Canada First Mortgage

Greetings!

This post is dedicated to Alberta under our new “Alberta Ambassador” category in our blog post.  As an Alberta Ambassador I wish to forward a link here for your viewing, that can also be found directly on the Alberta Government website.  It indicates where our economic strengths/highlights lay as a province on a number of different scales.  Enjoy!

http://albertacanada.com/about-alberta/economic-highlights.html

Sincerely,
Dan Mass

Verico Canada First Mortgage

OTTAWA — Interest rate hikes are on hold until at least the spring and maybe as long as late 2011, analysts say, as the Bank of Canada decided Tuesday to keep its policy rate unchanged amid weaker-than-anticipated growth, especially in the United States.

The Canadian dollar fell by more than two cents at one point following the decision, as the central bank signalled the country would need to rely more on net exports for growth — a sign, economists added, the loonie’s value would be a key consideration in future rate decisions.

The central bank said it scaled back its growth projections for this country as the global recovery enters a “new phase.” It now expects GDP to expand just three per cent this year and 2.3 per cent in 2011, compared to expectations in July for advances of 3.5 per cent and 2.9 per cent, respectively. Second-quarter GDP growth, at two per cent annualized, was well below the central bank’s forecast of three per cent expansion.

Further, the Bank of Canada said it does not envisage the Canadian economy reaching full potential until the end of 2012, or one year later than previously expected. The same timeline applies to inflation — which guides all interest-rate decisions — as the “significant” excess slack would keep consumer prices increases from reaching the desired 2% level for another two years.

“This is not just a data watching central bank that is keeping its powder dry in order to evaluate developments over coming months — this is a central bank that has totally revised its outlook and market guidance,” said analysts at Scotia Capital. “To us, the Bank of Canada is saying they are on hold until late next year.”

The central bank also signalled the composition of growth is set to change, with less emphasis on consumer spending and increased reliance on business investment and net exports.

The Canadian dollar recovered slightly after its initial drop. It was trading around 96.92 cents U.S. at 11 a.m., down from Monday’s close of 98.61 cents U.S..

Jonathan Basile, economist at Credit Suisse Securities in New York, said this indicates the Bank of Canada “will be watching the Canadian dollar more closely” as strength in net exports is predicated on a loonie that doesn’t strengthen too much against its U.S. counterpart.

The statement “appears to be a pretty clear signal of the Bank of Canada’s intention to pause,” said Michael Woolfolk, managing director at BNY Mellon Global Markets in New York. “Moreover, it suggests that the central bank may pause longer than expected. With the Bank concerned now about the economy’s increasing reliance on net exports, it will take particular care not to unnecessarily bolster the loonie through future rate hikes.”

Economists at Royal Bank of Canada and Toronto-Dominion Bank told clients that March of next year might be the earliest at which the central bank resumes rate hikes.

“The economic outlook for Canada has changed,” said the central bank, led by governor Mark Carney. “(A) more modest growth profile reflects a more gradual global recovery and a more subdued profile for household spending” as real-estate activity slows and consumers deal with their personal debt.

The decision to keep key rate unchanged leaves “considerable monetary stimulus” in place to achieve the central bank’s preferred two per cent target, the central bank indicated.

Plus, Basile said the central bank signalled three factors that stand in the way of future rate hikes: a weaker U.S. outlook; constraints curbing growth in emerging-market economies; and domestic considerations, most notably household debt.

Tuesday’s rate statement reflects a more dovish tone from the central bank compared to its last decision roughly six weeks ago, when it opted to raise its benchmark interest rate by 25 basis points for a third consecutive time. More detail regarding the central bank’s outlook will emerge Wednesday when the Bank of Canada releases its latest quarterly economic outlook.

The big game-changer, analysts say, is the tepid U.S. economy and the signals from the U.S. Federal Reserve that it’s preparing to inject additional liquidity in the economy through asset purchases, with a dual goal of lowering borrowing costs and boosting inflation expectations.

