CAAMP to Honour Angela with Award at Hall of Fame & Awards Night in Toronto
Dominion Lending Centres is proud to announce that Angela Calla, Mortgage Broker with Dominion Lending Centres BC based in Coquitlam, British Columbia, is the recipient of the prestigious Accredited Mortgage Professional (AMP) of the Year Award.
Each year, CAAMP recognizes one AMP through this award who demonstrates outstanding commitment to supporting and enhancing the designation to their peers and mortgage consumers.
Angela has been a licensed Mortgage Broker for five years – since she was 22 years old. She has been with Dominion Lending Centres since its inception in January 2006. Angela launched her career after recognizing the opportunity for mortgage brokering to marry her passion for real estate with smart financial planning.
Through her daily business practices and involvement with the media, Angela promotes herself as an AMP who strives to educate her clients and take the fear out of mortgage financing. A regular expert guest on Realty Television and Breakfast Television, Angela has also been a source for articles in the Globe and Mail, as well as several other publications and local radio stations.
Additionally, Angela hosts The Mortgage Show in Vancouver on talk 1410AM – now in its third season!
Angela will be formally recognized and presented with the AMP of the Year Award during CAAMP’s Hall of Fame and Awards Night on Sunday, November 22nd at the Metro Toronto Convention Centre.
Congrats, Angela!
Your DLC Head Office Team
This message was sent from DLC Head Office Team to acalla@dominionlending.ca. It was sent from: Dominion Lending Centres Inc., 2189 Austin Ave., Coquitlam, BC V3K 3R9, Canada. You can modify/update your subscription via the link below.
Friday, October 30, 2009
Monday, October 26, 2009
Variabel Rate the best long term option?
Study says variable-rate mortgages better deal for borrowers most times
The Canadian Press
TORONTO - Fixed mortgage rates may help you feel secure in your budgeting, but the Bank of Montreal (TSX:BMO) says the more volatile variable rate mortgages will save you money in the long run.
The bank put out a report Friday showing that, over the past 30 years, variable-rate mortgages have been more cost-effective about 82 per cent of the time.
That may come as a surprise to some after studies have shown many Canadians prefer a fixed-rate mortgage.
A fixed rate locks the borrower into a set interest rate for a certain period of time.
That gives many borrowers peace of mind knowing how much money to set aside each month for their mortgage payment.
Variable rates change along with interest-rate moves.
BMO said the Bank of Canada's overnight lending rate is at its lowest possible point now, which could mean there are fewer benefits to a variable rate in the foreseeable future.
BMO highlighted two historical periods when fixed rates were considered beneficial - in the late 1970s and late 1980s - and both were just before interest rates started rising again.
The bank added that the current interest environment is similar to both of these periods.
"Short-term rates are at extreme lows and pressure is likely to build for higher rates in the year ahead," said deputy chief economist Doug Porter in the report.
"The question of whether to lock in to a longer-term fixed mortgage rate or stay in a variable rate has become an increasingly complex and important issue."
Canada has been in a long-term declining rate environment since the early 1980s, the bank suggested.
As a result, the spread between five-year fixed mortgages and variable mortgages has been pushed wider in recent years, and is now near an all-time high.
The Canadian Press
TORONTO - Fixed mortgage rates may help you feel secure in your budgeting, but the Bank of Montreal (TSX:BMO) says the more volatile variable rate mortgages will save you money in the long run.
The bank put out a report Friday showing that, over the past 30 years, variable-rate mortgages have been more cost-effective about 82 per cent of the time.
That may come as a surprise to some after studies have shown many Canadians prefer a fixed-rate mortgage.
A fixed rate locks the borrower into a set interest rate for a certain period of time.
That gives many borrowers peace of mind knowing how much money to set aside each month for their mortgage payment.
Variable rates change along with interest-rate moves.
BMO said the Bank of Canada's overnight lending rate is at its lowest possible point now, which could mean there are fewer benefits to a variable rate in the foreseeable future.
BMO highlighted two historical periods when fixed rates were considered beneficial - in the late 1970s and late 1980s - and both were just before interest rates started rising again.
The bank added that the current interest environment is similar to both of these periods.
"Short-term rates are at extreme lows and pressure is likely to build for higher rates in the year ahead," said deputy chief economist Doug Porter in the report.
"The question of whether to lock in to a longer-term fixed mortgage rate or stay in a variable rate has become an increasingly complex and important issue."
Canada has been in a long-term declining rate environment since the early 1980s, the bank suggested.
As a result, the spread between five-year fixed mortgages and variable mortgages has been pushed wider in recent years, and is now near an all-time high.
Friday, October 23, 2009
What a strong Loonie means for interest rates
BoC focus on consumers worries analysts
Paul Vieira, Financial Post
OTTAWA -- Mark Carney, the governor of the Bank of Canada, said Thursday consumers would be at the "heart" of an economic recovery that continues to pick up steam, leaving analysts worrying a new wave of spending will only drive consumers deeper into debt.
