Not too hot, not too cold — Canada’s inflation rate is about where Bank of Canada governor Mark Carney would want it leading into his next big decision on interest rates.

Statistics Canada reported Tuesday that annualized inflation dipped four-tenths of a point to 1.4 per cent last month, and the central bank’s core index slipped one notch to 1.8 per cent, well below the bank’s preferred target of two per cent.

With temporary factors the only major contributors to above-target inflation, analysts said Carney may still go ahead with his second interest rate hike in two months on July 20, but it won’t be because inflation is keeping him up at a night.

A BMO economist noted, however, that the Canada’s central bank is still charging a very low rate for overnight loans — which are only available to a small number of very large financial institutions.

“It’s true this inflation rate is quite benign, but the bank’s overnight rate (0.5 per cent) is below the inflation rate. That’s quite rare,” noted Douglas Porter, deputy chief economist with BMO Capital Markets.

“There’s no urgency, but over time the trend will be to get those interest rates at least back to inflation if not a bit higher.”

The big unknown is how fast and how high. Porter sees the central bank pausing after another quarter-point hike to 0.75 per cent next month, while the TD Bank said Tuesday it believes Carney will bring the policy rate to 1.5 per cent by year’s end, “barring any financial market flareups.”

CIBC’s Krishen Rangasamy said May’s soft prices report again underlines the sizable economic slack still present in Canada, despite two consecutive quarters of 4.9 per cent and 6.1 per cent growth.

The Bank of Canada believes growth is moderating, however, and the economy won’t return to full capacity until sometime in the middle of next year.

Most of the inflation numbers point to a moderating trend.

On a month-to-month basis, Canadians paid 0.3 per cent more for goods last month than they did in April.

Excluding energy, the national inflation rate stood at a tepid one per cent.

Overall, six of the major components tracked by Statistics Canada recorded price increases, most moderate.

Transportation prices rose 4.1 per cent, largely due to gasoline, while shelter costs rose 1.3 per cent as a 4.4 per cent rise in the price of homes was offset by a 5.4 per cent decline in mortgage interest costs.

Food prices, a key element of the index, went up a tame 0.8 per cent, the smallest increase since March 2008.

The agency said gasoline prices were still 6.2 per cent higher than they were 12 months ago, but that is a huge drop from the 16.3 per cent difference that existed in April. On a monthly basis, gasoline was actually 0.5 per cent lower in May than in April.

The only major inflation bump in the future will come in the next few months when Ontario and British Columbia move to a harmonized sales tax, but because it is a one-time adjustment, the change won’t affect the central bank.

Read more: http://www.articlesbase.com/mortgage-articles/canada-inflation-rate-2740091.html#ixzz0sAZsaU4U
Under Creative Commons License: Attribution

Average weekly earnings in Alberta tied with Saskatchewan for the fastest year-over-year rate of growth in April.

Statistics Canada reported today that earnings rose by 5.7 per cent in those two provinces from April 2009.

Alberta continued to have the highest average of weekly earnings including overtime of all provinces at $989.93. However, that number fell by 0.3 per cent from March.

At the national level, average weekly earnings rose by 0.5 per cent from March and by 3.3 per cent on an annual basis to $845.25. It was the largest pace of annual growth in the country since August 2008.

Non-farm payroll employment rose for the third consecutive month in April, increasing by 35,600 in Canada to 14.6 million. This brings total gains since the start of the upward trend in August 2009 to 166,900 (1.2 per cent), said Statistics Canada.

In Alberta, employment was down 0.3 per cent from a year ago but up 0.3 per cent from March to just over 1.7 million people.

The federal agency said April’s increases in Canada were widespread among services industries, with the largest gains in retail and wholesale trade; amusement, gambling and recreation; professional, scientific and technical services and administrative and support services.

There were also gains in the goods sector in April, as the number of jobs continued to grow in construction and in mining, quarrying and oil and gas extraction.

Statistics Canada said average weekly earnings grew in six of Canada’s seven largest industrial sectors. From April 2009 to April 2010, growth was above average in educational services (8.6 per cent), retail trade (5.2 per cent), manufacturing (4.2 per cent), and accommodation and food services (4.2 per cent). Over the same period, average weekly earnings declined in health care and social assistance (2.0 per cent).

