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House prices, credit revisit recessionary trends: CIBC Add to ...

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Revisiting trends of the slump Canadian house prices and consumer credit are "revisiting recessionary trends," which will dampen consumer spending that is so key to the economic recovery, CIBC World Markets warns in a new report. "It's no secret that house prices have been falling recently, but less noted is that the performance of the housing market is already approaching levels seen during the recession," economists Benjamin Tal and Krishen Rangasamy said. "... Even a modest 5-per-cent additional drop in average price in 2011, on top of the 6 per cent it already shed from its peak, will lead to a negative wealth effect of $10-billion, stripping growth in consumer spending by more than a full percentage point."

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Their outlook is equally bleak for consumer credit, which has driven spending and is also "mimicking recessionary trends" on a month-to-month basis. Growth in consumer credit will dip to 3.5 per in the next 12 months, on an annualized basis, compared to 6 per cent, also annualized, in the first half of the year.

"Not surprisingly, the Canadian recovery didn't play out as advertised," they wrote. "While we did see a spike late last year and early 2010, the momentum has faded lately, largely as a result of a strong [Canadian dollar]and a softening U.S. economy."

CIBC World Markets economists believe that fears of a double-dip recession "look overdone." But in an overall global forecast, Avery Shenfeld noted that "the Great Recession that shattered global growth in 2008-09 is now water under the bridge, but the Great Disappointment of a subpar global recovery will be with us for a good while longer." Among other highlights of the report:

  • Global GDP growth will run "well below" the 5-per-cent pace of the prior expansion.
  • Emerging Asian economies still have room to grow but will feel some of the chill.
  • Canada's trade sector will underperform the domestic economy this year and next.
  • The recent improvement in business investment in Canada won't last.

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Potash fight heats up The takeover battle for Potash Corp. of Saskatchewan is escalating, moving into the courts as the company tries to fend off BHP Billiton Ltd.'s $38.6-billion (U.S.) hostile bid. Potash has now launched a lawsuit against BHP, alleging it made "false and misleading statements and omissions" in its offer and regarding its plans to acquire the business. The lawsuit, filed in a U.S. District Court in Illinois, doesn't seek monetary damages, but asks for complete and accurate disclosure.

None of the allegations have been proven in court. BHP responded in a statement that it believes the lawsuit has no merit and it will fight it "vigorously."



The skinny on RIM's tablet The tech world is abuzz today on reports that Research In Motion Ltd. could take the wraps off a new tablet computer as early as next week, The Wall Street Journal reports. The tablet, which would rival the popular iPad from Apple Inc. and has been a subject of much speculation recently, could be introduced at a developers' conference in San Francisco, the news organization said. Some at RIM have dubbed the device the BlackPad, and, the Journal reports, it is scheduled to be released in the fourth quarter. With a seven-inch touch screen, it will have one or two built-in cameras, Bluetooth and broadband connections.

But, the report said, it will only be able to connect to wireless networks through a BlackBerry. And, in what the Journal called a significant development, the BlackPad would have a new operating system built by QNX Software Systems, which was acquired by RIM this year.

Streetwise columnist Boyd Erman adds that RIM could introduce two sizes of the new tablet.

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