• TSX -60.14 (Reuters) fell for the first time in six sessions on Tuesday as investors cashed in recent profits
• DOW +20.03
• Dollar +.66c to 95.23cUS
• Oil -$.38 to $79.05US per barrel.
• Gold +$1.10 to $1,101.90USD per ounce
Canadian economic growth’s lost decade Aging population and low productivity will limit growth for 10 years study says
By Julian Beltrame
OTTAWA — It may one day be remembered as the lost decade, in economic terms.
A new report published by the TD Bank says Canada is headed for a decade of stagnant growth that will test the budgets of Canadian households and governments alike.
The bank says a combination of post-recession adjustments, the aging population and low productivity will limit Canada’s potential growth to about two per cent over the next 10 years.
That is two-thirds the level of growth experienced the previous two decades, the report says.
And it could be even more muted than that. The bank said the ”other elephant in the room“ that could further depress economic growth is the measures governments may adopt to control climate change.
”It is critical to recognize that things will not simply return to how they were,“ economists Derek Burleton and Grant Bishop wrote.
“This (muted growth) represents a new normal for the budgets of households and governments, as well as the returns on domestic capital investment.”
And there is not much that anyone can do about it, the economists said in an interview.
Structural adjustments brought out by the recession will keep potential growth — broadly defined as sustainable growth when an economy is at full capacity — at about 1.6 per cent for the next three years.
Actual growth will likely edge higher during this period until the economy shakes off the rust from the recession and returns to full capacity.
But then Canada will be hit by an aging workforce time bomb as the baby boom generation moves into retirement — restricting growth to about 2.1 per cent from 2013 to the end of the century’s second decade.
“The real depressing element is lower labour force growth,” explained Bishop. “There is no way to fix the fact the (baby boom generation) will be leaving the labour force and there aren’t going to be enough people to replace them.”
Burleton notes that Canada will not be unique among industrialized countries in entering a lengthy period of more modest economic activity.
The U.S. economy will be operating under a speed governor for some time. Federal Reserve officials issued a fresh warning Tuesday that unemployment, which topped 10 per cent in October, will remain high for the next several years and continue to restrain needed consumer spending.
Where Canada is somewhat unique, particularly compared with the United States, is its history of low productivity gains, which Burleton calls the country’s ”Achilles heel.“
The economists say Canadian workers will be able to produce more going forward, partly because of government policies like tax harmonization and increased business investment in machinery and equipment. But it will not be enough to overcome the loss of workers to retirement.
“Without attention to Canada’s languishing performance in technological innovation, a renewed emphasis on building a highly skilled workforce, and a reduction in regulatory barriers to competition, productivity growth will continue to stagnate relative to our international peers,” the report asserts.
For Canadians, this means modest income growth with real per capital gross domestic product — a proxy for living standards — increasing by about one per cent for the decade, half the rate of the two previous decades.
”Household income cannot outpace economy-wide growth over the long haul,“ the economists point out. ”(And) households cannot continue to borrow at rates exceeding income growth and prospective asset appreciation.“
For governments, the challenge will be how to return to balanced budgets as revenue growth slows well below what they were used to before the recession.
The economists say one possibility is for governments to increase taxes. The other is severe spending restraint in the range of two or three per cent — less than half pre-recession levels.
”It’s within the realm of possibility governments can balance budgets without tax increases, but it will take hard choices on the spending front,“ Burleton said.
The TD Bank report is not the first to warn of lower growth potential going forward and the perils of an aging population.
The Bank of Canada’s latest monetary report estimates potential output of 1.2 per cent this year, rising to 1.9 per cent in 2011, but does not project further into the future.
The parliamentary budget officer, Kevin Page, has also recently spoken on the challenge to government finances posed by an aging population and is expected to issue a major report on the issue early next year.
Wednesday, November 11, 2009
Tuesday, November 10, 2009
Financial Update For Nov. 10, 2009
Gold and Loonie SOAR on American dollar weakness- gold tops $1,100 with another record close
Dow Jones hits 2009 high
Canadian home builders scramble to meet demand - sale prices in October up 20% from a year ago
• TSX +236.46 (Reuters) investors continued to be buoyed by the weekend pledge from the Group of 20 rich and developing countries to maintain stimulus measures as long as economies remained weak .
• DOW +203.52 to 10,226.94 closing at its highest level this year.
• Dollar +1.57c to 94.57cUS The big mover in the currency markets was the pound, which slipped 0.5 per cent to $1.66 after the Fitch ratings agency warned that Britain was the major economy most at risk of losing its triple A debt rating.
• Oil +$2.00 to $79.43US per barrel.