MTONEGUZZI@THEHERALD.CANWEST.COM

© Copyright (c) The Calgary Herald

Read more: http://www.calgaryherald.com/business/Alberta+Saskatchewan+lead+country+wage+growth/3200281/story.html#ixzz0sABA2JQI

CALGARY - The number of Albertans receiving regular Employment Insurance benefits in April declined for the sixth consecutive month, reported Statistics Canada today.

The federal agency said that number dropped by 2,500 people during the month to 49,900.

And Calgary experienced its first year-over-year decline in EI beneficiaries since the beginning of the economic downturn in the fall of 2008.

Since the peak of June 2009, the number of beneficiaries in Alberta has fallen by 20.6 per cent, the second fastest rate of decline after Ontario (26.5 per cent), said Statistics Canada.

In April, 667,400 people across the country received regular EI benefits, virtually unchanged from the previous month. The number of people receiving regular EI benefits has declined by 161,900 since the peak of 829,300 reached in June 2009, a drop of 19.5 per cent.

“Claims have generally been declining since their peak in May 2009. Although there was little change in April, the number of claims received has declined by 30.5 per cent since the start of the downward trend in May 2009, with the fastest rate of decrease in Alberta (41.1 per cent), Ontario (37.9 per cent), and British Columbia (23.6 per cent),” said the federal agency.

“Compared with April 2009, the number of EI beneficiaries was down in nine of the 12 large centres in Alberta in April 2010. This was a marked change from previous months when virtually all large centres in the province posted year-over-year increases. The most pronounced percentage decline occurred in Lloydminster. In Calgary, the number of beneficiaries edged down by 370 to 17,600 and in Edmonton, it decreased by 680 to 15,800. These are the first year-over-year declines for both Calgary and Edmonton since the beginning of the economic downturn in the fall of 2008.”

© Copyright (c) The Calgary Herald

Read more: http://www.calgaryherald.com/business/Number+recipients+Alberta+drops+sixth+straight+month/3171091/story.html#ixzz0rDdZSxNK

Oil sands investment boosts forecast of 4.1% spurt

CALGARY - Alberta will experience a significant economic rebound this year and lead the nation in GDP growth, says a report released today by Scotiabank.

The report forecast GDP growth of 4.1 per cent for the province while overall Canadian growth would be 3.6 per cent, the strongest advance in a decade for the country. In 2011, Scotiabank is forecasting Alberta economic growth at 3.4 per cent - tied with Saskatchewan for the best in Canada. Nationally, it is predicting Canadian GDP at 2.7 per cent next year.

Scotiabank said a strong pickup in investment will fuel growth in the energy and manufacturing sectors this year in Alberta.

“Investment has perked up in the oil sands, as easing costs and higher oil prices revived investment intentions in late 2009, with $2.2 billion in outlays scheduled for 2010 alone,” said the report. “Renewed activity in the industry will lead to significant benefits flowing through the economy, with manufacturing and services all heavily tied to conditions in the energy sector. While the bulk of investment will stem from oil sand development and tight oil plays, recent revisions to the province’s royalty framework are a major positive for the natural gas industry.”

mtoneguzzi@theherald.canwest.com

© Copyright (c) The Calgary Herald

Paul Vieira, Financial Post · Angel Gurria is never short of words, or emotion. The secretary-general of the Organization for Economic Co-operation and Development will talk about almost anything economic-related, and do it with a passion that’s to be expected from a native of Mexico. Mr. Gurria, a former finance and foreign affairs minister in Mexico, has been head of the Paris think-tank since 2006, and has tried to provide a voice of reason during the economic crisis. In its most recent outlook, the OECD said developed economies should begin the process of budget-cutting and get debt levels back to more reasonable levels. And in Montreal this past week for the International Economic Forum of the Americas, the multi-lingual Mr. Gurria warned economies have a tough dilemma ahead: They have to maintain fiscal policies that lead to job creation, while at the same time get their own fiscal houses in order. Mr. Gurria talked to the Financial Post’s Paul Vieira in Montreal. This is an edited version of the interview:

Q Is the euro crisis the beginning of new woes, or did the crisis that broke in 2008 really end?