As a result, a pause from the Bank of Canada “is entirely justifiable,” said Eric Lascelles, chief Canadian strategist at TD Securities, in a note to clients prior to the release of the central bank’s decision. “The thought that if the U.S. needs (further easing), the economic prospects for the U.S., and by extension Canada, are also threatened.”

The Bank of Canada said the global economic recovery is entering a “new phase,” as the factors supporting growth in advanced economies, such as the rebuilding of inventories and pent-up demand, subside just as fiscal stimulus is wound down.

“The combination of difficult labour market dynamics and ongoing de-leveraging . . . is expected to moderate the pace of growth relative to prior expectations,” the central bank said. “These factors will contribute to a weaker-than-projected recovery in the United States in particular.”

Growth in emerging economies is expected to ease as governments in those markets put the brakes on stimulus spending and raise borrowing costs. As it happened, China raised interest rates earlier Tuesday.

And recent moves by emerging markets and advanced economies to intervene in foreign-exchange markets was highlighted by the Bank of Canada as a further risk to the global economic recovery. “Heightened tensions in currency markets and related risks associated with global imbalances could result in a more protracted and difficult global recovery,” the central bank said.

The warning emerges just days before a key Group of 20 meeting of finance ministers and central bankers in South Korea in which foreign-exchange policies is now expected to dominate the agenda. Both Carney and Finance Minister Jim Flaherty are set to attend the meeting.

© Copyright (c) Postmedia News

Read more: http://www.calgaryherald.com/business/Bank+Canada+holds+rate/3693546/story.html#ixzz12opItQms

KRISTINE OWRAM, THE CANADIAN PRESS
THE CANADIAN PRESS, 2010

As the loonie flirts with parity for the second time this year, Canadians are becoming increasingly familiar with the effects of a higher dollar and are finding creative ways to take advantage of it.

The Canadian dollar was ahead 0.18 of a cent at 99.7 cents US near midday Thursday, backing off a gain that briefly saw it pass parity with the greenback for the first time since April.

Earlier in the morning it traded as high as 100.14 cents US.

The loonie has been gaining traction on weakness in the U.S. dollar and strength in commodity prices. Since last reaching parity in April, the dollar has approached the psychological barrier several times, only to fall back.

A high dollar has become part of everyday life for Canadians, and people are learning to get the most out of it.

Tim Kropp owns a UPS store in Lewiston, N.Y., bordering the Niagara region of southern Ontario. He said the vast majority of his customers are Canadians who have discovered they can get good deals by ordering goods online from American stores and having them shipped to an American post office box.

Having a mailbox south of the border not only allows Canadians to save on shipping costs and possibly customs duties, but also lets them order items from American stores where they are often less expensive. That’s because as the loonie moves higher, price drops often don’t keep pace in Canada, making it cheaper for Canadians to go cross-border shopping.

“We get a lot of Canadians ordering from Amazon.com, and I asked them: ‘Don’t they have Amazon.ca?’” Kropp said.

“But they said you either can’t get the item or the price difference makes it worth it to drive down and pick it up.”

Book prices, which are determined at the time of publication, can appear out of date when compared to the value of the loonie, which fluctuates on a daily basis. This is why there can be such a big discrepancy between the U.S. and Canadian prices listed on a book jacket, even when the dollar is at par.

But it isn’t just books Kropp is seeing delivered to his store.

“I just had a customer from Toronto the other day. She bought a big popcorn machine and she said it was $1,300 cheaper (to order it from the States),” he said.

Of the 150 mailboxes in Kropp’s store, only two of them aren’t used by Canadians.

“It’s definitely a trend we’re seeing at all the UPS stores along the border,” he said, adding that he’s seen his Canadian customer base increase by about 50 per cent since the dollar began to creep higher.

“We contacted UPS about a location, what’s available, and their whole main reason of telling us Lewiston was available was because they knew, based on what the other store up in Niagara Falls is doing, that they needed another location just to handle the Canadian customers.”