• Gold +$5.70 to $1,100.80USD per ounce
Canadian home builders scramble to meet demand
Garry Marr, Financial Post
The Canadian housing market's surprising turnaround is spreading to new home construction as developers scramble to respond to a supply shortage that has sent pricing soaring for existing homes.
But any increase in construction on the new home side will likely not surface fast enough to feed the demand for housing that continues to be spurred on by record low interest rates.
Canada Mortgage and Housing Corp. said Monday there were 157,300 units constructed last month on a seasonally adjusted annualized basis, a 5.4% increase from a month earlier. Annualized starts at dropped as low as 118,500 in April.
"There is not a lot of inventory around," said Gary Friend, president of the Canadian Home Builders' Association, adding his industry has been careful not to speculate. "We have to watch our Ps and Qs, as we try to meet this demand."
Any increase in supply would be welcomed as a shortage of new listings has lead to a spike in prices. The Canadian Real Estate Association said last month existing home prices across the country were up 13.6% in September from a year ago as a supply problem was evident in almost every city.
The shortage has yet to ease despite the suggestion higher prices would coax homeowners to sell. This month the Toronto Real Estate Board reported sale prices in October were up 20% from a year ago.
"The existing homes market is in short supply so we've gone from a buyer's market to seller's market. The way it gets linked is you get some spillover into the new homes market and that's starting to happen," said Bob Dugan, chief economist with CMHC.
The agency has already upped its forecast for new home construction for 2010 from 150,300 to 164,900. Even at that level though, construction is still well off the 211,000 new starts recorded in 2008.
Paul Ferley, assistant chief economist with the Royal Bank of Canada, said "at the margins" new home construction could help ease the housing crunch. "Builders are aware and will contribute where they can to advance construction activity but no they can't turn on a dime."
Dow Jones hits 2009 high
Canadian home builders scramble to meet demand - sale prices in October up 20% from a year ago
• TSX +236.46 (Reuters) investors continued to be buoyed by the weekend pledge from the Group of 20 rich and developing countries to maintain stimulus measures as long as economies remained weak .
• DOW +203.52 to 10,226.94 closing at its highest level this year.
• Dollar +1.57c to 94.57cUS The big mover in the currency markets was the pound, which slipped 0.5 per cent to $1.66 after the Fitch ratings agency warned that Britain was the major economy most at risk of losing its triple A debt rating.
• Oil +$2.00 to $79.43US per barrel.
• Gold +$5.70 to $1,100.80USD per ounce
Canadian home builders scramble to meet demand
Garry Marr, Financial Post
The Canadian housing market's surprising turnaround is spreading to new home construction as developers scramble to respond to a supply shortage that has sent pricing soaring for existing homes.
But any increase in construction on the new home side will likely not surface fast enough to feed the demand for housing that continues to be spurred on by record low interest rates.
Canada Mortgage and Housing Corp. said Monday there were 157,300 units constructed last month on a seasonally adjusted annualized basis, a 5.4% increase from a month earlier. Annualized starts at dropped as low as 118,500 in April.
"There is not a lot of inventory around," said Gary Friend, president of the Canadian Home Builders' Association, adding his industry has been careful not to speculate. "We have to watch our Ps and Qs, as we try to meet this demand."
Any increase in supply would be welcomed as a shortage of new listings has lead to a spike in prices. The Canadian Real Estate Association said last month existing home prices across the country were up 13.6% in September from a year ago as a supply problem was evident in almost every city.
The shortage has yet to ease despite the suggestion higher prices would coax homeowners to sell. This month the Toronto Real Estate Board reported sale prices in October were up 20% from a year ago.
"The existing homes market is in short supply so we've gone from a buyer's market to seller's market. The way it gets linked is you get some spillover into the new homes market and that's starting to happen," said Bob Dugan, chief economist with CMHC.
The agency has already upped its forecast for new home construction for 2010 from 150,300 to 164,900. Even at that level though, construction is still well off the 211,000 new starts recorded in 2008.
Paul Ferley, assistant chief economist with the Royal Bank of Canada, said "at the margins" new home construction could help ease the housing crunch. "Builders are aware and will contribute where they can to advance construction activity but no they can't turn on a dime."
Monday, November 9, 2009
Financial Update for Nov. 9, 2009
TSX +69.72 (Reuters) ending higher for a 4th straight session as gold miners rallied around record high bullion prices, offsetting the index's fall at the outset on weak jobs data that fueled worry about economic recovery.
• DOW +17.46 crossing the 10,000 threshold again to 10,023
• Dollar -.83c to .93.cUS after Statistics Canada said more than 43,000 jobs were lost in Canada last month, a huge miss compared with the consensus by economists, who had forecast the addition of 10,000 jobs
• Oil -$2.19 to $77.43US per barrel.
