CMHC forecasts continued new housing rebound
• TSX -32.40(Reuters)
• DOW +76.71
• Dollar +.35c to 92.78
• Oil -$1.13 to $78.13US per barrel.
• Gold -$13.70 to $1,053.40USD per ounce
CMHC forecasts continued new housing rebound
The Canadian Press
OTTAWA — The national housing agency is reporting that housing starts have started to recover and it expects the recovery to continue.
Canada Mortgage and Housing Corp. predicts starts will reach 141,900 this year and increase to 164,900 in 2010.
The CMHC’s fourth-quarter market outlook forecasts housing markets will continue to strengthen over the next year as economic conditions improve.
It says demand for existing homes has rebounded and both new and existing home markets are characterized by lower inventory levels.
However, the national housing agency says the strong pace of sales in the second and third quarters partly reflects delayed activity and is not likely to be sustained.
The CMHC says it expects the level of sales to move back closer in line with anticipated economic conditions.
It predicts existing home sales will reach 441,300 units in 2009 and increase to 445,150 units in 2010, while the average price is expected to be $312,950 in 2009 and $324,500 in 2010.
Hopes for recovery get a boost from manufacturing, construction and home sales news
By Martin Crutsinger
WASHINGTON — Hopes for the fledgling U.S. economic recovery got a boost Monday from better-than-expected news on manufacturing, construction and contracts to buy homes.
The surprisingly strong readings provided some comfort that the U.S. economy is packing more momentum than assumed going into the end of the year. Still, with jobs scarce, lending tight and consumers wary of spending, it’s unclear whether the gains can be sustained as government stimulus programs wind down.
The U.S. Institute for Supply Management’s gauge of manufacturing activity grew in October at the fastest pace in more than three years. It was driven by businesses’ replenishing of stockpiles, higher demand for American exports and support from the U.S. government’s $787-billion US stimulus program.
The ISM index shot up to 55.7 in October, the third straight reading above 50, which signals growth in the sector. It was the highest level since April 2006.
“It clearly looks like we are seeing a turnaround in the manufacturing sector,” said David Wyss, chief economist at Standard&Poor’s in New York.
Economists cautioned that the manufacturing pattern seen in the past two post-recession recoveries likely will be repeated this time: In each case, early strength in manufacturing, led by companies’ restocking of inventories, faded within a few months.
Wyss agrees that the ISM index could dip below 50 in the first quarter of next year. But he thinks that would be a temporary slump and not a sign that the economy was dipping back into recession.
“A bit of a slip in manufacturing would be consistent with a sluggish recovery,” he said.
The overall economy, as measured by the gross domestic product, expanded at a 3.5 per cent rate in the July-September quarter. That number provided compelling evidence that the longest recession since the 1930s was ending. Wyss said he expects GDP growth to slow to around 1.7 per cent in the current quarter and to remain sluggish in the first half of next year.
Other economists are more optimistic, with some forecasting that GDP growth could come in around three per cent in the current quarter. They pointed to the government report Monday that construction spending rose a bigger-than-expected 0.8 per cent in September, fuelled by the strongest jump in home construction in six years. The gain in housing offset continued weakness in construction of office buildings, hotels and shopping centres.
In a third report, the National Association of Realtors said the volume of signed contracts to buy previously occupied homes rose 6.1 per cent in September to a reading of 110.1. That’s the highest level since December 2006. And it’s more than 21 per cent above a year ago.
The eighth straight monthly gain came as the housing market rebounds from the worst downturn in decades. The improvement has been aided by federal intervention to lower mortgage rates and bring more buyers into the market. For example, the contracts to buy homes rose as buyers scrambled to qualify for a tax credit for first-time buyers that expires at the end of this month. Congress is moving to extend the credit until April 30.
“We think this recovery is sustainable,” said Sal Guatieri, an economist at BMO Capital Markets. “We think there is enough government stimulus in place to push the economy forward and manufacturing will be getting support from a weakening U.S. dollar and strength in Asia which will boost exports.”
Manufacturing in China, which posted the strongest growth of the world’s major economies in the third quarter, expanded for an eighth straight month in October, according to a survey by a government-sanctioned industry group. European surveys also showed growth despite the recent climb by the euro and pound against the dollar. That currency gap makes Europe’s exports more expensive.
The expanding signs of a U.S. rebound gave an initial boost to investors on Wall Street Monday, but the rally lost steam on a retreat in financial stocks. The Dow Jones industrial average added about 75 points in late afternoon trading, while broader indexes were mixed.