Improved financial conditions and consumer confidence, coupled with indications that labour market conditions "may have" ceased deteriorating, has led the Bank of Canada to believe consumer spending will account for a larger share of total economic growth in the years ahead, according the central bank's quarterly economic outlook, released Thursday.
Consumer spending will offset some of the losses in the export-oriented sector, which is expected to contract 1% next year due to the strength of the Canadian dollar.
"The conundrum for the central bank is the longer they keep interest rates low, the more likely it is that it will create [a debt] problem," said Andrew Pyle, wealth advisor and markets commentator with ScotiaMcLeod.
The central bank upgraded growth projections for the second half of 2009, seeing expansion of 2% for the third quarter and 3.3% for the fourth quarter.
The bank previously expectated 1.3% and 3% in the third and fourth quarters, respectively. Then, the economy is set to expand 3% next year and 3.3% in 2011.
In 2010, consumer spending is set to contribute half of the growth in final domestic demand, which includes consumer purchases, housing, public spending and business investment. By 2011 it will climb to three-quarters.
This reliance on consumers has analysts wondering whether Canadians might find themselves caught in a debt trap, especially given the current low cost of borrowing -- as led by the Bank of Canada's record-low 0.25% policy rate.
Laurentian Bank Securities has noted that household credit as a share of GDP (currently at 90%) and the household debt-to-GDP ratio (at 140%) are "quite elevated" and kept creeping up during the recession.
At a media conference, Mr. Carney said the bank believes, all told, savers will outstrip borrowers, as incomes begin to grow on better job market conditions. He told reporters households should plan their financial affairs "prudently" on the anticipation that interest rates will eventually return to a more normal level.
That might be easier said than done, said Stewart Hall, an economist at HSBC Securities Canada. He said history and markets demonstrate consumers respond to cheap prices, whether it is for gas or for financing.
"The Bank of Canada [seems] to have removed themselves from the dynamic of cheap money ... and instead fallen back on the view that, at best, we are simply seeing pent-up demand and at worst ... that lenders and borrowers will self regulate and act in a prudent way," Mr. Hall said. "The heart wants what the heart wants and many a purchase, houses included, prove emotional rather than prudent."
Mr. Carney said the housing market dynamic has "raised some concerns" at the central bank, although it anticipates housing growth to slow down in early 2010 as pent-up demand for real estate is met, affordability declines and the federal home-renovation tax credit expires.
The strengthening dollar, the bank said, is driven in large part by the weakness in the U.S. currency. This, however, may be one of the consequences of unwinding global imbalances, as Americans will need to increase its exports and savings to generate wealth.
Large loonie hard to hurdle Strong dollar will be a drag on recovery, Carney saysBy JULIAN BELTRAME The Canadian Press
OTTAWA — The stubbornly strong loonie is the major impediment to the Canadian economy rebounding more strongly from the recent deep recession, says Bank of Canada governor Mark Carney.
In a new warning about the currency that is approaching parity with the U.S. greenback, Carney says Canada would experience noticeably stronger recovery next year and in 2011 if the loonie had stayed at the 87-cent level the bank envisaged in the summer.
Carney said Thursday that’s why the bank made it clear this week that barring an unforeseen spike in inflation, it will keep interest rates at the historic low of 0.25 per cent until at least next July.
Carney said the central bank has several tools at its disposal, including intervention in the currency market, but didn’t specify which would be put to use.
""Intervention is always an option," he said.
"Markets should take seriously our determination to set policy to achieve the inflation target. Markets sometimes lose their focus. We don’t lose our focus."
The loonie closed 0.16 of a cent lower at 95.44 cents US on Thursday, but many expect it to hit parity in the next few months, mainly because of weakness in the American dollar, which has dropped against most of the world’s major currencies.
A high loonie makes it cheaper to take U.S. vacations and buy imported goods. But it also harms the Canadian manufacturing sector because it makes exports of everything from minerals and metals to newsprint, machinery and lumber more expensive for buyers in the United States, Canada’s main export market.
Carney called the loonie’s persistent rise since July ""the major downside risk" to the economy, noting that although the loonie was higher two years ago, the difference now is that it comes during a period of severe economic weakness.
His comments came after the central bank issued a comprehensive 28-page quarterly review of the global economy, showing a sharp rebound is underway, fuelled by government stimulus and the need to restock depleted inventories.
But in Canada, the strong burst in activity will last at most a few months more before giving way to the slow and difficult climb back from the deep hole that the recession dug over the past year, the review adds.
The bank is more optimistic about the second half of this year than it was three months ago, noting modest employment gains in August and September.
In a supporting report, Statistics Canada announced that retail sales jumped 0.8 per cent in August to $34.5 billion, largely as a result of strong activity at new car dealerships and at gas stations.
"When the labour market fares well, good things tend to happen to the rest of the Canadian economy," said CIBC economist Krishen Rangasamy.
The domestic economy is now expected to record a two-per-cent gain in the third quarter — the July-September period — and 3.3 per cent during the last three months of this year. The Bank of Canada’s July forecast called for growth of 1.3 per cent and three per cent, in the third and fourth quarters respectively.
