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A string of weaker-than-expected economic data has led markets to place very low odds on rate hike this month from the Bank of Canada.
Canada’s economy unexpectedly lost 6,600 jobs in September, largely because a steep drop in part-time jobs outweighed gains in full-time positions. Market operators had expected a gain of 10,000 jobs. Statistics Canada said the unemployment rate edged down to 8.0 percent from 8.1 percent in August.
Still, economists suggested the headline jobs data masked some underlying strength. Most important, full-time jobs gained for a second straight month, by a robust 37,100, compared to a 43,700 drop in part-time employment. Scotia Capital said this likely represented a conversion of part-time work to full-time work, which is a “mild positive” as it expands hours worked. Plus, full-time jobs are generally better paying and more stable.
Meanwhile, Canadian Finance Minister Jim Flaherty claimed to be encouraged by the country’s September jobs data.
“I’m not surprised. We’re seeing moderate growth in Canada. I’m encouraged by the growth in full-time jobs, the unemployment rate has dropped.
Canadians ought to expect we will see continued moderate growth. We’re in much better shape than most other industrialized countries.”
Over the course of 2010, the rate of part-time job creation has outpaced full-time and, as a consequence, the number of hours worked remains below the peak level hit prior to the economic downturn, said Dawn Desjardins, assistant chief economist at Royal Bank of Canada.
“At the same time, debt levels have been rising with the household debt-to-income ratio hitting a new high early this year,” she said. “The prospect of more moderate growth going forward suggests that labour market conditions will improve more slowly in the months ahead and that the unemployment rate will only gradually drift lower.”
http://www.financialpost.com
CAAMP Stats – October issue
Below are the statistical tables from the October 2010 Issue of CAAMP Stats.
To find out more about the Canadian Association of Accredited Mortgage Professionals (CAAMP), please visit their website at www.caamp.org
Bank of Canada Interest Rate
| July 20, 2010 | 0.75 % |
| September 8, 2010 | 1.00 % |
| October 19, 2010 | Next meeting date |
Source: Bank of Canada
Bank Prime Lending Rate
| July 21, 2010 | 2.75 % |
| September 9, 2010 | 3.00 % |
| October 20, 2010 | Next meeting date |
Source: Bank of Canada
Conventional Mortgage – 5 Year Rate*
| August 23, 2010 | 5.49 % |
| August 30, 2010 | 5.39 % |
| September 15, 2010 | 5.39 % |
Source: Bank of Canada
*Determinant for high ratio mortgage variable qualifying rate
US Federal Reserve Board Discount Rate
| August 10, 2010 | 0.00 % – 0.25 % |
| September 21, 2010 | 0.00 % – 0.25 % |
| November 3, 2010 | Next Meeting date |
Exchange Rate $CDN($US)
| September 1, 2010 | 0.9506 |
| September 17, 2010 | 0.9696 |
| October 4, 2010 | 0.9785 |
Source: Bank of Canada
Government of Canada Bonds
| Bond Type | August 25, 2010 | September 15, 2010 | September 29, 2010 |
| 1 year Treasury Bill | 0.98% | 1.30% | 1.27% |
| 3 year Benchmark Bond Yield |
1.53% | 1.72% | 1.58% |
| 5 year Benchmark Bond Yield |
2.08% | 2.25% | 2.01% |
| 10 year Benchmark Bond Yield |
2.83% | 2.90% | 2.74% |
Source: Bank of Canada
Total New Housing Starts (Seasonally adjusted and annualized)
| Province | June 2010 |
June 2009 |
July 2010 |
July 2009 |
August 2010 |
August 2009 |
| Newfoundland/Labrador | 4,500 | 2,900 | 3,300 | 2,900 | 1,800 | 2,400 |
| PEI | 1,000 | 1,000 | 800 | 600 | 800 | 1,000 |
| Nova Scotia | 3,200 | 2,700 | 5,800 | 3,300 | 2,200 | 4,200 |
| New Brunswick | 4,700 | 3,300 | 6,100 | 3,800 | 4,000 | 3,700 |
| Quebec | 54,500 | 37,900 | 52,900 | 46,200 | 38,200 | 47,300 |
| Ontario | 56,100 | 45,800 | 53,200 | 39,100 | 59,400 | 44,200 |
| Manitoba | 8,100 | 5,000 | 9,700 | 4,000 | 4,000 | 5,000 |
| Saskatchewan | 6,200 | 5,100 | 5,300 | 3,600 | 6,100 | 5,100 |
| Alberta | 27,000 | 20,000 | 29,200 | 17,600 | 20,900 | 18,400 |
| British Columbia | 27,000 | 14,100 | 22,800 | 13,100 | 25,400 | 19,200 |
| CANADA | 192,300 | 137,800 | 189,100 | 134,200 | 162,800 | 150,500 |
Source: CMHC Housing Now – September 2010 and September 2009. This seasonally adjusted data goes through stages of revision at different times of the the year.