At the White House, President Barack Obama said the public and private sectors must find more ways to create jobs to continue the recovery. In remarks at the start of a meeting with his economic advisers, Obama credited his stimulus package for recent better economic figures, including the manufacturing boost.
But layoffs continue. Sun Microsystems Inc. said in October it plans to eliminate up to 3,000 jobs before it’s acquired by Oracle Corp.
In October, the ISM said 13 of the 18 manufacturing industries surveyed expanded, led by petroleum and coal production, apparel and furniture. Three industries shrank.
“There’s still a lot of caution from our clients,” said Richard Zambacca, president of Think Resources, an engineer staffing company in Atlanta. “People are looking for funding.”
The Associated Press
Tuesday, November 3, 2009
Monday, November 2, 2009
Financial Update For Nov. 2, 2009
• TSX -248.21 to 10,805(Reuters)
• DOW -119.48 to 9,762
• Dollar -1.08c to 92.
• Oil -$2.09 to $77.46US per barrel.
• Gold -$4.80 to $1,034.70USD per ounce
CIT Group files for Chapter 11 bankruptcy protection
By Stephen Manning
WASHINGTON — Lender CIT Group has filed for Chapter 11 bankruptcy protection, in an effort to restructure its debt while trying to keep loans flowing to the thousands of mid-sized and small businesses.
CIT made the filing in New York bankruptcy court Sunday, after a debt-exchange offer to bondholders failed. CIT said in a statement that its bondholders have overwhelmingly approved a prepackaged reorganization plan which will reduce total debt by $10 billion while allowing the company to continue to do business.
“The decision to proceed with our plan of reorganization will allow CIT to continue to provide funding to our small business and middle market customers, two sectors that remain vitally important to the U.S. economy,” said Jeffrey Peek, chair and chief executive. Peek has said he plans to step down at the end of the year.
CIT’s move will wipe out current holders of its common and preferred stock, likely meaning the U.S. government will lose the $2.3 billion it sunk into CIT last year to prop up the ailing company. The government could have lost billions more, however, had it not declined to hand over more aid to the company earlier this year.
The Chapter 11 filing is one of the biggest in U.S. corporate history. CIT’s bankruptcy filing shows $71 billion in finance and leasing assets against total debt of $64.9 billion. Its collapse is the latest in a string of huge cases driven by the financial crisis over the past two years, as bailed out industry heavyweights like General Motors and Chrysler both entered bankruptcy court.
CIT has been trying to fend off disaster for several months and narrowly avoided collapse in July. It has struggled to find funding as sources it previously relied on, such as short-term debt, evaporated during the credit crisis.
It received $4.5 billion in credit from its own lenders and bondholders last week, reportedly made a deal with Goldman Sachs to lower debt payments, and negotiated a $1 billion line of credit from billionaire investor and bondholder Carl Icahn. But the company failed to convince bondholders to support a debt-exchange offer, a step that would have trimmed at least $5.7 billion from its debt burden and given CIT more time to pay off what it owes.
It is unclear what the filing will mean for the country’s small businesses, many of which look to CIT for loans to cover expenses like buying materials at a time when other credit is hard to come by.
Analysts have warned that already ailing sectors, like retailers, could be hit especially hard, since CIT serves as the short-term financier for about 2,000 vendors that supply merchandise to more than 300,000 stores.
The Associated Press
Canada’s economy still sputtering
October 30, 2009
OTTAWA —Canada’s economy unexpectedly went into reverse again in August, adding new uncertainty about the strength and sustainability of the recovery.
The country’s real gross domestic product slipped 0.1 per cent in August — the first outright decline in three months — in a broad set-back led by oil-and-gas extraction, mining, utilities, mining and manufacturing.
The markets reacted strongly to today’s news, led by the Canadian dollar’s one-cent dive to the mid-92-cent level.
Economists said the negative reading, after a flat July that was not revised upwards as some had hoped, will make it very difficult for the economy to match the Bank of Canada’s newest forecast announced last week that growth would average two per cent in the third quarter.
With only the September data remaining, it would take a massive bounce to meet the expectation.
If it’s a recovery, “it’s a pretty wimpy start of a recovery,” said Scotiabank senior economist Derek Holt.
With the strong dollar likely having cut into exports and boosted imports in September, Holt said it is not beyond the realm of possibility that the quarter as a whole could turn in a negative performance — which would mean the recession, technically, did not end.
“I don’t rule out a negative (reading) at all,” he said.
