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O (my God) Canada: We're raiding RRSPs. Housing's down. Small firms are dour. (But there's risqué fun in Vancouver)

Briefing highlights

  • The good, the bad and the risqué
  • Markets at a glance
  • Manufacturing sales slip
  • Air Canada posts quarterly profit
  • Enbridge profit tops estimates

The good, the bad and the risqué

Canadians have a lot going for them.

But we've also got some nasty habits that could become even more of a concern this year as interest rates rise, housing slows, consumers pull back and the job market eases after its heady run.

Here are some recent findings on the economic and personal finance front. And why Vancouver may be having more fun.

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Retirement savings

We're raiding our RRSPs.

And, in a troubling sign, more of us are withdrawing just to pay for day-to-day expenses, according to a new Bank of Montreal survey.

Some highlights from the BMO study:

  • Forty per cent of us have withdrawn money from our registered retirement savings plans.
  • The average raid on that kitty rose this year to $20,952 from $17,213 last year.
  • Among the reasons, 27 per cent wanted the money to buy a home, 23 per cent to meet living expenses, 21 per cent for emergencies, and 20 per cent to pay down debt.

"We've seen a steady increase in the amount of money Canadians are withdrawing from their RRSPs to meet short-term needs; this should be considered only as a last resort," Robert Armstrong, vice-president of multi-asset solutions at BMO's asset management operation, said in releasing the study.

A man looks at a retirement planning brochure in this file photo.

Add to that the fact that the latest findings from the federal Office of the Superintendent of Financial Institutions, released this week, shows we're living longer.

That's obviously a wonderful thing, especially at my age, but it comes at an obvious cost.

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According to the OSFI Old Age Security Program "mortality experience fact sheet," a document that politely tells you how long you've got left to live, life expectancy among OAS beneficiaries has been rising since 2000.

For men aged 65, 75 and 85, life expectancy has increased since 2000 from 16.5 years, 10 years and 5.4 years, respectively, to 19.2, 12 and 6.4 as of 2016.

For women, the corresponding increase is from 20.1, 12.6 and 6.7 to 22, 14.2 and 7.7.

(Try counting it up on your fingers like I did.)


The market is slumping.

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So if you're worried about a bubble popping, as many policy makers are, that's a good thing. If you're obsessed with what your neighbours' homes are selling for, or if you've been tapping your equity, maybe not so good.

You can't make all that much out of one month's data, particularly a month that saw the introduction of new OSFI mortgage rules.

But, as The Globe and Mail's Janet McFarland reports, Thursday's monthly report from the Canadian Real Estate Association showed home sales tumbled 14.5 per cent in January from December.

The average price fell 2.4 per cent, though much depended on where you live and the type of home being sold. The pace of growth in the MLS home price index, which is considered a better measure, slowed.

Now, economists believe sales late last year were pumped up by buyers rushing to meet the new rules, but there's going to be an impact.

"It's too early to tell whether the new rules dampened homebuyer demand permanently or just displaced activity temporarily. We think it's both," said Royal Bank of Canada senior economist Robert Hogue.

"Developments in January are consistent with our view that we've entered a period of payback for transactions brought forward late last year ahead of the new mortgage rule," he added.

"Our outlook for 2018 calls for a second-consecutive modest annual decline in resales and sharp moderation in price appreciation."

Household debt

We owe $1.71 for every dollar we've got to spend. At 171.1 per cent, our level of household debt to disposable income has raised eyebrows around the world.

It's all tied into the housing market, of course, as we borrowed cheap money in the post-crisis era to buy those ever more expensive homes.

Now, interest rates are rising and many of us could find ourselves in trouble.

CIBC World Markets economists Benjamin Tal and Royce Mendes said those higher rates alone whack Canadian borrowers, but some of us are going to struggle.

"In total, for both mortgage and non-mortgage debt, we estimate that less than 20 per cent of the outstanding has been exposed to higher rates so far," Mr. Tal and Mr. Mendes said in a study this week, adding they expect that percentage to climb to about 30 per cent.

That means the Bank of Canada "will have to be mindful" of the spreading effect of its rate increases as debt resets.

"Now, there's no doubt for that subset of borrowers, higher rates will be painful," the CIBC economists said.

"But our numbers suggest that, as a direct result of the expected increase in interest rates, Canadians will pay in aggregate roughly $3-billion more for debt service in the coming year, something that by itself would have contributed to only a minor slowdown in spending."

Hold that thought for a couple of minutes.

Toronto stocks

Here's a 10-year look. Do you really need to see more?

Trade and manufacturing

These are uncertain times, particularly on the trade front as NAFTA negotiations plod on.

The last trade report from Statistics Canada showed a fatter deficit, though "with the loonie expected to hover around current levels, and demand expected to remain healthy thanks to robust growth stateside, Canada's trade picture should improve in 2018, actually contributing to overall growth," said Toronto-Dominion Bank economist Dina Ignjatovic.

And today, Statistics Canada's monthly report showed manufacturing sales faltering in December by 0.3 per cent, though November was revised up.

"On the whole, we remain cautiously optimistic for the Canadian manufacturing sector," said TD senior economist Michael Dolega.

"On the one hand, rising global demand alongside a U.S. economy that's about to get a dose of fiscal stimulus bode well for the export-oriented sector, with the relatively inexpensive loonie also providing support," he added.