Average MLS® Resale Price for Local Markets
| City | August 2009 | August 2010 |
| Halifax | $231,203 | $254,298 |
| Saint John | $166,117 | $173,918 |
| Quebec | $220,760 | $239,688 |
| Montreal | $279,897 | $303,707 |
| Ottawa | $315,176 | $322,281 |
| Toronto | $387,899 | $410,995 |
| Hamilton/Burlington | $291,374 | $299,812 |
| Winnipeg | $207,389 | $222,597 |
| Saskatoon | $281,871 | $305,866 |
| Calgary | $388,725 | $385,712 |
| Edmonton | $318,321 | $326,550 |
| Vancouver | $608,032 | $680,782 |
| Victoria | $481,279 | $471,929 |
Source: Canadian Real Estate Association
Housing Affordability Index
Standard two-storey
| Average Price | Qualifying Income ($) | RBC Housing Affordability Measure | |||||
| Region | Q2 2010 ($) | Y/Y % ch. | Q2 2010 | Q2 2010 (%) | Q/Q Ppt. ch. | Y/Y Ppt. ch. | Avg. since ’85 (%) |
| Canada* | 374,200 | 10.1 | 86,600 | 48.9 | 2.1 | 4.3 | 43.3 |
| British Columbia | 625,400 | 12.0 | 130,100 | 71.2 | 2.5 | 8.3 | 54.0 |
| Alberta | 373,900 | 4.9 | 85,100 | 37.5 | 0.7 | 1.5 | 38.6 |
| Saskatchewan | 319,900 | 8.4 | 77,500 | 43.0 | 0.6 | 2.2 | 38.0 |
| Manitoba | 276,000 | 10.7 | 68,500 | 39.3 | 2.2 | 3.1 | 37.7 |
| Ontario | 393,000 | 9.8 | 93,500 | 47.4 | 2.6 | 4.0 | 43.7 |
| Quebec | 263,100 | 12.3 | 64,000 | 43.7 | 1.6 | 4.5 | 38.8 |
| Atlantic | 224,000 | 6.5 | 58,000 | 37.8 | 1.5 | 2.1 | 38.1 |
| Toronto | 564,600 | 10.7 | 126,600 | 60.0 | 3.1 | 5.9 | 53.4 |
| Montreal | 331,400 | 9.5 | 77,900 | 53.3 | 1.9 | 4.9 | 41.6 |
| Vancouver | 768,700 | 14.3 | 156,700 | 82.6 | 2.9 | 11.2 | 62.4 |
| Ottawa | 358,600 | 12.7 | 90,600 | 43.0 | 3.5 | 4.3 | 39.0 |
| Calgary | 422,100 | 5.5 | 91,600 | 40.2 | -0.1 | 1.8 | 40.3 |
| Edmonton | 373,600 | 8.1 | 86,400 | 39.0 | 1.2 | 2.3 | 37.0 |
Detached bungalow
| Average Price | Qualifying Income ($) | RBC Housing Affordability Measure | |||||
| Region | Q2 2010 ($) | Y/Y % ch. | Q2 2010 | Q2 2010 (%) | Q/Q Ppt. ch. | Y/Y Ppt. ch. | Avg. since ’85 (%) |
| Canada* | 330,000 | 10.8 | 76,000 | 42.9 | 1.9 | 4.0 | 39.0 |
| British Columbia | 561,600 | 15.4 | 116,700 | 63.8 | 1.7 | 8.8 | 48.8 |
| Alberta | 347,900 | 5.2 | 77,900 | 34.3 | 1.4 | 1.4 | 36.1 |
| Saskatchewan | 313,100 | 6.4 | 73,600 | 40.8 | 1.5 | 1.6 | 36.6 |
| Manitoba | 249,500 | 10.0 | 62,800 | 36.0 | 0.8 | 2.7 | 36.8 |
| Ontario | 342,200 | 10.3 | 81,200 | 41.2 | 2.3 | 3.6 | 40.1 |
| Quebec | 221,100 | 11.6 | 53,500 | 36.5 | 1.3 | 3.7 | 32.9 |
| Atlantic | 196,000 | 4.5 | 49,700 | 32.4 | 1.1 | 1.4 | 31.6 |
| Toronto | 472,800 | 10.9 | 105,900 | 50.2 | 2.4 | 5.0 | 48.2 |
| Montreal | 267,200 | 11.0 | 63,200 | 43.2 | 1.8 | 4.3 | 36.8 |
| Vancouver | 688,600 | 18.0 | 140,500 | 74.0 | 1.7 | 11.7 | 57.2 |
| Ottawa | 354,100 | 11.7 | 86,800 | 41.2 | 3.6 | 4.0 | 36.6 |