A number of things have broken right for Canada to make this happen. Commodity prices, particularly oil, have firmed up, financial markets have stabilized faster than expected, and the global economy, particularly in China, has rebounded quicker and stronger than expected.
And consumers have bounced back strongly, although the manufacturing export sector continues to struggle. There are also concerns about how future government restraint might erode growth as Ontario, Alberta and the federal government warn of spending curbs to cope with large deficits.
That will be more a problem after 2011 when many temporary stimulus measures reach sunset and governments try to work off massive deficits, said TD Bank economist Pascal Gauthier. But he believes governments will play it by ear when they start withdrawing stimulus, or enact deep spending cuts.
""I don’t think the governments themselves could cause a recession because by that time we will have some clarity on whether the private-sector recovery has some legs in it," he said.
For the next two years, however, it will be the loonie that cuts away at economic growth, the bank’s outlook argues.
Even if the dollar averages 96 cents US, and does not go above parity as some expect, the impact on the export side of the economy will severe enough to restrict growth to 3.0 per cent in 2010 and 3.3 per cent in 2011, a smaller bounce than normally follows deep recessions.
""Over the balance of the projection period, growth is slightly lower, reflecting the effect of the higher value of the Canadian dollar," the bank said, noting that a high dollar will make life difficult for manufacturers to sell in foreign markets.
On Tuesday, the bank issued a similar warning when it reaffirmed, in strong words, that it intends to keep interest rates at the historic low of 0.25 per cent at least until next summer.
The language had the desired impact of driving the loonie down nearly two cents Tuesday.
Still, no economist believes Carney strong warnings will be sufficient to keep the loonie grounded for long. In the final, analysis, the bank believes it has already set back by three months the recovery period.
It won’t be until late 2011 — two full years from now — that Canada’s economy will again be hitting on all cylinders, the bank says.
Paul Vieira, Financial Post
OTTAWA -- Mark Carney, the governor of the Bank of Canada, said Thursday consumers would be at the "heart" of an economic recovery that continues to pick up steam, leaving analysts worrying a new wave of spending will only drive consumers deeper into debt.
Improved financial conditions and consumer confidence, coupled with indications that labour market conditions "may have" ceased deteriorating, has led the Bank of Canada to believe consumer spending will account for a larger share of total economic growth in the years ahead, according the central bank's quarterly economic outlook, released Thursday.
Consumer spending will offset some of the losses in the export-oriented sector, which is expected to contract 1% next year due to the strength of the Canadian dollar.
"The conundrum for the central bank is the longer they keep interest rates low, the more likely it is that it will create [a debt] problem," said Andrew Pyle, wealth advisor and markets commentator with ScotiaMcLeod.
The central bank upgraded growth projections for the second half of 2009, seeing expansion of 2% for the third quarter and 3.3% for the fourth quarter.
The bank previously expectated 1.3% and 3% in the third and fourth quarters, respectively. Then, the economy is set to expand 3% next year and 3.3% in 2011.
In 2010, consumer spending is set to contribute half of the growth in final domestic demand, which includes consumer purchases, housing, public spending and business investment. By 2011 it will climb to three-quarters.
This reliance on consumers has analysts wondering whether Canadians might find themselves caught in a debt trap, especially given the current low cost of borrowing -- as led by the Bank of Canada's record-low 0.25% policy rate.
Laurentian Bank Securities has noted that household credit as a share of GDP (currently at 90%) and the household debt-to-GDP ratio (at 140%) are "quite elevated" and kept creeping up during the recession.
At a media conference, Mr. Carney said the bank believes, all told, savers will outstrip borrowers, as incomes begin to grow on better job market conditions. He told reporters households should plan their financial affairs "prudently" on the anticipation that interest rates will eventually return to a more normal level.
That might be easier said than done, said Stewart Hall, an economist at HSBC Securities Canada. He said history and markets demonstrate consumers respond to cheap prices, whether it is for gas or for financing.
"The Bank of Canada [seems] to have removed themselves from the dynamic of cheap money ... and instead fallen back on the view that, at best, we are simply seeing pent-up demand and at worst ... that lenders and borrowers will self regulate and act in a prudent way," Mr. Hall said. "The heart wants what the heart wants and many a purchase, houses included, prove emotional rather than prudent."
Mr. Carney said the housing market dynamic has "raised some concerns" at the central bank, although it anticipates housing growth to slow down in early 2010 as pent-up demand for real estate is met, affordability declines and the federal home-renovation tax credit expires.
The strengthening dollar, the bank said, is driven in large part by the weakness in the U.S. currency. This, however, may be one of the consequences of unwinding global imbalances, as Americans will need to increase its exports and savings to generate wealth.
Large loonie hard to hurdle Strong dollar will be a drag on recovery, Carney saysBy JULIAN BELTRAME The Canadian Press
OTTAWA — The stubbornly strong loonie is the major impediment to the Canadian economy rebounding more strongly from the recent deep recession, says Bank of Canada governor Mark Carney.
In a new warning about the currency that is approaching parity with the U.S. greenback, Carney says Canada would experience noticeably stronger recovery next year and in 2011 if the loonie had stayed at the 87-cent level the bank envisaged in the summer.