A You are absolutely correct. The euro crisis is just a different phase of the crisis. And just like the first manifestation of the crisis, this deals with overleverage. First it was overleverage of the banks and the stabilization of the financial system, plus the drop in government revenues due to recession, plus the increase in automatic stabilizers, plus stimulus spending. All this produced these exorbitant deficits and this mind-boggling accumulation of debt, which we would have just laughed at a few years ago of ever happening. The euro crisis is the same problem of overleverage, but has moved from the private sector to the public sector. This is just unsustainable and has to be fixed.

Q Any surprise by the drubbing in the markets, due mostly to Europe? And any shock at how intense it has been in such a short time?

A I think at some point in time, governments took the first decision to do whatever it takes. No more failures of banks. That has consequences. The second decision was to say, “We will go out and stimulate.” That was a deliberate, co-ordinated, co-operative type of decision, and something which we are seeing the consequences of now.

The first decision was linked to stabilizing the financial system. The second decision was a little bit different because, objectively, everyone went into some kind of stimulus, with China doing 15% of GDP, and the United States did something like 6%. The difference was the degree of response that the economies had. And then there was the result of the economy. And that’s when revenue drops, and you have to spend automatically [on unemployment benefits]. That was not planned. It is the result of a general economic situation. Countries were having enough trouble just with that, on top of digging into their pockets and going into deliberate deficit spending. And now we see the consequences.

Q The US$1-trillion rescue package from European policymakers was meant to calm markets and support the euro, but that has yet to materialize. What happened?

A It is going to. It was only on [Monday] night that European policymakers got it together in term of finalizing the conditions. The proposal has been going through legislatures. Germany got its passed two weeks ago, but some of the other countries have been circling the wagons because their parliaments were reticent. But let’s assume everyone chips in, and they are in. Then that’s done. Once the money is in place and ready to be triggered, it is going to produce a lot more peace of mind than it has right now.

There were a lot of skeptical voices out there because they did not see the package gelling. What they don’t understand is the way Europe works, or how things happen. They happen slowly, there’s always a little bumpiness, but it happens. And there was enough resolve. This is sorting itself out.

Q What topic, or topics, is going to dominate the G20 leaders summit in Toronto?

A In 2008, the G20 was focused on stabilizing the financial system, and avoiding a cataclysmic disaster. In 2009, it was about growth. This meeting in Toronto is going to be about a more balanced, more nuanced, more complex formula for growth. The balance has to do with the situation where you need to put an emphasis on growth but also on fiscal consolidation, or deficit adjustment. That balance, and the need to be looking at both sides, will be much more apparent now.

There is also a need for countries not to withdraw the stimulus just yet. The monetary tightening is something that is going to happen by next year. Countries have to roll out all the stimulus packages –some of them are finished, but some of them are still happening. So don’t interrupt until you are through with them. Finish the plan. And don’t start cutting the budget just yet, maybe start in 2011. Leaders need to, at the very least, strongly signal how they are going to address the deficit and debt issues. How are they are going to bring down the deficit to a manageable level, but ensure a soft landing. Then the ultimate issue is, whether markets will be more or less tolerant and patient
Read more: http://www.financialpost.com/subprime+crisis+developed+into+euro+crisis/3145815/story.html#ixzz0qpgBSZDN

Homes are a long-term investment

“Ups and downs of the housing market is near-impossible, so the best time to buy is when you can afford it.”

‘You know, you’re making the biggest mistake of your life. The housing market is going to fall.”

I got this great piece of advice from another journalist at the Financial Post, who has since left the newspaper, after buying my first home. Not exactly the type of thing you want to hear after taking on huge debt and making the biggest financial decision of your life.

Lucky for me, I didn’t heed that advice about Toronto’s red-hot real estate market — in 1998. I’m not going to say I made a shrewd business decision 12 years ago, or even six years later when I bought a larger house.

For me, it wasn’t a case of not following what turned out to be bad advice from a fellow business journalist. Nor was it about trying to time the market.

