 in 2009 and increase slightly to 135,000 in 2010. In September 2007, new homes were being constructed at a seasonally adjusted annualized rate of 273,000.
"A glut in the housing stock means that builders will have to rein in residential construction further -- particularly in the most overbuilt markets. As well, excess inventories in certain markets will prove an additional drag on home prices," it said.
TD said Calgary and Edmonton had accumulated "worrisome" inventories of unsold single family homes, while the overhang of supply in Saskatoon's was at a historical high. Montreal also had a growing inventory of unsold condos and apartments. Toronto and Vancouver have so far avoided a major oversupply in inventories, however the large number of condos under construction in both cities raised the possibility of mounting oversupply this year.
Meanwhile, lower interest rates and house prices have helped housing become slightly more affordable Mortgage payments cost the consumer about 34% of an average household income in 2007, compared with 22% in 2000. This rate is predicted to have fallen to 32% in 2008.
Tuesday, April 7, 2009
Financial Update for April 7, 2009
• TSX -49.59
• DOW -41.74
• Dollar -.53c to 80.74USD
• Oil -$1.46 to $51.05US per barrel.
• Gold -$24.50 to $872USD per ounce
• Canadian 5 yr bond yields +.02bps to 1.90 four weeks ago it was 1.86
• http://www.financialpost.com/markets/market_data/money-yields-can_us.html
For all you Bank of Canada Rate watchers out there…
A further explanation of what may lie ahead for the Bank of Canada in terms of its new “quantitative easing” policy, as well as a subtle rate prediction at the end of the article.
What is Quantative easing? Quantitative easing is an economic term describing an action that may be taken by a country's central bank in times of economic stress. A central bank controls the amount of available currency in a country, and it can create new money through what are known as open market operations. Put very simply, this means that the central bank creates or prints money out of thin air, although in an indirect way. When this is done in order to stimulate an economy in recession, it is known as quantitative easing, since it seeks to ease an economic burden by increasing the quantity of available currency. (www.wisegeek.com)
Canada Quantitative Easing to Be ‘Gentler’ Than U.S., CIBC Says
By Greg Quinn
April 6 (Bloomberg) -- Canada will adopt a “gentler” form of quantitative easing than the U.S. has because of its explicit inflation targeting policies and healthier banks, said Avery Shenfeld, chief economist at Canadian Imperial Bank of Commerce.
Bank of Canada Governor Mark Carney will adopt so-called quantitative or credit easing within six months of announcing guidelines on April 23, Shenfeld said in a telephone interview from Toronto today. The central bank may purchase corporate debt -- such as short-term commercial paper -- and government bonds that mature in three to seven years, he said.
The Bank of Canada has almost run out of room for using interest-rate cuts to stimulate an economy in recession, after it lowered its key borrowing rate to 0.5 percent on March 3.
Policy makers may be able to boost the economy by purchasing securities to revive debt markets, without using the transactions to inject newly created money into the economy. “It might not be true quantitative easing,” Shenfeld said.
Under quantitative easing, asset purchases can be paid for with new money created by the central bank. The extra cash is supposed to encourage banks to expand lending to consumers and businesses.
The U.S. Federal Reserve’s extraordinary policies are reflected in its balance sheet, which has more than doubled over the past year. The Fed has taken on assets including mortgage securities, corporate debt and now long-term Treasuries under its latest policy decision last month.
“In Canada, the banking system isn’t as broken and therefore a lighter hand will be required,” Shenfeld said.
The Bank of Canada’s 2 percent inflation target will also limit how far the central bank is willing to go to boost demand, Shenfeld said.
‘All-out War’
“Only in the unlikely event that Canadian core inflation goes negative on a sustained basis would we expect the Bank to launch an all-out war on deflation that also pumped up money growth,” he said.
The core inflation rate, the consumer price index excluding eight volatile products, will slow to a 0.8 percent annual pace in the fourth quarter, he predicts.
Governor Carney said at an April 1 speech that publishing guidelines doesn’t mean using extraordinary policies is “preordained,” and any new steps will be consistent with the inflation target.