That is still not the base-case scenario envisioned by economists, however. Most, including Holt, believe the third quarter will show modest growth, but not enough to boost confidence and far behind the 3.5-per-cent pace set by the U.S. for the corresponding period.
The two-country comparison appears to support a report by the Canadian Centre for Policy Alternatives this week that argued the United States had done a far better job of rolling out stimulus spending than Ottawa. The report estimates the President Obama administration has outspent the Harper government seven-to-one so far.
About half of the gross domestic product jump in the U.S. during the third quarter was attributed to the wildly popular cash-for-clunkers program and government incentives for new home buyers, both of which have ended.
“We now put more hope in a strong quarter four, but there is no doubt that the Canadian economy has been slower out of the recessionary gate that we had initially expected,” said Meny Grauman, an economist with CIBC.
Grauman said the Bank of Canada is now likely to keep interest rates at the lowest practical level of 0.25 per cent until the end of 2010, well beyond the conditional commitment of next summer.
That changes the picture of the loonie going forward and puts into question earlier expectations it would reach parity by the end of the year, and possibly rise above next year.
The August fall-back was almost entirely due to continued weakness in the critical goods producing part of the economy, with consumer-generated activity remaining strong.
Oil-and-gas extraction fell 2.3 per cent, as maintenance work at some crude petroleum facilities on the East Coast slowed production. Natural gas production also retreated.
The output of the mining sector excluding oil and gas extraction declined 1.4 per cent.
Manufacturing activity decreased 0.7 per cent, with eight of the 21 major groups retreating. Wholesale declined 0.5 per cent, reflecting weakness in foreign and domestic demand.
Meanwhile, retail sales increased 0.3 per cent, the public sector advanced 0.4 per cent, construction gained 0.2 per cent, and the level of activity of real estate agents and brokers remained high for a third straight month.
The output of utilities also rose, 1.8 per cent, as natural-gas distribution and the production of electricity increased.
The Canadian Press
• DOW -119.48 to 9,762
• Dollar -1.08c to 92.
• Oil -$2.09 to $77.46US per barrel.
• Gold -$4.80 to $1,034.70USD per ounce
CIT Group files for Chapter 11 bankruptcy protection
By Stephen Manning
WASHINGTON — Lender CIT Group has filed for Chapter 11 bankruptcy protection, in an effort to restructure its debt while trying to keep loans flowing to the thousands of mid-sized and small businesses.
CIT made the filing in New York bankruptcy court Sunday, after a debt-exchange offer to bondholders failed. CIT said in a statement that its bondholders have overwhelmingly approved a prepackaged reorganization plan which will reduce total debt by $10 billion while allowing the company to continue to do business.
“The decision to proceed with our plan of reorganization will allow CIT to continue to provide funding to our small business and middle market customers, two sectors that remain vitally important to the U.S. economy,” said Jeffrey Peek, chair and chief executive. Peek has said he plans to step down at the end of the year.
CIT’s move will wipe out current holders of its common and preferred stock, likely meaning the U.S. government will lose the $2.3 billion it sunk into CIT last year to prop up the ailing company. The government could have lost billions more, however, had it not declined to hand over more aid to the company earlier this year.
The Chapter 11 filing is one of the biggest in U.S. corporate history. CIT’s bankruptcy filing shows $71 billion in finance and leasing assets against total debt of $64.9 billion. Its collapse is the latest in a string of huge cases driven by the financial crisis over the past two years, as bailed out industry heavyweights like General Motors and Chrysler both entered bankruptcy court.
CIT has been trying to fend off disaster for several months and narrowly avoided collapse in July. It has struggled to find funding as sources it previously relied on, such as short-term debt, evaporated during the credit crisis.
It received $4.5 billion in credit from its own lenders and bondholders last week, reportedly made a deal with Goldman Sachs to lower debt payments, and negotiated a $1 billion line of credit from billionaire investor and bondholder Carl Icahn. But the company failed to convince bondholders to support a debt-exchange offer, a step that would have trimmed at least $5.7 billion from its debt burden and given CIT more time to pay off what it owes.
It is unclear what the filing will mean for the country’s small businesses, many of which look to CIT for loans to cover expenses like buying materials at a time when other credit is hard to come by.
Analysts have warned that already ailing sectors, like retailers, could be hit especially hard, since CIT serves as the short-term financier for about 2,000 vendors that supply merchandise to more than 300,000 stores.
The Associated Press
Canada’s economy still sputtering
October 30, 2009
OTTAWA —Canada’s economy unexpectedly went into reverse again in August, adding new uncertainty about the strength and sustainability of the recovery.