Carney said Thursday that’s why the bank made it clear this week that barring an unforeseen spike in inflation, it will keep interest rates at the historic low of 0.25 per cent until at least next July.
Carney said the central bank has several tools at its disposal, including intervention in the currency market, but didn’t specify which would be put to use.
""Intervention is always an option," he said.
"Markets should take seriously our determination to set policy to achieve the inflation target. Markets sometimes lose their focus. We don’t lose our focus."
The loonie closed 0.16 of a cent lower at 95.44 cents US on Thursday, but many expect it to hit parity in the next few months, mainly because of weakness in the American dollar, which has dropped against most of the world’s major currencies.
A high loonie makes it cheaper to take U.S. vacations and buy imported goods. But it also harms the Canadian manufacturing sector because it makes exports of everything from minerals and metals to newsprint, machinery and lumber more expensive for buyers in the United States, Canada’s main export market.
Carney called the loonie’s persistent rise since July ""the major downside risk" to the economy, noting that although the loonie was higher two years ago, the difference now is that it comes during a period of severe economic weakness.
His comments came after the central bank issued a comprehensive 28-page quarterly review of the global economy, showing a sharp rebound is underway, fuelled by government stimulus and the need to restock depleted inventories.
But in Canada, the strong burst in activity will last at most a few months more before giving way to the slow and difficult climb back from the deep hole that the recession dug over the past year, the review adds.
The bank is more optimistic about the second half of this year than it was three months ago, noting modest employment gains in August and September.
In a supporting report, Statistics Canada announced that retail sales jumped 0.8 per cent in August to $34.5 billion, largely as a result of strong activity at new car dealerships and at gas stations.
"When the labour market fares well, good things tend to happen to the rest of the Canadian economy," said CIBC economist Krishen Rangasamy.
The domestic economy is now expected to record a two-per-cent gain in the third quarter — the July-September period — and 3.3 per cent during the last three months of this year. The Bank of Canada’s July forecast called for growth of 1.3 per cent and three per cent, in the third and fourth quarters respectively.
A number of things have broken right for Canada to make this happen. Commodity prices, particularly oil, have firmed up, financial markets have stabilized faster than expected, and the global economy, particularly in China, has rebounded quicker and stronger than expected.
And consumers have bounced back strongly, although the manufacturing export sector continues to struggle. There are also concerns about how future government restraint might erode growth as Ontario, Alberta and the federal government warn of spending curbs to cope with large deficits.
That will be more a problem after 2011 when many temporary stimulus measures reach sunset and governments try to work off massive deficits, said TD Bank economist Pascal Gauthier. But he believes governments will play it by ear when they start withdrawing stimulus, or enact deep spending cuts.
""I don’t think the governments themselves could cause a recession because by that time we will have some clarity on whether the private-sector recovery has some legs in it," he said.
For the next two years, however, it will be the loonie that cuts away at economic growth, the bank’s outlook argues.
Even if the dollar averages 96 cents US, and does not go above parity as some expect, the impact on the export side of the economy will severe enough to restrict growth to 3.0 per cent in 2010 and 3.3 per cent in 2011, a smaller bounce than normally follows deep recessions.
""Over the balance of the projection period, growth is slightly lower, reflecting the effect of the higher value of the Canadian dollar," the bank said, noting that a high dollar will make life difficult for manufacturers to sell in foreign markets.
On Tuesday, the bank issued a similar warning when it reaffirmed, in strong words, that it intends to keep interest rates at the historic low of 0.25 per cent at least until next summer.
The language had the desired impact of driving the loonie down nearly two cents Tuesday.
Still, no economist believes Carney strong warnings will be sufficient to keep the loonie grounded for long. In the final, analysis, the bank believes it has already set back by three months the recovery period.
It won’t be until late 2011 — two full years from now — that Canada’s economy will again be hitting on all cylinders, the bank says.
Wednesday, October 21, 2009
Carney wins round one with loonie taking currency down 2 cents with one blow
By Julian Beltrame, The Canadian Press
OTTAWA - The Bank of Canada took the wind out of the loonie's sails Tuesday, driving down the currency nearly two cents against the U.S. dollar with a warning that it was prepared to stick to low interest rates for some time.
And although the central bank's words have had short-term impacts on the currency before, this time the effect may last longer, economists said.
In one of the gloomier reports in months, the central bank's governing council declared that a strong loonie threatens Canada's economic recovery, saying its recent rise more than offset all the encouraging indicators seen over the summer.
"(The) heightened volatility and persistent strength in the Canadian dollar are working to slow growth and subdue inflation pressures," the bank said. "The current strength in the dollar is expected, over time, to more than fully offset the favourable developments since July."
As expected, the central bank kept its policy interest rate moored at the historic low of 0.25 per cent, the level it's been at since the spring.
The affect of the bank's statement could be seen immediately. The currency fell a penny against the U.S. dollar within minutes of the announcement and kept going, at one time trading down 2.17 cents U.S.
It closed on slightly better footing, though still down 1.98 cents at 95.17 cents U.S.