Economists say the dollar could hover near parity for a while, as signals mount that the U.S. economy is going to remain weak.

The American dollar has been pressured by speculation that the U.S. government will start injecting more money into the economy to give it another boost.

The most recent appreciation in the loonie followed the release of minutes from a U.S. Federal Reserve meeting which suggested the American central bank will further ease conditions through buying Treasury bills — so-called quantitative easing.

Quantitative easing is a way for the central bank to inject more liquidity into the economy without lowering interest rates, which are already as low as they can go in the United States.

That suggests U.S. central bankers are worried about the slow pace of the U.S. recovery and want to provide more cash to help jump-start stronger growth.

A stronger loonie will make Canadian exports of everything from auto parts and furniture to newsprint and lumber more expensive for American customers. But it will also cut the cost of imported goods and make it cheaper to travel abroad.

William Hanley, Financial Post · Friday, Oct. 8, 2010

As you tuck into the organic, range-fed turkey with all the trimmings this weekend, you can give a quiet, low-key, typically Canadian thanks for living in this quiet, low-key country. Sure, unemployment remains at high levels and the economic recovery is slowing. But Thanksgiving 2010 will be a good one, relatively speaking, for the great majority of Canadians.

Having spent last week in England — my second visit there in a month — I can offer up my own quiet thanks for being able to return to this country, which some English friends refer to as “the Great White Bore.” The dwindling number of British Christians who still attend church have recently been staging harvest festivals, their version of Thanksgiving in which rich tableaux of food are presented next to altars, a thanks to their God for nature’s bounty.

This year’s celebrations just happened to coincide with the new government unveiling plans for a festival of cuts that eventually might carve back government spending by a massive 40%, making for a bitter harvest of decades of excess.

Compared with Britain and any number of countries, including the United States, Canada is in not-so-bad shape. Of course, you can’t eat relative performance, as the Bay Street saying goes, only the absolute variety. Yet most of us will be able to sit down to a lunch or dinner this weekend that finds us in finer fettle than we might have hoped at Thanksgiving 2009, with the unemployment rate down in the past year, house prices staying firm against the odds, the stock market around a 52-week high and government budget deficits beginning to fall as tax revenues rise.

Just this week, the International Monetary Fund forecast Canada’s economy to grow 3.1% this year and 2.7% in 2011. Though those numbers are down from July projections of 3.6% and 2.8%, respectively, and are not typical of an economy in the early years of recovery, they are respectable given the even slower comeback for the United States, and remain “above potential,” according to the IMF, a circumstance that has us leading the G7 nations, however modestly.

Nevertheless, while most of us are giving thanks this weekend for our good fortune in finding ourselves in this particular corner of the world, some of us can’t help but wonder what we might be offering up thanks for a year from now.

One of the things missing from this recovery and something many of us savers of a certain age will be hoping for by next Thanksgiving is a rise in yields on fixed-income investments. Though the Bank of Canada has raised its overnight rate twice to 0.75% in recent months, GICs and the like are still paying the square root of squat.

Unfortunately, the decelerating recovery here and in the United States will likely put the BoC on hold in the months ahead. While it might seem selfish to wish for a more substantial interest rate increase, such a rise would signal an improvement in the economy and for economic prospects. The BoC and governor Mark Carney would like nothing more than to have to raise rates from their historic lows to guard against a rise in inflation, but will do so only in a substantial way if the U.S. economy shows stronger signs of recovering from its Great Recession.

Meantime, conservative investors – twice bitten by the stock market in the past decade and still shy of getting back in – will be monitoring the progress of equity prices, wondering whether it’s too late to begin buying or to buy more.

That question may be the centrepiece of some Thanksgiving table talk this weekend. Years ago, our Thanksgiving weekends were spent at the family cottage, where parlour games around the dining table were side orders to the lashings of food and drink. We played Scrabble, Monopoly and all manner of card games.