The country’s real gross domestic product slipped 0.1 per cent in August — the first outright decline in three months — in a broad set-back led by oil-and-gas extraction, mining, utilities, mining and manufacturing.
The markets reacted strongly to today’s news, led by the Canadian dollar’s one-cent dive to the mid-92-cent level.
Economists said the negative reading, after a flat July that was not revised upwards as some had hoped, will make it very difficult for the economy to match the Bank of Canada’s newest forecast announced last week that growth would average two per cent in the third quarter.
With only the September data remaining, it would take a massive bounce to meet the expectation.
If it’s a recovery, “it’s a pretty wimpy start of a recovery,” said Scotiabank senior economist Derek Holt.
With the strong dollar likely having cut into exports and boosted imports in September, Holt said it is not beyond the realm of possibility that the quarter as a whole could turn in a negative performance — which would mean the recession, technically, did not end.
“I don’t rule out a negative (reading) at all,” he said.
That is still not the base-case scenario envisioned by economists, however. Most, including Holt, believe the third quarter will show modest growth, but not enough to boost confidence and far behind the 3.5-per-cent pace set by the U.S. for the corresponding period.
The two-country comparison appears to support a report by the Canadian Centre for Policy Alternatives this week that argued the United States had done a far better job of rolling out stimulus spending than Ottawa. The report estimates the President Obama administration has outspent the Harper government seven-to-one so far.
About half of the gross domestic product jump in the U.S. during the third quarter was attributed to the wildly popular cash-for-clunkers program and government incentives for new home buyers, both of which have ended.
“We now put more hope in a strong quarter four, but there is no doubt that the Canadian economy has been slower out of the recessionary gate that we had initially expected,” said Meny Grauman, an economist with CIBC.
Grauman said the Bank of Canada is now likely to keep interest rates at the lowest practical level of 0.25 per cent until the end of 2010, well beyond the conditional commitment of next summer.
That changes the picture of the loonie going forward and puts into question earlier expectations it would reach parity by the end of the year, and possibly rise above next year.
The August fall-back was almost entirely due to continued weakness in the critical goods producing part of the economy, with consumer-generated activity remaining strong.
Oil-and-gas extraction fell 2.3 per cent, as maintenance work at some crude petroleum facilities on the East Coast slowed production. Natural gas production also retreated.
The output of the mining sector excluding oil and gas extraction declined 1.4 per cent.
Manufacturing activity decreased 0.7 per cent, with eight of the 21 major groups retreating. Wholesale declined 0.5 per cent, reflecting weakness in foreign and domestic demand.
Meanwhile, retail sales increased 0.3 per cent, the public sector advanced 0.4 per cent, construction gained 0.2 per cent, and the level of activity of real estate agents and brokers remained high for a third straight month.
The output of utilities also rose, 1.8 per cent, as natural-gas distribution and the production of electricity increased.
The Canadian Press
Friday, October 30, 2009
Financial Update For Oct. 30, 2009
• TSX +269.89 to 11,075(Reuters) snapped a four-session-long losing streak, as the U.S. Commerce Department reported that U.S. gross domestic product rose at a 3.5 per cent annualized pace, slightly better than the 3.3 per cent growth that economists had expected. It was the first time the U.S. economy has grown since early 2008.
• DOW +199.89 to 9,962
• Dollar +1.00c to 93.72
• Oil +$2.41 to $79.87US per barrel. Commodity prices turned higher in the wake of the GDP announcement, which raised hopes that an expanding U.S. economy will translate into increased demand.
• Gold +$16.50 to $1,046.40USD per ounce
Recession takes a mental toll, expert says
By Rose Simone, Record staff
WATERLOO – As the recession takes its toll on jobs, it will also take a toll on the mental health and productivity of the nation, says the head of federal non-profit corporation that is trying to put mental health issues on the business agenda of workplaces.
“The advent of depression is in part a function of the uncertainty and job insecurity in our lives,” Bill Wilkerson, co-founder and chief executive of the Global Business and Economic Roundtable on Addiction and Mental Health, said in an interview after speaking at a forum on work-related stress in Waterloo on Thursday.
“The absence of work, loss of work, and uncertainty about work is a major factor in the mental health status of the whole population,” he said.
Wilkerson was speaking at the forum organized by the Waterloo Region Suicide Prevention Council.
He said he was disconcerted by the trend of “emptying the workplace,” even before the recession hit, and added that “it is tragic and harmful to the country’s economic growth.”
