These are stories Report on Business is following Wednesday, May 15, 2013.
Same old B.C. premier faces same old economic woes
British Columbia's Christy Clark returns to the premier's job with a solid victory, but the same old economic problems.
Ms. Clark, whose Liberals rode to victory in yesterday's provincial election, is faced with high unemployment, slow economic growth and an exceptionally weak housing market.
"Among the headwinds are a slowing domestic housing market and softer Asian export demand, though a resurgent U.S. housing market plus firmer momentum in China will likely support exports later in the year," economists at BMO Nesbitt Burns said in a recent report.
Royal Bank of Canada economists, for example, expect the B.C. economy to expand by just 1.6 per cent this year, well below its three neighbours to the east and among the slowest in the country.
Next year is projected to be better, with growth of 2.7 per cent, but unemployment is not expected to ease below the 6-per-cent mark for some time yet.
RBC forecasts a jobless rate of 6.3 per cent both this year and next, though that's below the projected national averages of 7 per cent and 6.7 per cent, respectively. Other forecasts project a B.C. jobless rate of up to 6.7 per cent this year.
British Columbia also has the misfortune of being home to the country's only housing markets that have, to date, been alone in showing falling prices along with slumping sales.
Yesterday, for example, the Teranet-National Bank home price index showed a drop of 3.3 per cent in Victoria in April from a year earlier, and 1.5 per cent in Vancouver.
For Vancouver, it marked the ninth straight month of decline.
"British Columbia is already knee-deep in its housing correction, especially in the Greater Vancouver market where prices and starts had reached unsustainable levels," according to a recent report from Toronto-Dominion Bank.
"We expect the market to begin stabilizing later this year, helped by ultra-low interest rates and some rejuvenation in foreign appetite for real estate."
There are some optimistic signs, however.
"The Liberals have tabled a balanced [fiscal year 2013-14] budget, with the help of asset sales, and have pledged to limit spending growth to the rate of nominal GDP growth," senior economist Robert Kavcic of BMO Nesbitt Burns said today.
"They are also focusing intently on expanding the LNG sector, and while not exactly cheering the idea, are open to heavy oil pipeline expansion from Alberta, subject to a set of conditions."
The Liberal win, added RBC Dominion Securities, "is likely to bolster expectations on a more significant energy-infrastructure in the province to help expand Pacific export markets."
- Gary Mason: Focus on economy pays off for Christy Clark in a comeback for the ages
- Despite Liberal win, B.C.'s stand on pipelines still unanswered
- Jack Mintz in Economy Lab: Lessons from the B.C. election: The economy trumps all for voters
- Economy to challenge whoever wins power in B.C.
- See our complete election coverage
Home sales slip
Canada's housing market continues to cool, though sales have been "remarkably steady," the country's realtors say.
Sales slipped 3.1 per cent in April from a year earlier, and edged up 0.6 per from March, The Globe and Mail's Tara Perkins reports.
According to the Canadian Real Estate Association, the Multiple Listing Service home price index showed a gain of 2.2 per cent last month, the slowest pace in more than two years. The national average price was up 1.3 per cent from a year earlier.
"Since changes to mortgage rules made in 2012 took effect, national sales have been running 9 to 10 per cent below levels posted in the first half of 2012 but they've been remarkably steady," said CREA's chief economist, Gregory Klump.
"April activity was on par with where it stood last August, and month-to-month changes since then have held to within a range of plus or minus 2 per cent."
New listings fell 0.9 per cent in April from March, down in about half of the country's markets.
"We are continuing to see signs of a spring thaw in the Canadian housing market, an encouraging development especially heading into the all-important spring home-buying season," said senior economist Sonya Gulati of Toronto-Dominion Bank.
- Home resales fall 3 per cent in April from year-earlier levels
- David Parkinson in Economy Lab: In Canada's housing market, the other shoe has already dropped
- House price gains expected to dip to lowest since 2009
- Flaherty's concerns throw 30-year mortgages in spotlight again
- Vancouver home resales down 6.1% in April from year ago
- GTA home resales fall only 2% in April in wake of steep declines
- Why is the man who bet against U.S. housing so worried about Canada?