Economists said the reason for the big drop was not so much what the bank said about the dollar - it had made similar warnings for months - but more because markets had expected it would soon follow the lead of Australia, which has begun to raise interest rates.
Canada's central bank put a stop to that speculation Tuesday when it downgraded economic growth prospects for this year and 2011.
The bank now estimates the Canadian economy will shrink by 2.4 per cent in 2009, not 2.3 per cent as it predicted last month. Next year's forecast was unchanged at three per cent growth, but the bank downgraded its forecast for 2011 growth by two-tenths of a point to 3.3 per cent.
As significantly, it set back a full quarter its expectation for when economic output and inflation can be expected to return to where it wants them, to the fall of 2011.
"This is a somewhat more modest recovery in Canada than the average of previous economic cycles," the bank said.
With inflation nowhere in the horizon, there appears little urgency for governor Mark Carney to back off his conditional commitment to keep the central bank's policy rate at the lower bound of 0.25 per cent until next July. The thinking may be that short-term interest rates will stay at the historic floor even longer, perhaps until the end of next year.
"The delay in returning back to its target rate on inflation would allow a longer period of keeping rates on hold," said CIBC chief economist Avery Shenfeld.
"Financial markets tend to get edgy sitting still, but Carney is a man in no hurry to act."
Royal Bank currency strategist Matthew Strauss said Carney's gambit will have long-lasting impacts on the dollar.
That doesn't mean the dollar won't rise again, since the main driver will be oil prices and other external forces. But, he said, the bank governor has taken some of the speculation out of the calculation and going forward expects the loonie will underperform compared with other commodity-weighted currencies, such as the Australian dollar.
"It will definitely have an effect," he said. "Now the market knows exactly where the Bank of Canada and the Government of Canada stands."
Scotiabank economists Derek Holt and Karen Cordes said the markets should have seen it coming.
They wrote in a note to clients that it's ill-advised to lump Canada in with Australia, saying there are "night-and-day differences in the Canadian economy's export exposures and currency sensitivities."
Canada fell into a recession similar to one it experienced in the early 1990s, with its recovery prospects closely tied to the weak U.S. economy. Australia, which is benefiting from returning strong growth in China, never fell into even a technical recession.
Carney believes the Canadian dollar will keep future growth even more sluggish than it thought a few months ago.
Two indicators from Statistics Canada on Tuesday filled in the picture of an economy that is recovery, but not robustly.
The leading index of economic indicators rose 1.1 per cent in September, slightly less than the revised 1.2 per cent gain registered in August. And Canadian wholesalers took a hit in August as sales dropped 1.4 per cent.
The TD Bank said it now believes the Canadian economy likely contracted 0.2 per cent in August after a flat reading in July.
In September, the last time the bank pronounced on interest rates, Carney and the governing council had enthused that the recovery was going so well it was expecting to revise its July growth forecast that predicted 1.3 per-cent growth in the gross domestic product in the third quarter and three per cent in the fourth.
But that was when the bank expected the loonie to average 87 cents US through 2010.
OTTAWA - The Bank of Canada took the wind out of the loonie's sails Tuesday, driving down the currency nearly two cents against the U.S. dollar with a warning that it was prepared to stick to low interest rates for some time.
And although the central bank's words have had short-term impacts on the currency before, this time the effect may last longer, economists said.
In one of the gloomier reports in months, the central bank's governing council declared that a strong loonie threatens Canada's economic recovery, saying its recent rise more than offset all the encouraging indicators seen over the summer.
"(The) heightened volatility and persistent strength in the Canadian dollar are working to slow growth and subdue inflation pressures," the bank said. "The current strength in the dollar is expected, over time, to more than fully offset the favourable developments since July."
As expected, the central bank kept its policy interest rate moored at the historic low of 0.25 per cent, the level it's been at since the spring.
The affect of the bank's statement could be seen immediately. The currency fell a penny against the U.S. dollar within minutes of the announcement and kept going, at one time trading down 2.17 cents U.S.
It closed on slightly better footing, though still down 1.98 cents at 95.17 cents U.S.
Economists said the reason for the big drop was not so much what the bank said about the dollar - it had made similar warnings for months - but more because markets had expected it would soon follow the lead of Australia, which has begun to raise interest rates.
Canada's central bank put a stop to that speculation Tuesday when it downgraded economic growth prospects for this year and 2011.
The bank now estimates the Canadian economy will shrink by 2.4 per cent in 2009, not 2.3 per cent as it predicted last month. Next year's forecast was unchanged at three per cent growth, but the bank downgraded its forecast for 2011 growth by two-tenths of a point to 3.3 per cent.
As significantly, it set back a full quarter its expectation for when economic output and inflation can be expected to return to where it wants them, to the fall of 2011.
"This is a somewhat more modest recovery in Canada than the average of previous economic cycles," the bank said.
With inflation nowhere in the horizon, there appears little urgency for governor Mark Carney to back off his conditional commitment to keep the central bank's policy rate at the lower bound of 0.25 per cent until next July. The thinking may be that short-term interest rates will stay at the historic floor even longer, perhaps until the end of next year.