Wilkerson said the lost work time productivity because of depression and substance abuse in Canada is now estimated at $51 billion a year. Stress also increases the risks and costs associated with heart disease, diabetes and high blood pressure, he added.
He said companies also have immediate commercial reasons to care about mental health because everything from sales to customer service and customer loyalty are affected by the employer’s relationship with the workers.
Wilkerson added that although some people mistake depression as a sign of weakness, it is actually a “disease of the brave and the hard-working.” Soldiers suffer post-traumatic stress after witnessing horrific scenes precisely because they care about the victims, and likewise, people suffer from depression because they care about what they do, he said.
He said the politics and culture of a workplace typically play a bigger role in stress than the work itself, because people become anxious and depressed if they feel they are not treated fairly or are prevented from contributing their skills.
Wilkerson, who was sworn in as a member of the Royal Canadian Mounted Police because he was helping that organization develop strategies for dealing with workplace stress, added that even in a high-stress job like policing, “the policing itself is not the major source of stress . . . the source of stress is usually what is going on in the office.”
He also said companies need to promote work-life balance and discourage taking work home. He added that since Waterloo Region is the home of the BlackBerry, a symbol of the “hurried world we live in,” it also should take a leadership role in researching ways to help people achieve a work-life balance and promote better mental health.
Wilkerson said insurance companies that provide disability benefits also have a responsibility. “You could never get insurance to operate in a building that did not have a fire protection system. So what if insurance companies were to say to a company, ‘because of your disability rates and work-time losses, there is something amiss in the kind of management you have?’”
Wilkerson added that reducing the toll of depression “requires social innovation, not just medical science.”
• DOW +199.89 to 9,962
• Dollar +1.00c to 93.72
• Oil +$2.41 to $79.87US per barrel. Commodity prices turned higher in the wake of the GDP announcement, which raised hopes that an expanding U.S. economy will translate into increased demand.
• Gold +$16.50 to $1,046.40USD per ounce
Recession takes a mental toll, expert says
By Rose Simone, Record staff
WATERLOO – As the recession takes its toll on jobs, it will also take a toll on the mental health and productivity of the nation, says the head of federal non-profit corporation that is trying to put mental health issues on the business agenda of workplaces.
“The advent of depression is in part a function of the uncertainty and job insecurity in our lives,” Bill Wilkerson, co-founder and chief executive of the Global Business and Economic Roundtable on Addiction and Mental Health, said in an interview after speaking at a forum on work-related stress in Waterloo on Thursday.
“The absence of work, loss of work, and uncertainty about work is a major factor in the mental health status of the whole population,” he said.
Wilkerson was speaking at the forum organized by the Waterloo Region Suicide Prevention Council.
He said he was disconcerted by the trend of “emptying the workplace,” even before the recession hit, and added that “it is tragic and harmful to the country’s economic growth.”
Wilkerson said the lost work time productivity because of depression and substance abuse in Canada is now estimated at $51 billion a year. Stress also increases the risks and costs associated with heart disease, diabetes and high blood pressure, he added.
He said companies also have immediate commercial reasons to care about mental health because everything from sales to customer service and customer loyalty are affected by the employer’s relationship with the workers.
Wilkerson added that although some people mistake depression as a sign of weakness, it is actually a “disease of the brave and the hard-working.” Soldiers suffer post-traumatic stress after witnessing horrific scenes precisely because they care about the victims, and likewise, people suffer from depression because they care about what they do, he said.
He said the politics and culture of a workplace typically play a bigger role in stress than the work itself, because people become anxious and depressed if they feel they are not treated fairly or are prevented from contributing their skills.
Wilkerson, who was sworn in as a member of the Royal Canadian Mounted Police because he was helping that organization develop strategies for dealing with workplace stress, added that even in a high-stress job like policing, “the policing itself is not the major source of stress . . . the source of stress is usually what is going on in the office.”
He also said companies need to promote work-life balance and discourage taking work home. He added that since Waterloo Region is the home of the BlackBerry, a symbol of the “hurried world we live in,” it also should take a leadership role in researching ways to help people achieve a work-life balance and promote better mental health.
Wilkerson said insurance companies that provide disability benefits also have a responsibility. “You could never get insurance to operate in a building that did not have a fire protection system. So what if insurance companies were to say to a company, ‘because of your disability rates and work-time losses, there is something amiss in the kind of management you have?’”
Wilkerson added that reducing the toll of depression “requires social innovation, not just medical science.”
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