- Peter Munk's contrarian bet on Toronto's condo market
The latest numbers from Europe today highlight how the troubled continent is "still no closer" to resolving its troubles.
Several years into a debt crisis that followed the global meltdown, Europe continues to struggle with weak economies and high unemployment.
As our European correspondent Eric Reguly reports, the economy of the 17-member euro zone contracted by 0.2 per cent in the first quarter of the year, while that of the wider 27-member European Union slipped by 0.1 per cent.
While the contractions weren't as severe as in the fourth quarter, the numbers from the Eurostat agency showed continuing recession.
Those, of course, are numbers for the full monetary union and broader EU, so some countries are faring better than others.
But even the powerhouses of Germany and France are troubled.
France, for example, is now in its third recession in four years, while Germany's economy eked out a gain of just 0.1 per cent.
"Euro zone GDP as a whole was unsurprisingly weak, reminding us that while we are no longer expecting a Spanish or Italian bailout on a daily basis, the overall situation remains dire," said sales trader Yusuf Heusen of IG in London.
"This crisis has rumbled on since 2009 and we are still no closer to a solution. Tinkering around the edges of the problem has been the standard response to the euro zone's existential crisis, but will only prolong the agony."
The European Central Bank did cut interest rates in its most recent decision, but the move was seen as one that won't have much impact.
This is not to suggest that Europe's leaders have not made huge strides over the past couple of years, only that much more will be needed, and that divisions over how the crisis should be attacked appear to be holding up further progress.
"While EU leaders continue to congratulate themselves on the continued fall in sovereign bond yields, citing them as a sign of confidence, of which they are nothing of the sort, they continue to waste time in failing to deal with the real problems of the banking sector and the transmission mechanism in Europe," said senior analyst Michael Hewson of CMC Markets in London.
The Bank of England, on the other hand, today painted a more optimistic picture of the U.K. economy, though that may be little solace.
"The real crisis, however, is in wage terms, with worker pay still falling far behind inflation," IG's Mr. Heusen said.
"Given the vital importance of consumer spending to the British economy, this is the area that should concern the government."
- France slips into triple-dip as euro zone recession drags
- Bank of England offers ray of hope for U.K. economy
Manufacturing sales slip
Canada's manufacturing sector suffered a 0.3-per-cent drop in sales in March, but largely because of energy products.
Strip out oil and coal, Statistics Canada said today, and sales climbed 0.3 per cent. Autos and food chalked up increases.
Over all, the March showing marked the third drop in four months, the agency said, as shipments fell in 10 of 21 industries that accounted for one-third of the sector.
"Over the past year, shipments are still down 1 per cent, so the over all profile remains disappointing, particularly given signs of life in the U.S. economy," said chief economist Avery Shenfeld of CIBC World Markets.
Lloyds on industry reputation
A lot of British kids won't be headed for the City.
It's not just that they don't want to be bankers. Some would be "embarrassed," according to a new survey highlighted by Lloyds Banking Group.
The poll by YouGov PLC, used in a speech by Lloyds CEO António Horta-Osório at Oxford University's Saïd Business School, illustrates the view among some of bankers in the wake of the financial crisis, and the troubles in recruiting young people.
"We need to take steps as a sector towards rebuilding our reputation through how we behave and what we do," he said, according to notes on his speech.
"In tandem with this we urgently need to address the perception of banking as an attractive career opportunity for young people."
As The Economist notes, the results of the poll would be different among MBA students, but this survey, conducted in late April and early May online, was of 1,000 students aged 16 and up.
The findings are telling:
Just 2 per cent would be more likely to opt for the financial services industry, compared to the 26 per cent who would go into public survey.
More than 40 per cent don't trust banks, according to Lloyds, and 56 per cent trust them less than they did five years ago. (Of course, they could have been as young as 11 then.)
Here's the cringe factor: "Over one quarter of students (28 per cent) surveyed, would be too embarrassed to tell friends if they are going to work in a bank," Lloyds said.
"The next generation should see banking as an industry that helps to build economic wealth and is playing its part as a useful member of our local communities," Mr. Horta-Osório said.
"We want the best and the brightest to see banking as a credible career choice. This is vital for the industry's long-term viability."
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