"The delay in returning back to its target rate on inflation would allow a longer period of keeping rates on hold," said CIBC chief economist Avery Shenfeld.
"Financial markets tend to get edgy sitting still, but Carney is a man in no hurry to act."
Royal Bank currency strategist Matthew Strauss said Carney's gambit will have long-lasting impacts on the dollar.
That doesn't mean the dollar won't rise again, since the main driver will be oil prices and other external forces. But, he said, the bank governor has taken some of the speculation out of the calculation and going forward expects the loonie will underperform compared with other commodity-weighted currencies, such as the Australian dollar.
"It will definitely have an effect," he said. "Now the market knows exactly where the Bank of Canada and the Government of Canada stands."
Scotiabank economists Derek Holt and Karen Cordes said the markets should have seen it coming.
They wrote in a note to clients that it's ill-advised to lump Canada in with Australia, saying there are "night-and-day differences in the Canadian economy's export exposures and currency sensitivities."
Canada fell into a recession similar to one it experienced in the early 1990s, with its recovery prospects closely tied to the weak U.S. economy. Australia, which is benefiting from returning strong growth in China, never fell into even a technical recession.
Carney believes the Canadian dollar will keep future growth even more sluggish than it thought a few months ago.
Two indicators from Statistics Canada on Tuesday filled in the picture of an economy that is recovery, but not robustly.
The leading index of economic indicators rose 1.1 per cent in September, slightly less than the revised 1.2 per cent gain registered in August. And Canadian wholesalers took a hit in August as sales dropped 1.4 per cent.
The TD Bank said it now believes the Canadian economy likely contracted 0.2 per cent in August after a flat reading in July.
In September, the last time the bank pronounced on interest rates, Carney and the governing council had enthused that the recovery was going so well it was expecting to revise its July growth forecast that predicted 1.3 per-cent growth in the gross domestic product in the third quarter and three per cent in the fourth.
But that was when the bank expected the loonie to average 87 cents US through 2010.
Tuesday, October 20, 2009
Why Canada's housing sector didn't collapse
Globe and Mail Update Published on Monday, Oct. 19, 2009
While it's tempting to think of a “housing correction” as a continent-wide phenomenon, National Bank Financial says the Canadian and U.S. markets couldn't be more different.
“The two have absolutely nothing in common,” senior economist Marc Pinsonneault wrote in an economic update Monday. “In Canada, the correction got under way much later and lasted nowhere as long.”
Mr. Pinsonneault said “prudent lending practices” in Canada prevented the housing market from falling as hard as its American counterpart, and pointed out that Canada's crisis was a side-effect of its recession rather than its cause.
Here are four ways the markets have differed:
Duration of slowdown
The Canadian market began to slide in October, 2008, while the American slump has lasted 2 1/2 years.
“People wishing to sell their homes either cut their asking price or quite simply took their property off the market,” he said of the Canadian market. “Lower interest rates, lower home prices and renewed consumer confidence led to a quick recovery in sales, so much so that as early as last May, these had surpassed pre-recession levels.
Price declines
According to Teranet, Canadian home prices fell 8.9 per cent from their August, 2008, highs to their recessionary lows eight months later. In the U.S., the S&P/Case Shiller index shows prices slid 33 per cent in 33 months.
Delinquency rates
Canadian banks have seen delinquency rates climb to 0.4 per cent, compared to the 0.65 per cent high reached in 1992. The number is far greater in the U.S., at 3.67 per cent.
Consumer spending
When home prices are under pressure, consumers tend to reel in the spending.
“According to Statistics Canada, from the end of Q3 2008 to mid-2009, the value of household real estate wealth sagged only 1.1 per cent,” he said. “The impact of this impoverishment on consumer spending has been negligible.”
In the U.S., the value of household real estate wealth dropped 18.2 per cent. The Federal Reserve estimates that for each dollar lost in housing wealth, consumer spending pulls back up to 15 cents.
Steve Ladurantaye
While it's tempting to think of a “housing correction” as a continent-wide phenomenon, National Bank Financial says the Canadian and U.S. markets couldn't be more different.
“The two have absolutely nothing in common,” senior economist Marc Pinsonneault wrote in an economic update Monday. “In Canada, the correction got under way much later and lasted nowhere as long.”
Mr. Pinsonneault said “prudent lending practices” in Canada prevented the housing market from falling as hard as its American counterpart, and pointed out that Canada's crisis was a side-effect of its recession rather than its cause.
Here are four ways the markets have differed:
Duration of slowdown
The Canadian market began to slide in October, 2008, while the American slump has lasted 2 1/2 years.
“People wishing to sell their homes either cut their asking price or quite simply took their property off the market,” he said of the Canadian market. “Lower interest rates, lower home prices and renewed consumer confidence led to a quick recovery in sales, so much so that as early as last May, these had surpassed pre-recession levels.
Price declines
According to Teranet, Canadian home prices fell 8.9 per cent from their August, 2008, highs to their recessionary lows eight months later. In the U.S., the S&P/Case Shiller index shows prices slid 33 per cent in 33 months.
