• TSX +30.72 thanks to higher mining stocks. The TSX closes at 1pm today.
• DOW +1.51 amid another economic report showing that consumer spending and incomes rose last month. The U.S. Commerce Department says consumer spending jumped 0.5 per cent in November, while incomes gained 0.4 per cent.
• Dollar +.85c to 95.38cUS to the strongest level in almost 3 weeks amid speculation an accelerating economic recovery will prompt the central bank to raise interest rates sooner than it expected.
• Oil +$2.27 to $76.67US per barrel.
• Gold +$7.30 to $1,093.93USD per ounce
•
Stimulus and housing give economy one-two punch
The Canadian economy strung together back-to-back months of growth for the first time in almost two years, but economists warn that consumers and government stimulus have been "carrying the ball" by fuelling a booming real-estate market that is ultimately unsustainable.
Canada's economy grew a modest 0.2% in October, the latest figures from Statistics Canada show. That followed a 0.4% increase in September.
Stewart Hall, economist with HSBC Securities Canada, said the country's real-estate market has been a major factor, fuelling spending in everything from renovations to new furnishings and even new cars to go in new garages.
"Financial, insurance and real estate have continued to be that pillar of strength, consistently showing growth through much of this economic recession," he said. "And we know that is the housing market, a reflection of the remarkable strength in the existing-home sales market."
October figures from Statistics Canada show a 7.2% rise in existing-home sales activity from real-estate agents and brokers. However, construction activity was up only 0.1%.
Meanwhile, after posting a 1% rise in September, the key manufacturing category fell flat in October.
One area that outperformed was utilities, which grew 2.4% during the month as temperatures returned to seasonal levels after a mild September.
"The housing market has been the big surprise for 2009," Mr. Hall said. He warned that consumers are taking on more and more debt due to record-low interest rates, and banks are happy to lend that money out.
"You hear [Bank of Canada governor Mark] Carney say both borrowers and lenders need to act prudently. Well, of course they do. But the history of the past few years shows telling people to behave themselves just doesn't work," he said.
Supporting domestic demand will continue to be an area of concern in 2010 as the downturn itself was caused by a collapse in external demand, namely from the United States.
"We lost a lot of external demand and it's unreasonable to think we can recover that from domestic sources for an extended period of time," Mr. Hall said.
Douglas Porter, deputy chief economist with BMO Capital Markets, said economists were disappointed in the overall numbers because results from manufacturing, retail and wholesale trade all came in short of preliminary reports. The difference was likely due in part to businesses burning off their existing inventories.
"It's unusual for all three to be moving in the opposite direction," he said. "But we shouldn't be too down on the number. It's gratifying to see two months in a row of growth for the first time since late 2007."
While there was growth month over month, the economy was still 3.2% smaller than it was in October 2008. The latest figures marked the 12th straight month that economy was weaker than it was in the year-earlier period.
Economists will now watch to see if the economy closed out the year as expected, bouncing back from the fairly shaking base built in September and October and accelerating into a full-fledged recovery in 2010.
Alex Koustas of Scotia Economics released a provincial outlook for 2010, highlighting an expected rebound in Ontario, a slowdown in Quebec and commodities producers in Western Canada benefiting the most from strengthening global markets.
"That Canada escaped from the global slump fairly quickly is reflective of our relatively healthy household balance sheets and stable financial system," he said in a report. "However, the modest pace of the recovery highlights the ongoing trade and competitive hurdles that need to be overcome in order to return to stronger growth."
Scotia expects British Columbia to lead the way with GDP growth of 3% in 2010, on the back of the Vancouver Winter Olympics and improving coal prices.
The Atlantic provinces will see the least growth, with Prince Edward Island bringing up the rear at +1.9%.
Quebec will underperform, growing only 2.2% on uncertainty in forestry and aerospace while Ontario's manufacturing will lead a comeback to 2.7% GDP gains.
Thursday, December 24, 2009
Monday, December 21, 2009
Financial Update For Dec. 21, 2009
• TSX -9.66 Stock markets are expected to remain volatile in the shortened trading week ahead of Christmas, as investors clean up their books before the start of the new year.
• DOW +20.63
• Dollar +.38c to 93.81cUS
• Oil +$.71 to $73.36US per barrel. the Iraqi government said that an oil well had been taken over by a group of armed Iranians, which sent the prices up slightly in the final hours of trading.
• Gold +$4.00 to $1,110.80USD per ounce
• On the economic front, Canadian retail sales numbers for October will be released on Monday, with consensus forecasts predicting a 0.8 per cent rise month-over-month.
• On Wednesday, Canadian real GDP numbers for October will be released with consensus predictions targeting a modest 0.3 per cent gain for the month, on stronger manufacturing and housing market activity.