This year, your parlour game might consist of making forecasts for Thanksgiving 2011, writing them down and seeing where they stand a year from now.

I make the following predictions for a year from now: the S&P/TSX composite index will be around where it is now, or a little lower, as earnings advances become scarcer in still-struggling economies; interest rates will be a little higher, but not much; Canadian house prices will be 5% to 10% lower; gold and other commodities will hold their value as the U.S. dollar continues to weaken and emerging economies continue to grow; the loonie will be modestly over par against the greenback; and, finally, the Toronto Maple Leafs will once again have fans fantasizing about making the playoffs and winning the Stanley Cup.

Meantime, pass the sweet potatoes. http://www.financialpost.com/news/Canadians+lucky+ones/3645461/story.html#ixzz128u2QL5l

By Julian Beltrame, The Canadian Press

OTTAWA — Canadian inflation resumed tracking lower last month after an extraordinary spike in July that accompanied increases in sales taxes in three provinces.

Statistics Canada said Tuesday that consumer prices edged down one-tenth of a point to an annualized rate of 1.7 per cent in August from last year, and were also 0.1 of a percentage point lower than in July.

The news sent the Canadian dollar slightly lower, an indication markets are pricing down the likelihood that Bank of Canada governor Mark Carney will hike interest rates next month.

“The mild data for August should reinforce the case for a pause by the Bank of Canada,” said economist Krishen Rangasamy of CIBC World Markets.

“The main concern at this point is a flagging U.S. economy and if, as we expect, Canadian growth suffers as a result . . . that should have the Bank of Canada stay put on rates until spring of next year.”

Carney began hiking rates in June, taking the central bank’s trendsetting policy rate from 0.25 per cent to one per cent in three consecutive hikes.

But the economy has significantly underperformed Carney’s expectations since the first quarter, and analysts believe growth is continuing to slow.

Inflation is also starting to track lower than the central bank’s estimates.

While headline inflation is relatively close to the central bank’s two per cent target, that level is not indicative of the underlying downward pressure on prices.

Statistics Canada estimates the introduction of the harmonized sales tax in Ontario and British Columbia and an increase in the tax in Nova Scotia in July likely added 0.7 per cent to the national rate — more so in the impacted provinces — an effect that will be seen for a full year.

That means if that special, one-time factor were removed, annual inflation would be about one per cent, where it stood in June.

A truer measure of inflation is the underlying core index, which excludes volatile items and the HST. Core remained at a 1.6 per cent annualized rate last month, well below the central bank’s two per cent target, and below the bank’s estimate for the third quarter.

Douglas Porter, the Bank of Montreal’s deputy chief economist, said there is a bigger danger of deflation than inflation in Canada.

“Deflation has been the bigger risk for the industrialized economies for some time now and to some extent that’s even true in Canada,” he said.

“The reality is our inflation numbers are not materially different from those in the U.S.”

Porter said excess capacity in the economy and continued high unemployment, which at 8.1 per cent is about two points above pre-recession levels, should keep the lid on price gains.

The HST-effect was evident in the regional breakdown, with Ontario’s inflation topping the country at 2.9 per cent, British Columbia leading the western provinces with a 1.5 per cent rate and Nova Scotia at 1.7, the national average.

Overall, prices rose in seven of the eight components tracked by the agency, led by energy prices with a five per cent gain. More specifically, electricity rose 7.7 per cent, home purchase prices increased 5.5 per cent, car insurance was up 5.1 per cent, and restaurant meals increased 2.5 per cent.

Food prices also strengthened to a 1.6 per cent gain last month, following a 1.1 per cent pick-up in July, and prices associated with health and personal care rose 3.5 per cent.

The major deflationary influences were clothing and footwear, which declined 2.2 per cent, home mortgage costs, which declined 3.8 per cent, fresh vegetables, which dipped 4.2 per cent and air travel, which fell two per cent.

Manitoba had the country’s lowest inflation rate among provinces at 0.3 per cent.