I was simply following the same pattern as most Canadians: I got married and decided to stop renting and buy something. Later came the need for a bigger home when the second kid was on the way.

Which brings us to today. The supply of housing is rising fast as people try to list their homes for sale before the market “crashes.” This is happening at the same time that demand is starting to wane. Economists and even the real estate industry, are all predicting a correction — the only argument being how severe it will be.

So, the question for anyone buying is: should you wait?

Don Lawby, chief executive of Century 21 Canada, thinks the strategy of waiting for a crash is not going to work during this economic cycle. “For a market to crash, you have to have people who are desperate to sell,” says Mr. Lawby. “People will [only sell] if they can’t afford their mortgage or they don’t have a job.” He doesn’t see a decline in prices, “unless you are predicting that mortgages will renew at a hefty premium — which is not the case — or a whole bunch of people are going to lose their jobs.” Mr. Lawby believes neither will happen.

And, he adds, you are really into a risky game if you are timing the market. “A house is a home. If all you are doing is looking at it as an investment — that’s what happened the last 15 years — it’s not just that. It’s a place to live and a place to raise a family,” says Mr. Lawby. Even Benjamin Tal, a senior economist with CIBC World Markets, who, last month, said in a report that Canadian housing is 14% overvalued, has doubts about playing the market. But he suspects that’s exactly what some Canadians will do.

“Is there a sense that prices will go down and people will wait? I think it might be an issue,” says Mr. Tal. “It won’t be the main reason [people don't buy], but it will happen at the margins. The fact that people sell at the peak and wait to buy is a normally functioning market.”

But even if you do make the right call on housing prices, it could end up backfiring on you in other ways. For example, if interest rates rise fast enough, any gains you make on price could be erased by interest charges, says Mr. Tal. Edmonton certified financial planner Al Nagy says you need to think of your house the way you think about any long-term investment. “Whether it’s an investment for use in your retirement or a house to live in, it’s a long-term thing. The timing becomes less critical than it would be if it is a speculative [investment].”

And he says making a call on the housing market is as tricky as any other investment call. “It’s very rare you catch the bottom. You can’t let the market dictate when it’s time to buy. The time to buy is when you can afford it,” says Mr. Nagy.

I’m not sure that philosophy would fly with my former colleague, but the problem with timing the market is: what if your timing is off ?

gmarr@nationalpost.com

Terry McBride , For Canwest News Service SASKATOON — Canadians have taken advantage of extremely low interest rates to overextend themselves. The Bank of Canada wants to try to prevent inflation by raising interest rates to slow the economy down. How will debtors manage?

Inflation vs. deflation

Actually, debtors generally prefer inflation (when prices go up) because that can make it easier to repay a debt, which is a fixed dollar amount owing. Loan payments become more affordable when wages keep up with inflation.

Debtors usually fear deflation (when prices go down) because it becomes more difficult to repay an obligation when the fixed number of dollars can buy more. Deflation is already a major concern these days in Europe where some governments are raising taxes and cutting back on spending to tackle mushrooming public debts. Businesses there may be forced to cut prices and workers’ wages to cope with the economic slowdown.

Debtors fear deflation. How can they handle debt payments after their wages are cut or they lose their jobs? Serious household debt management issues arise.

Mortgage term

If your mortgage is coming up for renewal, how do you choose the best mortgage term? If you have had a variable or floating rate of interest tied to the prime rate, should you take the safe route and lock in a fixed, usually considerably higher, interest rate for five years?

If your mortgage payments rise, then you will have to look at various ways to manage other debts.

Consolidate

One popular debt management strategy is to combine various loans into your mortgage or a line of credit. Consolidation can eliminate high-interest credit card debt. Free up some cash flow by reducing your interest costs.

Talk to a professional debt counsellor. Can you have a single monthly payment? You could continue to make the same level of payments on your consolidated loan as you did before consolidation. Aim to reduce your principal owing and cut interest costs.

Amortization

Knowing how amortization works will help you to understand how to properly manage your debts. Amortization is how long you are scheduled to repay an instalment loan.

