These are stories Report on Business is following Friday, Feb. 22, 2013.
Housing starts to sink
Canada’s cooling real estate market is taking its toll on home building, and the increase in home values.
Canada Housing and Mortgage Corp. said today it expects housing starts to sink in the early part of this year, before picking up later in 2013 and moving “slightly higher” next year.
Residential construction starts are expected to come in between 178,600 and 202,000 this year, and 171,200 to 217,000 in 2014.
It projected sales of existing homes between 418,200 and 484,000 this year, and 439,600 next.
Where prices are concerned, the national agency expects an average $356,500 to $378,500 this year, and $363,800 and $390,800 in 2014.
Based on the “point forecast,” that would be a gain of 1 per cent this year and 2.7 per cent next year.
“CMHC expects housing construction activity will trend lower in the first half of 2013, before gaining more momentum by the end of the year as economic and employment growth remain supportive of the Canadian housing market,” said Mathieu Laberge, CMHC's deputy chief economist.
“In 2014, improving economic conditions may be partially offset by a slight moderation in the number of first-time homebuyers, and potential small and steady increases in mortgage interest rates.”
- Home sales down 5.2% year-over-year in January
- If Canadian homes are overpriced by 10%, what happens next?
Euro zone seen still slumping
This shouldn’t come as a surprise, but the European Commission forecasts no end this year to the recession in the euro zone.
According to its latest projections, released today, the economy of the 17-nation monetary union will contract by 0.3 per cent this year, prolonging a slump originally forecast to ease earlier.
Some economies are in a severe slump, and unemployment is high, but the troubles of the currency zone have eased somewhat over the past several months.
All eyes, however, are on Italy’s two-day election, and the threat of a stalemate and what that would mean to the group.
“Short-term downside risk is concentrated around the prospect of Silvio Berlusconi’s return to the political arena, and equity bulls will be keeping their fingers crossed for a rational outcome from this weekend’s Italian election,” said CMC’s Mr. Basi.
“A key bond auction in Italy next week will give debt trader’s an immediate opportunity to respond to the vote’s outcome, with any significant spike in yields having the potential to cap equity gains.”
- EU forecast paints bleak economic picture for 2013
- A crisis in waiting as Italians prepare to head to the polls
Canadian retailers suffered a hefty setback in the key month of December, but largely in the dealer showrooms.
Retail sales dropped 2.1 per cent in December, Statistics Canada said today, but just 0.9 per cent when you exclude cars and parts.
The decline was the first in six months.
Sales were down in seven of the 11 sectors measured, accounting for 58 per cent of overall traffic.
"December's retail report was awful, adding to evidence that Canada ended the year poorly," said senior economist Krishen Rangasamy of National Bank Financial.
"The drop in retail volumes, coupled with earlier-reported drops in real wholesaling and manufacturing represent a triple whammy that may cause December GDP to contract about 0.2 per cent, the worst performance since February last year. That sets up Canada for a quarterly growth rate under 1 per cent annualized for the second quarter in a row."
The annual rate of inflation in Canada now stands at just 0.5 per cent, its lowest in three years.
The January rate dipped from 0.8 per cent in December, largely because of slowing gas prices, which were down 1.8 per cent from a year earlier, Statistics Canada said today.
On an annual basis, consumers also paid less for clothes and shoes, but more food and alcohol and tobacco.
But, oh, those lucky folks in Saskatchewan and Alberta, where gas prices fell 8.8 per cent and 7.3 per cent, respectively. Gas prices rose, by 1.5 per cent, in Prince Edward Island alone.
On a monthly basis, and seasonally adjusted, consumer prices dipped 0.1 per cent in January.
So-called core prices, which exclude volatile items and guide the Bank of Canada, climbed 1 per cent on an annual basis, down slightly from 1.1 per cent in December.
On a month-to-basis, core prices increased 0.1 per cent in January.
"While headline inflation likely will see a snap-back next month, as gasoline prices are up almost 8 per cent so far in February alone, core inflation looks set to stay at a low ebb for a while yet," said chief economist Douglas Porter of BMO Nesbitt Burns.
"The combination of sluggish growth, intensifying retail competition and a still-strong loonie are keeping a tight lid on underlying price pressures."
Behind the headlines
Here’s a look at people in the news this week, and what they said. And what I think they should have said.
Here’s what G20 finance ministers and central bankers said in their statement after wrapping up a summit in Moscow on the weekend: “To address the weakness of the global economy, ambitious reforms and co-ordinated policies are key to achieving strong, sustainable and balanced growth and restoring confidence.”
What they should have said: We don’t know what to do, either. (But there are 200 million people without work around the world, and we had a very nice dinner in Moscow, so we had to say something.)
- Economy Lab: How the G20 is failing its 'strong, sustainable and balanced growth' mantra
- G20 finance ministers pledge no currency war
Bank of Canada Governor Mark Carney said in a televised interview Sunday that he’s seen an “adjustment” in the real estate market, and warned that “we think there’s a bit more to come over the next couple of years.”
What he should have said: Hmmm, maybe I should raise interest rates when I get to the Bank of England so the same thing doesn’t happen there.
- More adjustment to come in home prices: Carney
- Divided Bank of England knocks pound, sets stage for Carney
Here’s what B.C. Finance Minister Mike de Jong said Tuesday after releasing a pre-election budget: “Let’s not forget, the global recession that began in 2008-09 was probably the biggest economic and financial shock we will see in our lifetimes. And jurisdictions everywhere are struggling to recover.”
What he should have said: Actually, the depth of the economic contraction and the height in unemployment were nowhere near as bad in Canada as they were during the recessions of the early 1980s and early 1990s. But I had to say something profound and ominous so I could tax the rich, hike corporate taxes and charge $2 more for a carton of cigarettes.
Mr. de Jong’s counterpart to the right, both geographically and politically, unveiled a fiscal update that same day.
Here’s what Doug Horner said as he forecast a deficit of up to $4-billion: “Alberta is dealing with rapidly falling resource revenues and it means we’re making some tough decisions.”
What he should have said: Build me a pipeline. Please.
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