Delinquency rates
Canadian banks have seen delinquency rates climb to 0.4 per cent, compared to the 0.65 per cent high reached in 1992. The number is far greater in the U.S., at 3.67 per cent.
Consumer spending
When home prices are under pressure, consumers tend to reel in the spending.
“According to Statistics Canada, from the end of Q3 2008 to mid-2009, the value of household real estate wealth sagged only 1.1 per cent,” he said. “The impact of this impoverishment on consumer spending has been negligible.”
In the U.S., the value of household real estate wealth dropped 18.2 per cent. The Federal Reserve estimates that for each dollar lost in housing wealth, consumer spending pulls back up to 15 cents.
Steve Ladurantaye
Prime Remains at 2.25%
Bank of Canada maintains overnight rate target at 1/4 per cent and reiterates conditional commitment to hold current policy rate until the end of the second quarter of 2010
OTTAWA – The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1/4 per cent. The Bank Rate is unchanged at 1/2 per cent and the deposit rate is 1/4 per cent.
Recent indicators point to the start of a global recovery from a deep, synchronous recession. Global economic and financial developments have been somewhat more favourable than expected at the time of the July Monetary Policy Report (MPR), although significant fragilities remain.
A recovery in economic activity is also under way in Canada. This resumption of growth is supported by monetary and fiscal stimulus, increased household wealth, improving financial conditions, higher commodity prices, and stronger business and consumer confidence. However, heightened volatility and persistent strength in the Canadian dollar are working to slow growth and subdue inflation pressures. The current strength in the dollar is expected, over time, to more than fully offset the favourable developments since July.
Given all of these factors, the Bank now projects that, relative to the July MPR, the composition of aggregate demand will shift further towards final domestic demand and away from net exports. Growth is expected to be slightly higher in the second half of this year than previously projected but to average slightly lower over the balance of the projection period. The Canadian economy is projected to grow by 3.0 per cent in 2010 and 3.3 per cent in 2011, after contracting by 2.4 per cent this year. This is a somewhat more modest recovery in Canada than the average of previous economic cycles.
The Bank now expects that the output gap will be closed in the third quarter of 2011, one quarter later than it had projected in July. Correspondingly, inflation is also expected to return to the 2 per cent target in the third quarter of 2011, one quarter later than in July's projection.
While the underlying macroeconomic risks to the projection are roughly balanced, the Bank judges that, as a consequence of operating at the effective lower bound, the overall risks to its inflation projection are tilted slightly to the downside.
Conditional on the outlook for inflation, the target overnight rate can be expected to remain at its current level until the end of the second quarter of 2010 in order to achieve the inflation target. Consistent with this conditional commitment, the Bank will continue to conduct longer-term Purchase and Resale Agreements based on existing terms and conditions and according to the accompanying schedule: http://www.bankofcanada.ca/en/notices_fmd/2009/notice_fad201009.pdf.
In its conduct of monetary policy at low interest rates, the Bank retains considerable flexibility, consistent with the framework outlined in the April MPR.
Information note:
A full update of the Bank's outlook for the economy and inflation, including risks to the projection, will be published in the MPR on Thursday, 22 October. The next scheduled date for announcing the overnight rate target is 8 December 2009.
OTTAWA – The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1/4 per cent. The Bank Rate is unchanged at 1/2 per cent and the deposit rate is 1/4 per cent.
Recent indicators point to the start of a global recovery from a deep, synchronous recession. Global economic and financial developments have been somewhat more favourable than expected at the time of the July Monetary Policy Report (MPR), although significant fragilities remain.
A recovery in economic activity is also under way in Canada. This resumption of growth is supported by monetary and fiscal stimulus, increased household wealth, improving financial conditions, higher commodity prices, and stronger business and consumer confidence. However, heightened volatility and persistent strength in the Canadian dollar are working to slow growth and subdue inflation pressures. The current strength in the dollar is expected, over time, to more than fully offset the favourable developments since July.
Given all of these factors, the Bank now projects that, relative to the July MPR, the composition of aggregate demand will shift further towards final domestic demand and away from net exports. Growth is expected to be slightly higher in the second half of this year than previously projected but to average slightly lower over the balance of the projection period. The Canadian economy is projected to grow by 3.0 per cent in 2010 and 3.3 per cent in 2011, after contracting by 2.4 per cent this year. This is a somewhat more modest recovery in Canada than the average of previous economic cycles.
The Bank now expects that the output gap will be closed in the third quarter of 2011, one quarter later than it had projected in July. Correspondingly, inflation is also expected to return to the 2 per cent target in the third quarter of 2011, one quarter later than in July's projection.
While the underlying macroeconomic risks to the projection are roughly balanced, the Bank judges that, as a consequence of operating at the effective lower bound, the overall risks to its inflation projection are tilted slightly to the downside.
Conditional on the outlook for inflation, the target overnight rate can be expected to remain at its current level until the end of the second quarter of 2010 in order to achieve the inflation target. Consistent with this conditional commitment, the Bank will continue to conduct longer-term Purchase and Resale Agreements based on existing terms and conditions and according to the accompanying schedule: http://www.bankofcanada.ca/en/notices_fmd/2009/notice_fad201009.pdf.