If interest rates rise, consider stretching the repayment period on an instalment loan to reduce the size of your monthly payments. Making your payments smaller seems very attractive at first. However, by making payments over a longer time period you will eventually pay much more interest in the long run.

Debt snowball

Here is a strategy for cutting down your overall debt level:

Make a list of your debts. Add up how much you pay on each loan.

Pick the smallest debt to tackle first. Pay the minimum on all debts except for your target debt. Pay whatever is left on your target debt until it is paid off. Then, continue with the debt snowball strategy by choosing the next debt on the list as your target debt. Pay it off.

Borrow wisely

The next time you have to borrow, avoid buying something that drops in value. The only time you should buy something using debt is if it is something that will appreciate in value or generate additional cash flow for you.

As a general rule, if you are buying something with borrowed money, make sure that what you buy lasts longer than the debt. Don’t add to your debt burden by going on a vacation financed by credit cards.

Emergency fund

Do you have to borrow when you have an emergency? Instead you should build an emergency fund with cash held in reserve. You could use a Tax-Free Savings Account, the cash surrender value of a whole life policy or a Canada Savings Bond payroll savings plan, for example. Having cash available to pay for an emergency will give you greater financial security than an untapped line of credit.

Terry McBride is a member of Advocis (The Financial Advisors Association of Canada)
Read more: http://www.financialpost.com/personal-finance/mortgage-centre/Managing+debt+while+rates+grow/3136091/story.html#ixzz0qXodyQrw

CALGARY - Calgary is the best place in Canada to invest in the residential real estate market, according to a new report released today.

The Real Estate Investment Network’s report said that Calgary experienced one of its best economic and real estate periods in Canadian history a couple of years ago but then entered a strong, and needed correction.

“During the economic downturn, Calgary’s market is making a predictable correction resulting in slightly more affordable housing compared to recent years passed,” said the report. “It was economically impossible for the market to continue at the pace at which it was heading and now finds itself adjusting to market realities.

“This adjustment period, as the market searches for its new foundation from which to build, should continue in 2010 as the provincial economy is poised for another growth spurt.”

The REIN report said the in-migration pace in the city continuing to lead the country combined with the “renewed affordability” will help propel the local market over the coming years.

“We, fortunately, should not see the massive over-boom situation we previously witnessed as the market remains more in line with the fundamentals,” said the report.

Following Calgary as the top Canadian real estate investment cities are Kitchener-Waterloo-Cambridge, Edmonton, Surrey, Maple Ridge, Hamilton, St. Albert, Simcoe Shores (Barrie-Orillia), Red Deer, Winnipeg and Saskatoon.

“Successful real estate investing is all about identifying a town or neighbourhood that has a future, not a past,” said the report. “Sadly, many investors like to invest based on past performance; thus, they are constantly chasing the market. This is called speculating - not investing.”

MTONEGUZZI@THEHERALD.CANWEST.COM

Read more: http://www.calgaryherald.com/business/real-estate/Investment+report+ranks+Calgary+Canadian+real+estate+markets/3111466/story.html#ixzz0qH4MXMeZ

by Gail Vaz-Oxlade, for Yahoo! Canada Finance
Thursday, May 27, 2010

Ever wonder how that magical number – The Credit Score – is computed?

Whether you’re obsessing over your FICO score or your Beacon score, you’re likely shopping for credit. The FICO score was developed by Fair Isaac & Co., which began credit scoring in the late 1950s. The point of the score is consolidate your credit profile into a single number. The Beacon score is a brand name used by Equifax, the largest credit-reporting agency in Canada. While Fair, Isaac & Co. and the credit bureaus do not reveal how these scores are computed, whether you get a loan or not is a numbers game: The more points you score on your credit app, the better you do.

There’s a reason you have to fill out so much information when you’re applying for credit. Everything counts. Your age, your address, and even your telephone number all have a role to play in whether or not you’ll get credit.

Young ‘uns and old folk are at a disadvantage since under 21 and over 65 likely means you aren’t working; no points for you. If you’re married, you’ll get a point for being “stable.” And while you might think that being divorced would work against you (all that spousal and child support), most creditors don’t give a whit.