The Bank of Canada will probably keep its benchmark lending rate unchanged at 0.5 percent through the first quarter of next year, opting first to scale back its quantitative or credit easing policies when the economy picks up again, Shenfeld also said. Gross domestic product will contract until the fourth quarter when it will expand at a 2.5 percent pace, he said.
To contact the reporter on this story: Greg Quinn in Ottawa at gquinn1@bloomberg.net.
• DOW -41.74
• Dollar -.53c to 80.74USD
• Oil -$1.46 to $51.05US per barrel.
• Gold -$24.50 to $872USD per ounce
• Canadian 5 yr bond yields +.02bps to 1.90 four weeks ago it was 1.86
• http://www.financialpost.com/markets/market_data/money-yields-can_us.html
For all you Bank of Canada Rate watchers out there…
A further explanation of what may lie ahead for the Bank of Canada in terms of its new “quantitative easing” policy, as well as a subtle rate prediction at the end of the article.
What is Quantative easing? Quantitative easing is an economic term describing an action that may be taken by a country's central bank in times of economic stress. A central bank controls the amount of available currency in a country, and it can create new money through what are known as open market operations. Put very simply, this means that the central bank creates or prints money out of thin air, although in an indirect way. When this is done in order to stimulate an economy in recession, it is known as quantitative easing, since it seeks to ease an economic burden by increasing the quantity of available currency. (www.wisegeek.com)
Canada Quantitative Easing to Be ‘Gentler’ Than U.S., CIBC Says
By Greg Quinn
April 6 (Bloomberg) -- Canada will adopt a “gentler” form of quantitative easing than the U.S. has because of its explicit inflation targeting policies and healthier banks, said Avery Shenfeld, chief economist at Canadian Imperial Bank of Commerce.
Bank of Canada Governor Mark Carney will adopt so-called quantitative or credit easing within six months of announcing guidelines on April 23, Shenfeld said in a telephone interview from Toronto today. The central bank may purchase corporate debt -- such as short-term commercial paper -- and government bonds that mature in three to seven years, he said.
The Bank of Canada has almost run out of room for using interest-rate cuts to stimulate an economy in recession, after it lowered its key borrowing rate to 0.5 percent on March 3.
Policy makers may be able to boost the economy by purchasing securities to revive debt markets, without using the transactions to inject newly created money into the economy. “It might not be true quantitative easing,” Shenfeld said.
Under quantitative easing, asset purchases can be paid for with new money created by the central bank. The extra cash is supposed to encourage banks to expand lending to consumers and businesses.
The U.S. Federal Reserve’s extraordinary policies are reflected in its balance sheet, which has more than doubled over the past year. The Fed has taken on assets including mortgage securities, corporate debt and now long-term Treasuries under its latest policy decision last month.
“In Canada, the banking system isn’t as broken and therefore a lighter hand will be required,” Shenfeld said.
The Bank of Canada’s 2 percent inflation target will also limit how far the central bank is willing to go to boost demand, Shenfeld said.
‘All-out War’
“Only in the unlikely event that Canadian core inflation goes negative on a sustained basis would we expect the Bank to launch an all-out war on deflation that also pumped up money growth,” he said.
The core inflation rate, the consumer price index excluding eight volatile products, will slow to a 0.8 percent annual pace in the fourth quarter, he predicts.
Governor Carney said at an April 1 speech that publishing guidelines doesn’t mean using extraordinary policies is “preordained,” and any new steps will be consistent with the inflation target.
The Bank of Canada will probably keep its benchmark lending rate unchanged at 0.5 percent through the first quarter of next year, opting first to scale back its quantitative or credit easing policies when the economy picks up again, Shenfeld also said. Gross domestic product will contract until the fourth quarter when it will expand at a 2.5 percent pace, he said.
To contact the reporter on this story: Greg Quinn in Ottawa at gquinn1@bloomberg.net.
Subscribe to:
Comments (Atom)