In its conduct of monetary policy at low interest rates, the Bank retains considerable flexibility, consistent with the framework outlined in the April MPR.
Information note:
A full update of the Bank's outlook for the economy and inflation, including risks to the projection, will be published in the MPR on Thursday, 22 October. The next scheduled date for announcing the overnight rate target is 8 December 2009.
Tuesday, October 13, 2009
Recovery in the works, still a ways to go!
Most economists say recession is over and recovery is beginning
By Mae Anderson
NEW YORK — More than 80 per cent of economists believe the recession is over and an expansion has begun, but they expect the recovery will be slow as worries over unemployment and high federal debt persist.
That consensus comes from leading forecasters in a survey by the National Association for Business Economics released Monday.
“The survey found that the vast majority of business economists believe that the recession has ended but that the economic recovery is likely to be more moderate than those typically experienced following steep declines,” said association president-elect Lynn Reaser, chief economist at Point Loma Nazarene University.
The forecasters upgraded the economic outlook for the next several quarters, but cautioned that unemployment rates and the federal deficit are expected to remain high through the next year. Forecasters now expect the economy, as measured by gross domestic product, to advance at a 2.9 per cent pace in the second half of the year, after falling for four straight quarters for the first time on records dating to 1947. They expect a three per cent gain in 2010.
Still, the federal deficit has ballooned and the jobless rate is expected to lag behind, as employers remain cautious.
The unemployment rate rose to 9.8 per cent in September from 9.7 per cent, the Labour Department said earlier this month, the highest point in 26 years.
Forecasters expect the unemployment rate to continue to rise, to 10 per cent in the first quarter of next year, before edging down to 9.5 per cent by the end of 2010.
The recession, the worst since the 1930s, has eliminated a net total of 7.2 million jobs.
Worries about unemployment are likely to continue to constrain household spending. Personal consumption spending likely began rising in the second half of this year, but is expected to remain low in 2010. Still, Americans aren’t expected to save as much as they have in past decades. The savings rate is expected to be above the 2 per cent average of the past four years, but below the 9 per cent average in the 1970s and 1980s.
The housing recovery is one bright spot. Forecasters expect 2010 to be the first year since 2005 that the housing sector will contribute to overall growth. Home prices are expected to rise two per cent in 2010, but panellists do not believe that will stifle the housing recovery.
Inflation is expected to remain low due to the weak labour market and other factors. Thus, the association panel — which consists of 44 economists surveyed Sept. 2 through Sept. 24 — expects the federal funds rate to remain at its current record low near zero until late next spring, before a gradual rise begins.
“The good news is that this deep and long recession appears to be over, and with improving credit markets, the U.S. economy can return to solid growth next year without worry about rising inflation,” said Reaser.
The Associated Press
By Mae Anderson
NEW YORK — More than 80 per cent of economists believe the recession is over and an expansion has begun, but they expect the recovery will be slow as worries over unemployment and high federal debt persist.
That consensus comes from leading forecasters in a survey by the National Association for Business Economics released Monday.
“The survey found that the vast majority of business economists believe that the recession has ended but that the economic recovery is likely to be more moderate than those typically experienced following steep declines,” said association president-elect Lynn Reaser, chief economist at Point Loma Nazarene University.
The forecasters upgraded the economic outlook for the next several quarters, but cautioned that unemployment rates and the federal deficit are expected to remain high through the next year. Forecasters now expect the economy, as measured by gross domestic product, to advance at a 2.9 per cent pace in the second half of the year, after falling for four straight quarters for the first time on records dating to 1947. They expect a three per cent gain in 2010.
Still, the federal deficit has ballooned and the jobless rate is expected to lag behind, as employers remain cautious.
The unemployment rate rose to 9.8 per cent in September from 9.7 per cent, the Labour Department said earlier this month, the highest point in 26 years.
Forecasters expect the unemployment rate to continue to rise, to 10 per cent in the first quarter of next year, before edging down to 9.5 per cent by the end of 2010.
The recession, the worst since the 1930s, has eliminated a net total of 7.2 million jobs.
Worries about unemployment are likely to continue to constrain household spending. Personal consumption spending likely began rising in the second half of this year, but is expected to remain low in 2010. Still, Americans aren’t expected to save as much as they have in past decades. The savings rate is expected to be above the 2 per cent average of the past four years, but below the 9 per cent average in the 1970s and 1980s.
The housing recovery is one bright spot. Forecasters expect 2010 to be the first year since 2005 that the housing sector will contribute to overall growth. Home prices are expected to rise two per cent in 2010, but panellists do not believe that will stifle the housing recovery.
Inflation is expected to remain low due to the weak labour market and other factors. Thus, the association panel — which consists of 44 economists surveyed Sept. 2 through Sept. 24 — expects the federal funds rate to remain at its current record low near zero until late next spring, before a gradual rise begins.
“The good news is that this deep and long recession appears to be over, and with improving credit markets, the U.S. economy can return to solid growth next year without worry about rising inflation,” said Reaser.
The Associated Press
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