These are stories Report on Business is following Friday, Oct. 18, 2013.
Credit Suisse on housing
Credit Suisse is the latest group to warn of potential trouble in Canada's housing market.
In its global wealth report, the bank flagged the nagging concern about real estate and the record high debt burden among Canadian consumers, noting the rather short cooling-off period after Finance Minister Jim Flaherty tightened the mortgage rules in the summer of last year.
“Rapid growth in mortgages has fuelled a continuing rise in household debt,” Credit Suisse said in the annual study.
“Mortgage terms were tightened in 2012 and the market cooled somewhat, but there are continuing concerns. It is not clear whether the final landing will be hard or soft.”
Other groups have also warned that Canadian homes are way overvalued. And, as The Globe and Mail's Tara Perkins reports, sales have rebounded.
Most economists, though, believe the market is in for a soft landing, which is what Mr. Flaherty was aiming for, though he no doubt has a wary eye on the situation again.
On another front, the Credit Suisse report found that once you've hit the billionaire mark in Canada, it's not that easy to stay there.
Canada has a low “retention rate” when it comes to staying in the billionaire group over the longer term, according to Credit Suisse, which might be seen as surprising given how the financial crisis played out across the globe.
The bank tracked the staying power of billionaires, as ranked by Forbes, between 2000 and 2010. While Canada wasn’t at the bottom, it didn’t rank particularly high, either.
“Among the G7 countries, France, Italy and Japan might be expected to have a lower percentage of stayers because their billionaire ranks shrank considerably over the decade,” Credit Suisse said.
“However, Canada, Germany and the U.K. also have fairly low retention rates.”
According to the recent study, there were 18 billionaires in 2000-2001, 17 in 2005 and 24 in 2010. Of those who hit the mark in 2000-2001, some 56 per cent still remained in 2005, and just 44 per cent in 2010.
Credit Suisse noted that household wealth in Canada rose at an annual pace of 6.7 per cent between 2000 and mid-2013. But that’s by measuring wealth in U.S. dollars. When you strip out the effects of currency moves, it was 3.7 per cent a year.
Canada, EU strike trade deal
Canada and the European Union today unveiled a sweeping trade agreement designed to eliminate thousands of tariffs, encourage foreign investment and promote movement of labour.
The Comprehensive Economic and Trade Agreement, or CETA, goes far beyond the North American Free Trade Agreement and will see 98 per cent of EU and Canadian tariffs eliminated once the deal takes effect, The Globe and Mail's Paul Waldie reports from Brussels.
That includes 95 per cent of EU tariffs on agriculture products such as grains, canola and fruit. Other tariffs and restrictions will be phased out over seven years.
The agreement will have far reaching impacts, touching just about every sector of the Canadian economy and millions of workers and consumers.
The final result could see Canadians paying less for thousands of products made in Europe, such as cars which are currently subject to a 6 per cent tariff. European companies will also be able to bid on large provincial and municipal government contracts. And Canadian companies and farmers will gain open access to the EU for hundreds of products, some of which now face tariffs as high as 12 per cent.
- Paul Waldie: Canada, EU unveil 'historic' free trade agreement
- Bill Curry and Barrie McKenna: Canada's auto industry faces sweeping change with Europe trade deal
- Richard Blackwell: How Canada-EU trade agreement stacks up in key sectors
Where inflation’s concerned, there’s really nothing to see here, folks. And little for the Bank of Canada, for that matter.
Canada’s annual inflation rate held steady in September at 1.1 per cent, with consumer prices largely driven by higher costs of shelter and food.
Oh, and the alcohol and tobacco basket took a hefty jump, too.
On a month-over-month basis, seasonally adjusted, consumer prices rose 0.2 per cent, Statistics Canada said today.
The so-called core index, which strips out volatile items and helps guide the central bank, also held steady, at 1.3 per cent on annual basis.
"Today’s inflation reading is consistent with the broad trend of soft price pressures in the past several months, and is roughly consistent with the Bank of Canada’s expectations for inflation this quarter," said economist Emanuella Enanajor at CIBC World Markets.
Morgan Stanley rebounds
Morgan Stanley shares climbed today after the bank topped analysts’ estimates with a rebound in the third quarter.
Shares are up 3.2 per cent about 30 minutes before New York opens.
The bank posted a quarterly profit of $906-million (U.S.) or 45 cents a share, compared to a loss of $1.02-billion or 55 cents a year earlier, when the company took a hefty charge.
“Over all, our stronger year-over-year revenues and net income reflect the progress we have made to position the firm well for the future,” said chief executive officer James Gorman.
GE shares climb
Shares of General Electric Co. also rose, after the industrial giant posted third-quarter results that showed a record backlog.
The stock is up 3.2 per cent within about 30 minutes of the New York open.
GE profit slipped to $3.2-billion (U.S.) or 31 cents a share, while revenue dipped 1 per cent from a year earlier to $35.7-billion given the continuing move to shrink the portfolio of GE Capital.
Stripping out charges, operating earnings per share came in at 40 cents.
Notably, orders climbed 19 per cent, with the backlog at a record $229-billion, up by $6-billion from the second quarter.
“Our third-quarter results were very strong in an improving global business environment,” said chief executive officer Jeff Immelt.
Chinese growth picks up
China’s economy expanded in the third quarter by 7.8 per cent, a slight pickup that has prompted Capital Economics to wonder if this is “as good as it gets.”
“With the headline GDP number in line with consensus, the most important news today was the further evidence in the September data that momentum is peaking,” said Mark Williams and Julian Evans-Pritchard.
The Capital Economics analysts were referring to the fact that, in September alone, growth in industrial output slowed to 10.2 per cent from 10.4 per cent in August.
Fixed investment growth also slowed.
Overall economic growth compared to 7.5 per cent in the second quarter.
“A slowdown in growth in the fourth quarter would probably reawaken fears of a hard landing but we would welcome it,” the Capital Economics analysts said.
“A prolonged surge in credit-fuelled investment is the last thing China now needs.”
Streetwise (for subscribers)
ROB Insight (for subscribers)