"On the other hand, rising protectionist sentiment, including the resurgence of 'Buy American,' pose a downside risk for the sector, with the ongoing NAFTA negotiations hanging like a storm cloud over the outlook."

The loonie

Like the housing market, this can be a good or a bad thing.

Good, if you're an exporter to the U.S., where your products are cheaper because of a weak currency. Not so fortunate if you're heading south for March break or reading week, where you have less buying power.

The Canadian dollar has had a bit of a ride over the past couple of weeks, as its U.S. counterpart rose, then fell along with the turmoil in the stock markets.

Much will depend on the fate of the greenback, NAFTA negotiations and interest rate expectations from the Bank of Canada and Federal Reserve.

The Canadian and Australian dollars have been "the laggards" of the currency market, said Mark McCormick, North American head of foreign exchange strategy at TD Securities, adding he expects those two to "remain under pressure despite the risk bump in equities."

For the loonie, "the case to fade is clear, in our view," Mr. McCormick said.

"The U.S. is easing fiscal policy, reducing regulation, and the deleveraging cycle has lagged progress," he added.

"While the Canadian economy has weathered the shocks of the oil collapse, the U.S. and Canadian economies are structurally running in different directions as Canada, along with Australia, are both managing a debt and credit overhang that has broader implications on higher global interest rates."

The economy

Economic growth is expected to slow this year, coming off a strong 2017. It will still be moderate, though.

Canada has seen strong jobs growth, too, though the last report showed a whopping loss of 88,000 jobs in January, as The Globe and Mail's Rachelle Younglai reports.

Put that in perspective, however: On an annual basis, employment rose by 1.6 per cent, or almost 290,000 jobs, and most of them full-time. And the unemployment rate is still a shade below 6 per cent.

But jobs growth is expected to slow going forward.

"While certainly a weak report, it follows a record-breaking string of gains and points to an economy moving back toward a more neutral pace of growth," TD's Ms. Ignjatovic said of that Statistics Canada jobs reading.

Back to household debt now, and CIBC's Mr. Tal and Mr. Mendes.

They noted a few paragraphs ago that higher rates on their own won't kill the consumer. But there's more here, including the labour market and the new OSFI mortgage measures known as B-20 rules, that will restrain the shopping that has helped buoy the economy.

"Higher interest rates along won't break consumers' backs," they said.

"But combined with a deceleration in job creation and the tighter availability of consumer credit resulting from B-20 rules, there will still be a noticeable slowdown in household spending this year."

Small business

Canada's small businesses are troubled in their outlook, with a lot on their plates, particularly in Ontario, where, among other things, they're complaining about the speed with which minimum wages are rising.

Also hanging over their heads is the threat that President Donald Trump will, in fact, pull the plug on the North American free-trade agreement, though economists believe the troubled negotiations will end with a revised NAFTA.

In the United States, noted BMO senior economist Sal Guatieri, confidence among small businesses is running high as the Trump administration cuts taxes and red tape. Indeed, a record number of those shops plan to expand.

"Across Canada, optimism is more subdued, partly because of the threat of trade protectionism from the U.S.," Mr. Guatieri said.

"Notably, small businesses in Ontario are not much more upbeat today than coming out of the last recession, and less optimistic than their counterparts in half of the provinces," he added.

"If trade talks head south, Ontario will be the hardest hit province, largely due to its sizeable auto industry. Rising labour costs and elevated hydro costs are added challenges."

Risqué business

Vancouver is going risqué, using the latest in the Fifty Shades movie franchise to boost tourism with a themed, racy and fun contest.

The winner of the "Fifty Shades of Romance in Vancouver" sweepstakes, plus his or her plus-one, was being chosen Thursday, but I didn't ask for the name because I thought that, you know, they'd want their privacy.

The prize, worth almost $5,000, includes round-trip airfare for two, three nights at a high-end hotel and "an impressive lineup of date-worthy experiences" around the city, where several scenes from the trilogy were filmed.

Dakota Johnson and Jamie Dornan in Fifty Shades Freed

Tourism Vancouver, which is running the contest, had a fuller campaign about romantic stuff you can do in the city, all in an effort to promote its attractiveness, tied into Fifty Shades Freed.

And by all accounts, it worked, with 16,520 entries and a much broader reach, said special projects contractor Sonu Purhar.

The contest was open to those of you who are 19 and up, with some restrictions. I looked to see if there were upper age restrictions for those of us who might want to see Vancouver just to see Vancouver, but no.

(Apologies to the older set here, but I've had an age thing going since my birthday a couple of weeks ago, when a colleague reminded me how far away it actually all seemed when, in 1967, The Beatles sang When I'm 64.)

Tourism Vancouver was also able to draw support from and work with Universal Pictures, the Vancouver FIlm Commissioner and local businesses, Ms. Purhar said.

Tourism is almost a $5-billion industry in Vancouver, and worth about $15-billion across British Columbia. Last year alone, more than 10 million tourists visited the city, so this isn't just about a roll in the hay.

(Actually, many who live there can't afford more than a roll in a teeny apartment. Unless you're old enough to have bought a house a very long time ago. Which means you probably only care about rolling over and going to sleep.)

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