These are stories Report on Business is following Monday, Feb. 10, 2014.
Housing starts slip
Canada’s home building industry suffered a setback as the year kicked off, with home construction on the decline and pointing to a lower level of activity.
Housing starts slipped in January to an annual pace of 180,248 units from 187,144 in December, Canada Mortgage and Housing Corp. said today.
A six-month moving average shows construction starts dipping to 191,456 in January from 194,518.
“The trend in housing starts decreased slightly in January, while the inventory of newly completed and unabsorbed units saw a modest downward trend in the last half of 2014, the agency’s deputy chief economist, Mathieu Laberge, said in the report.
“This is consistent with our expectation that builders will continue to gradually adjust activity in order to manage their levels of inventory.”
Here's what economists are saying today:
“A third consecutive monthly decline brought housing starts to their lowest level since April 2013, though bad weather in January and December may have weighed on readings in those months. As such, we may see some recovery in the next few months as weather normalizes … However, we expect modestly higher interest rates as 2014 progresses will weigh on housing affordability and lead to some moderation in residential building activity going forward. We forecast housing starts of 182,000 in 2014, down only slightly from the 187,000 units in 2013 though well below the 195,000 average seen in the second half of last year.” Josh Nye, Royal Bank of Canada
“Underperformance of the Canadian economy relative to the U.S and the likely gradual increase of interest rates through 2015 will take some steam out of the demand for Canadian housing. We suspect that the pace of housing starts will continue their trek downward toward the demographically-supported level through 2015 … Over all, the recent cooling of housing starts supports our view for a soft landing of the Canadian housing market in 2014 and 2015.” Connor McDonald, Toronto-Dominion Bank
"It wasn’t a good start to the year for residential construction with this below-consensus report for January. The decline in [multiple-unit building] shouldn’t be surprising considering the accumulating inventories of unsold condos in some parts of the country. Considering the plunge in residential building permit applications towards the end of last year, it’s unlikely that we’ll get a quick rebound in starts in the current quarter.” Krishen Rangasamy, National Bank Financial
“The data were a bit more encouraging in terms of GDP contribution, as the drop was all in multi-unit housing, with single starts rising more than 3 per cent. The last two months readings are actually reasonably healthy given a harsh winter in some parts of the country, and roughly in line with the demand associated with population growth. Still, housing no longer looks to be a source of growth, and we will see the evidence of that in GDP reports as the large numbers of condos still under construction reach completion in 2014, and are replaced by a lower number of new starts.” Avery Shenfeld, CIBC World Markets
- Housing starts slide in January
- Canada's housing market overvalued by 10%, Toronto-Dominion Bank study finds
- Toronto home prices surge, again 'outpacing family incomes'
Toyota pulls out of Australia
The retreat of the world’s major auto makers from Australia is now complete.
Toyota Motor Corp. said today it would end production of autos and engines in the country by the end of 2017.
“We believed that we should continue producing vehicles in Australia, and Toyota and its work force here made every effort,” president Akio Toyoda said in a statement.
“However, various negative factors such as an extremely competitive market and a strong Australian dollar, together with forecasts of a reduction in the total scale of vehicle production in Australia, have forced us to make this painful decision.”
Toyota employs some 2,500 people in the country, which has already seen Ford Motor Co. and General Motors Co. decide to quit Australia, as well.
- Toyota to stop making cars in Australia from 2017
- Greg Keenan: Canada left behind in auto race as U.S., Mexico make gains
Developments in Canada and Switzerland over the past few days highlight how concerns over foreign workers are growing louder.
The issues in the two countries are different but nonetheless underscore a backlash in this post-crisis era of still-high unemployment.
In Canada’s oil sands, a company at the centre of a controversy pledged late Friday to bring back dozens of iron workers who said they were replaced by temporary foreign workers.
Under Canada’s Temporary Foreign Workers Program, such employees cannot be hired if there are Canadians for those jobs. The government moved to investigate the controversy swirling around Pacer Promec Joint Venture and the construction work at the Kearl oil sands mine near Fort McMurray, The Globe and Mail’s Carrie Tait, Josh Wingrove and Joe Friesen report.
“On behalf of PPJV, I regret that our actions, which we believe are consistent with the legislation, led to the current controversy,” managing partner Paolo Cattelan said in a statement on Friday.
“These temporary workers should have been assigned to other projects where there is an existing labour shortage.”
Canada’s unemployment rate stands at 7 per cent, and is forecast to hover around that level for some time yet amid a modest performance in the country’s labour market.
In Switzerland, where unemployment is enviably low, the slimmest majority of voters decided in a referendum yesterday to limit immigrants from the European Union, of which it is not a member.
The issue is more one of identity in Switzerland, where more than one-quarter of the population is reportedly foreign-born.
But there are issues surrounding work, as well, as the outcome would bring in job-related quotas and, as in Canada, see Swiss nationals favoured in job applications.
The Swiss government did not back the move, which was pushed by a right-leaning political party, has sparked outrage across Europe, as it will change the nature of a deal with the EU under which workers flowed freely.
According to Bloomberg News, some companies are worried about the possibility of a program under which businesses have to ask for approval.
Swiss banks, in particular, rely on foreign workers, Reuters reports, and there are now concerns over how the move could affect economic growth going forward.
“The effects of the vote will take a long time to feed through but can’t be good for growth,” said Kit Juckes, the chief of foreign exchange at Société Générale, noting that the vote had a limited, and only temporary, impact in currency markets.
“Maybe more important is that the result will make sterling-watchers look at the slender lead of the anti-independence vote in Scotland in a new light,” he added.
- Carrie Tait, Josh Wingrove and Joe Friesen: Iron workers will be rehired as Ottawa promises review
- Swiss vote to tighten immigration rules could strain EU relationship
- Tavia Grant: Tough labour talks ahead as workers push for wage hikes
- Temporary foreign workers flood into Canada as youth can't find work: Conference Board asks why
HudBay goes after Augusta
HudBay Minerals Inc. has launched an unsolicited bid for Augusta Resource Corp.
It’s an all-stock offer – 0.315 of a HudBay share and worth what the company says is $2.96 a share – that aims to grab control of Augusta’s Rosemont copper project near Tuscon.
“Given the fundamental value of Rosemont and the significant share price re-rating we expect upon securing the project’s two remaining major permits, we view HudBay’s unsolicited takeover offer to be low,” said analyst Christopher Change of Laurentian Bank Securities.
“In our view, a positive permitting decision alone should improve Augusta’s share price by more than 18 per cent.”
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