• Also, U.S. personal income and consumer spending will be released on Wednesday, and is expected to show that personal consumption was up 0.8 per cent for November, despite the economy
Canadian housing market sound, fears of consumer debt exaggerated: economists
December 18, 2009
Julian Beltrame, THE CANADIAN PRESS
The Canadian Press, 2009
OTTAWA - Canada's hot housing market received a clean bill of health from a major Canadian bank Friday, dismissing concerns voiced by the Bank of Canada that consumers may be taking on too much debt.
In a report on house and stock market rallies, economists with CIBC World Markets argue that the central bank's concerns are exaggerated, even though the bank was justified in raising them.
"Canada is not doomed to see a U.S.-style housing and mortgage blow-up," wrote CIBC's chief economist, Avery Shenfeld.
"The lessons for the U.S. were not that an extended period of low rates caused a mortgage and housing blow-up. It was a massive failure to supervise the worst excess of the American mortgage market that caused the trouble."
Last week, the Bank of Canada called record household debt the top risk facing the country's financial system, a warning repeated in Toronto earlier this week by the central bank's governor, Mark Carney.
The central bank did note that the risk to Canada's banking system was small, but worried that when interest rates rise to normal levels, up to 10 per cent of households could face difficulties in meeting monthly payment requirements.
Fresh data released Friday showed that spending by Canadian households averaged $71,360 last year, two per cent more than in 2007, with shelter representing about 20 per cent of the load.
Others have also expressed concern about consumer debt levels. In a note Friday, Bank of Montreal economist Sal Guatieri said at current rates the debt burdens being piled on by Canadians could reach American and British levels "just before they keeled over."
CIBC's Shenfeld and Benjamin Tal say their analysis shows that there is basis for the concern, but there are also critical factors that make the Canadian situation different.
By their calculation, the current $350,000 average selling price for a home in Canada is about seven per cent too high.
But they also say that with housing starts on the rise, thereby increasing the supply, the price of housing in Canada will moderate, not collapse.
And Canadian households are not exposed as their southern neighbours were to a market collapse.
Some have substantial equity in their homes and could downsize. Others, about 40 per cent of mortgage holders, have high debt payments because they are making accelerated pay-downs on principal, which they could suspend.
They note that while mortgage interest rates average about 4.4 per cent, payments as a share of after-tax income are higher - at the level they would be if rates were effectively six per cent.
And "history suggests many will jump into fixed mortgages" once variable rates come under upward pressure.
"The Bank of Canada was justified in raising these concerns, but once you get into the details, some of those threats don't appear quite as ominous," Shenfeld explained in an interview.
The CIBC economists agree with Carney that interest rates will rise, likely starting in the second half of next year, but "we don't see that as endangering a bubble either in the mortgage market or the equity market."
In a separate analysis, Shenfeld, Peter Buchanan and Krishen Rangasamy, all of CIBC, judged that the equity markets in Toronto still have room to grow even if some analysts believe stocks are overpriced already.
And they predict the Canadian dollar will average $1.05 US next year.
• DOW +20.63
• Dollar +.38c to 93.81cUS
• Oil +$.71 to $73.36US per barrel. the Iraqi government said that an oil well had been taken over by a group of armed Iranians, which sent the prices up slightly in the final hours of trading.
• Gold +$4.00 to $1,110.80USD per ounce
• On the economic front, Canadian retail sales numbers for October will be released on Monday, with consensus forecasts predicting a 0.8 per cent rise month-over-month.
• On Wednesday, Canadian real GDP numbers for October will be released with consensus predictions targeting a modest 0.3 per cent gain for the month, on stronger manufacturing and housing market activity.
• Also, U.S. personal income and consumer spending will be released on Wednesday, and is expected to show that personal consumption was up 0.8 per cent for November, despite the economy
Canadian housing market sound, fears of consumer debt exaggerated: economists
December 18, 2009
Julian Beltrame, THE CANADIAN PRESS
The Canadian Press, 2009
OTTAWA - Canada's hot housing market received a clean bill of health from a major Canadian bank Friday, dismissing concerns voiced by the Bank of Canada that consumers may be taking on too much debt.
In a report on house and stock market rallies, economists with CIBC World Markets argue that the central bank's concerns are exaggerated, even though the bank was justified in raising them.
"Canada is not doomed to see a U.S.-style housing and mortgage blow-up," wrote CIBC's chief economist, Avery Shenfeld.
"The lessons for the U.S. were not that an extended period of low rates caused a mortgage and housing blow-up. It was a massive failure to supervise the worst excess of the American mortgage market that caused the trouble."
Last week, the Bank of Canada called record household debt the top risk facing the country's financial system, a warning repeated in Toronto earlier this week by the central bank's governor, Mark Carney.