• Gold +$6.40 to $1,095.10USD per ounce after going as high as US$1,101.90. Gold is reacting to the bad news that the unemployment rate in the U.S. is above expectations. Everyone is focusing on the fragility of the recovery," said Michael Sprung, president at Sprung & Co. Investment Counsel. Gold hit the record high shortly after markets opened
G20 pledges to maintain emergency support until recovery is assured
ST. ANDREWS, Scotland - Finance officials from rich and developing countries pledged Saturday to maintain emergency support for their economies until recovery is assured, but failed to reach a clear agreement to bear the cost of fighting climate change.
There was also a mixed reaction among the Group of 20 leading rich and emerging countries to a British-led push to consider a fund for bank bailouts, possibly financed by a tax on financial transactions, to ensure that taxpayers don't bear the brunt of any future rescues.
The grouping - representing around 90 per cent of the world's wealth, 80 per cent of world trade and two-thirds of the world's population - said in a statement after talks in St. Andrews, Scotland, that economic recovery is "uneven and remains dependent on policy support."
U.S. Treasury Secretary Timothy Geithner said U.S. jobs figures out Friday showing unemployment at a 26-year high of 10.2 per cent "reinforced that this is still a very tough economic environment."
While the "process of growth is now beginning," that fledging growth still needs to be reinforced to create jobs and get businesses investing to underpin the recovery in the housing market and elsewhere, Geithner said.
"If we put the brakes on too quickly, we will weaken the economy and the financial system, unemployment will rise, more businesses will fail, budget deficits will rise, and the ultimate cost of the crisis will be greater," he told reporters in Scotland. "It is too early to start to lean against recovery."
The statement smoothed over divisions among G20 members about whether it was time to start talking about exit strategies to unwind recent massive stimulus measures. Germany, France and Russia have called for a joint plan on when countries should start repaying debt, and the European Central Bank has indicated it will soon start withdrawing some of its emergency lending to banks.
The officials also emphasized the need for quick implementation of banking industry reform, saying that stronger standards should be developed by the end of 2010, that could be put into force by the end of 2012 as financial conditions improve.
The G20 is comprised of Argentina, Australia, Brazil, Britain, Canada, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United States and the rotating EU presidency.
• DOW +17.46 crossing the 10,000 threshold again to 10,023
• Dollar -.83c to .93.cUS after Statistics Canada said more than 43,000 jobs were lost in Canada last month, a huge miss compared with the consensus by economists, who had forecast the addition of 10,000 jobs
• Oil -$2.19 to $77.43US per barrel.
• Gold +$6.40 to $1,095.10USD per ounce after going as high as US$1,101.90. Gold is reacting to the bad news that the unemployment rate in the U.S. is above expectations. Everyone is focusing on the fragility of the recovery," said Michael Sprung, president at Sprung & Co. Investment Counsel. Gold hit the record high shortly after markets opened
G20 pledges to maintain emergency support until recovery is assured
ST. ANDREWS, Scotland - Finance officials from rich and developing countries pledged Saturday to maintain emergency support for their economies until recovery is assured, but failed to reach a clear agreement to bear the cost of fighting climate change.
There was also a mixed reaction among the Group of 20 leading rich and emerging countries to a British-led push to consider a fund for bank bailouts, possibly financed by a tax on financial transactions, to ensure that taxpayers don't bear the brunt of any future rescues.
The grouping - representing around 90 per cent of the world's wealth, 80 per cent of world trade and two-thirds of the world's population - said in a statement after talks in St. Andrews, Scotland, that economic recovery is "uneven and remains dependent on policy support."
U.S. Treasury Secretary Timothy Geithner said U.S. jobs figures out Friday showing unemployment at a 26-year high of 10.2 per cent "reinforced that this is still a very tough economic environment."
While the "process of growth is now beginning," that fledging growth still needs to be reinforced to create jobs and get businesses investing to underpin the recovery in the housing market and elsewhere, Geithner said.
"If we put the brakes on too quickly, we will weaken the economy and the financial system, unemployment will rise, more businesses will fail, budget deficits will rise, and the ultimate cost of the crisis will be greater," he told reporters in Scotland. "It is too early to start to lean against recovery."
The statement smoothed over divisions among G20 members about whether it was time to start talking about exit strategies to unwind recent massive stimulus measures. Germany, France and Russia have called for a joint plan on when countries should start repaying debt, and the European Central Bank has indicated it will soon start withdrawing some of its emergency lending to banks.
The officials also emphasized the need for quick implementation of banking industry reform, saying that stronger standards should be developed by the end of 2010, that could be put into force by the end of 2012 as financial conditions improve.
The G20 is comprised of Argentina, Australia, Brazil, Britain, Canada, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United States and the rotating EU presidency.
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