No dependents? Zero points. You’re probably still gallivanting like a teenager since you haven’t yet “settled down.” One to three dependents? Score one point. You’re a solid citizen. More than three dependents? Score zero. Have you no self control! And don’t you know you that with all those mouths to feed you could get in debt over your head?

Your home address counts too. Live in a trailer park or with your parents? Bad risk, score zero points. You could skip town with nary a look over your shoulder. Rent an apartment? Give yourself one point. Own a home with a big fat mortgage and you’ll score major points since someone has already done some checking and you qualified for a mortgage. Own your home free and clear? Even better. You’ve proven you can pay off a sizable debt and now you have a pile of equity that the card company would love to help you spend.

Previous Residence? Zero to five years (some applications only go to three years), score zero points since you move around too much. No land-line: zero points. How the Dickens are they gonna find you when you fall behind in payments. Since they can’t use your cell phone to actually locate you physically, it doesn’t count.
Less then one year at your present employer earns you no points. Again, it’s a stability and earning continuity thing. The longer you’re on the job, the more likely you are to be bored out of your mind but you’ll score more points. And, not to overstate the obvious, the more you make the better.

The more willing you are to make your lender rich, the higher your score will be. Since the FICO score was originally designed to measure customer profitability, if you pay off your balance in full every month, you’re going to score lower than the guy who only makes the minimum payment and pays huge amounts of interest.

Scores range from 300 to 900 and if you manage to hit 750 or above you’ll qualify for the best rates and terms. Score 620 or lower and you’ll pay premium interest if you even qualify; 620 is the absolute minimum credit score for insured mortgages.

Your credit score can change quickly. Payment history accounts for about 35% of your credit score and just one negative report can drop your pristine score into the doldrums. Since scores are updated monthly, your bad behaviour won’t go unpunished for long.

The type of credit you have counts for about 10% of your score. And your current level of indebtedness accounts for about 30% so going too close to your credit limit is another way to deflate your score. One rule of thumb is to keep your balances below the 65% mark. So if you have a limit of $1,000, you won’t ever carry a balance that’s more than $650.

Having too much credit available can also hurt your ability to borrow since the more credit you have, the more trouble you can get yourself into. If you’ve got a walletful of cards, canceling credit you’re not using can be a good thing – for both you and your credit score – over the long haul. Careful though. If the card you’re eliminating is one with a long, positive history, you’ll eliminate what could be a very good record of your repayment when you cancel the card. You’d be better off cutting up the card so you aren’t tempted to use it, while you establish a track record (six months or more) before you actually cancel the account.
Credit shopping can also cost you points. Since about 10% of your credit score relates to the number and frequency of new credit enquiries, applying willy nilly for new credit will end up costing you.  However, it’s only when a lender checks your score that this registers on your score. Checking your own credit report/score is considered a “soft” inquiry and does not go against your score.

http://ca.finance.yahoo.com/personal-finance/article/yfinance/1623/credit-score-secrets

Jeremy Torobin Globe and Mail

Mark Carney is taking a cautious approach to raising interest rates, weighing Canada’s powerful economic rebound against the uncertainty of an “increasingly uneven” recovery across the globe.

The Bank of Canada Governor became the first central banker in the Group of Seven to raise borrowing costs since the financial crisis and recession, increasing the benchmark overnight rate Tuesday by one-quarter of a percentage point to a still exceptionally low 0.5 per cent.

Policy makers will keep an eye on Europe’s troubles, and won’t move more aggressively than they see fit, the Bank of Canada suggested, even though the economy is rebounding rapidly and inflation will likely exceed its 2-per-cent target this year. Much like in 2008 when the U.S. financial crisis pulled Canada into recession, the country’s economic health depends in large part on policy makers in other countries successfully containing homemade problems.

“Interest rates are incredibly low, given the strength of the domestic economy, but the global story is where it’s at right now,” Eric Lascelles, chief economic strategist at TD Securities in Toronto, said in an interview. “The level of uncertainty suggests there’s not a lot of confidence in the forecasts.’’ The open-ended nature of the announcement sparked a fall in the Canadian dollar and yields on two-year government bonds as investors pulled back their bets on what they had expected might be a series of uninterrupted rate hikes going forward.