The central bank did note that the risk to Canada's banking system was small, but worried that when interest rates rise to normal levels, up to 10 per cent of households could face difficulties in meeting monthly payment requirements.
Fresh data released Friday showed that spending by Canadian households averaged $71,360 last year, two per cent more than in 2007, with shelter representing about 20 per cent of the load.
Others have also expressed concern about consumer debt levels. In a note Friday, Bank of Montreal economist Sal Guatieri said at current rates the debt burdens being piled on by Canadians could reach American and British levels "just before they keeled over."
CIBC's Shenfeld and Benjamin Tal say their analysis shows that there is basis for the concern, but there are also critical factors that make the Canadian situation different.
By their calculation, the current $350,000 average selling price for a home in Canada is about seven per cent too high.
But they also say that with housing starts on the rise, thereby increasing the supply, the price of housing in Canada will moderate, not collapse.
And Canadian households are not exposed as their southern neighbours were to a market collapse.
Some have substantial equity in their homes and could downsize. Others, about 40 per cent of mortgage holders, have high debt payments because they are making accelerated pay-downs on principal, which they could suspend.
They note that while mortgage interest rates average about 4.4 per cent, payments as a share of after-tax income are higher - at the level they would be if rates were effectively six per cent.
And "history suggests many will jump into fixed mortgages" once variable rates come under upward pressure.
"The Bank of Canada was justified in raising these concerns, but once you get into the details, some of those threats don't appear quite as ominous," Shenfeld explained in an interview.
The CIBC economists agree with Carney that interest rates will rise, likely starting in the second half of next year, but "we don't see that as endangering a bubble either in the mortgage market or the equity market."
In a separate analysis, Shenfeld, Peter Buchanan and Krishen Rangasamy, all of CIBC, judged that the equity markets in Toronto still have room to grow even if some analysts believe stocks are overpriced already.
And they predict the Canadian dollar will average $1.05 US next year.
Friday, December 18, 2009
Financial Update For Dec. 18, 2009
• TSX -163.98
• DOW -132.86
• Dollar -.87c to 93.43cUS
• Oil -$.01 to $72.65US per barrel.
• Gold -$28.90 to $1,106.80USD per ounce
New survey finds Canadians spending more this holiday season than last year TORONTO — Canadian shoppers are opening their wallets a lot wider this year than last despite concerns over the economy, according to a new survey that tallies retail sales.
Moneris Solutions Corp., a debit and credit card payments processor, says its figures show sales are up sharply leading into the last weekend before Christmas. The Moneris survey, released today, tracks national sales in the final five weekends of the pre-holiday season. It says that in the first weekend of December, shoppers spent five per cent more overall, with department stores the clear winner as their sales shot up 12.8 per cent.
Clothing stores saw a 5.4 per cent increase in sales in the Dec. 4-6 weekend, while drugstores reported a 3.8 per cent increase. Last weekend, Dec. 11-13, it was the turn of apparel retailers as they rang in an 11.4 per cent increase in sales amid an overall six per cent jump compared with 2008.
“As the Canadian economy begins a trend toward recovery, the increase in pre-holiday spending is a clear indication of renewed consumer confidence,” said David Ades, Moneris’ senior vice-president, sales and marketing.
“Canadians are clearly more optimistic about the future this year than they were during this time last year, and retailers are capitalizing on this by using creative marketing tactics to draw them in early and often,” Ades said.
With both debit and credit card options in their wallets, consumers had been showing a slight preference for debit cards earlier this year.
“(But) credit card transactions saw a resurgence as the economy recovered,” Moneris said in a news release.
The 2009 pre-holiday spending data compared national retail sales over the past five weekends with the same period last year. The data covers all merchant categories and tallies the dollar value as well as the number of transactions made on Moneris debit and credit card terminals across the country.
The Canadian Press
Rates not expected to rise as consumer prices rise Canadian Press OTTAWA – Canadians are again starting to pay more for most things they consume as the inflation rate jumped to one per cent in November, the second straight month prices have risen sharply.
While higher gasoline prices were mostly to blame, Statistics Canada said the advance was broad-based. Prices rose in seven of eight major components tracked by the agency, and in all 10 provinces.
As well, the month-to-month index was higher with prices rising 0.5 per cent from October.
The last two months have seen a complete reversal in the inflation story in Canada, which previously was one of falling prices and negative inflation.
But a rapid decline in gas prices from record highs in July 2008 has reversed the trend, the agency said.
“Prices at the pump are now exerting upward pressure on the Consumer Price Index after an extended period in which they were the main contributors to year-over-year declines in overall consumer prices,” the agency explained.
In November, gas prices were 14.1 per cent higher than at the same time last year and 13.1 per cent lower in October from the previous year.
Other components pushing prices higher were food, transportation, household operations, and furniture and equipment.
In addition, consumers paid 7.8 per cent more for car insurance and 3.2 per cent more for health and personal care.
Meanwhile, the cost of passenger vehicles fell six per cent, and shelter costs declined 1.7 per cent as natural gas prices were almost 30 per cent lower this year than last. The mortgage interest costs were also well below last year by four per cent.
Overall, the trend of inflation is unlikely to worry the Bank of Canada as most price increases remain tame. Food, which had been a major driver of price increases, gained only 1.7 per cent in November, the smallest increase since April 2008.
Core inflation, which the central bank closely tracks because it represents underlying inflation pressures, was actually lower in November at 1.5 per cent, compared to 1.8 per cent in October. That is still well below the central bank’s two-per-cent target.
Regionally, the largest increases in annual inflation occurred in New Brunswick, with a 2.2-per-cent rise. The rate rose 1.9 per cent in Prince Edward Island, and by 1.7 per cent in both Nova Scotia and Quebec.
• DOW -132.86
• Dollar -.87c to 93.43cUS
• Oil -$.01 to $72.65US per barrel.
• Gold -$28.90 to $1,106.80USD per ounce
New survey finds Canadians spending more this holiday season than last year TORONTO — Canadian shoppers are opening their wallets a lot wider this year than last despite concerns over the economy, according to a new survey that tallies retail sales.
Moneris Solutions Corp., a debit and credit card payments processor, says its figures show sales are up sharply leading into the last weekend before Christmas. The Moneris survey, released today, tracks national sales in the final five weekends of the pre-holiday season. It says that in the first weekend of December, shoppers spent five per cent more overall, with department stores the clear winner as their sales shot up 12.8 per cent.
Clothing stores saw a 5.4 per cent increase in sales in the Dec. 4-6 weekend, while drugstores reported a 3.8 per cent increase. Last weekend, Dec. 11-13, it was the turn of apparel retailers as they rang in an 11.4 per cent increase in sales amid an overall six per cent jump compared with 2008.
“As the Canadian economy begins a trend toward recovery, the increase in pre-holiday spending is a clear indication of renewed consumer confidence,” said David Ades, Moneris’ senior vice-president, sales and marketing.
“Canadians are clearly more optimistic about the future this year than they were during this time last year, and retailers are capitalizing on this by using creative marketing tactics to draw them in early and often,” Ades said.
With both debit and credit card options in their wallets, consumers had been showing a slight preference for debit cards earlier this year.
“(But) credit card transactions saw a resurgence as the economy recovered,” Moneris said in a news release.
The 2009 pre-holiday spending data compared national retail sales over the past five weekends with the same period last year. The data covers all merchant categories and tallies the dollar value as well as the number of transactions made on Moneris debit and credit card terminals across the country.
The Canadian Press
Rates not expected to rise as consumer prices rise Canadian Press OTTAWA – Canadians are again starting to pay more for most things they consume as the inflation rate jumped to one per cent in November, the second straight month prices have risen sharply.
While higher gasoline prices were mostly to blame, Statistics Canada said the advance was broad-based. Prices rose in seven of eight major components tracked by the agency, and in all 10 provinces.
As well, the month-to-month index was higher with prices rising 0.5 per cent from October.
The last two months have seen a complete reversal in the inflation story in Canada, which previously was one of falling prices and negative inflation.
But a rapid decline in gas prices from record highs in July 2008 has reversed the trend, the agency said.
“Prices at the pump are now exerting upward pressure on the Consumer Price Index after an extended period in which they were the main contributors to year-over-year declines in overall consumer prices,” the agency explained.
In November, gas prices were 14.1 per cent higher than at the same time last year and 13.1 per cent lower in October from the previous year.
Other components pushing prices higher were food, transportation, household operations, and furniture and equipment.
In addition, consumers paid 7.8 per cent more for car insurance and 3.2 per cent more for health and personal care.
Meanwhile, the cost of passenger vehicles fell six per cent, and shelter costs declined 1.7 per cent as natural gas prices were almost 30 per cent lower this year than last. The mortgage interest costs were also well below last year by four per cent.
Overall, the trend of inflation is unlikely to worry the Bank of Canada as most price increases remain tame. Food, which had been a major driver of price increases, gained only 1.7 per cent in November, the smallest increase since April 2008.
Core inflation, which the central bank closely tracks because it represents underlying inflation pressures, was actually lower in November at 1.5 per cent, compared to 1.8 per cent in October. That is still well below the central bank’s two-per-cent target.
Regionally, the largest increases in annual inflation occurred in New Brunswick, with a 2.2-per-cent rise. The rate rose 1.9 per cent in Prince Edward Island, and by 1.7 per cent in both Nova Scotia and Quebec.
Subscribe to:
Posts (Atom)