| Calgary | 420,000 | 4.6 | 89,200 | 39.2 | 0.9 | 1.6 | 39.9 |
| Edmonton | 335,700 | 9.6 | 77,000 | 34.7 | 2.5 | 2.4 | 33.9 |
Source: RBC Quarterly Housing Affordability Study
Rate hike still possible
The threat of a renewed slowdown in the United States and slowing momentum for the Canadian economy has the Bank of Canada cautious about its next move. In Windsor, Ontario, Mark Carney said Canadians should brace for months of “modest” economic growth, acknowledging this will be reflected in the bank’s revised forecast to be released on October 20, in which third-and fourth-quarter estimates would be lowered. Any additional increases to interest rates in this uncertain environment would warrant “caution,” he added.
But despite heightened expectations that the central bank will pause at its next meeting, potential housing regulation and the next round of employment data may influence the decision.
After two recent increases to its overnight rate, Bank of Canada governor reiterated that “financial conditions remain exceptionally stimulative.” He also warned that while Canada’s situation and the inflation target dictate a different policy stance than in the United States, “there is a limit to this divergence.”
Canadian households have been running a net financial deficit for 37 consecutive quarters, and Mr. Carney acknowledged that the current situation in which investment in housing is outstripping total savings cannot continue.
Read more:
http://business.financialpost.com/
Mark Carney warns of economic risks
In a recent speech in Windsor, Ontario, Bank of Canada governor Mark Carney said that given the risks of a renewed U.S. slowdown and amid slow consumption and housing activity in Canada, “any further reduction in monetary policy stimulus would need to be carefully considered.”
Carney’s remarks came the same day new data showed Canada’s gross domestic product contracted for the first time in 11 months by 0.1 per cent in July.
While the Bank of Canada has raised interest rates three times in the past four months, most recently on Sept. 8, and the bank’s key overnight lending rate is currently 1.0 per cent, during the same time in the United States, the Federal Reserve has held the policy rate at almost zero.
“While Canada’s circumstances and the discipline of the inflation target dictate a different stance than in the United States, there are limits to this divergence,” he said.
The recession may be over, he warned, but it’ll still a long road back to a strong economy. Domestically, Canada’s relatively strong bounce-back from recession has been supported by housing expansion and personal consumption, two factors that can’t continue, Carney said.
“This cannot continue. With Canadians working, but not as much as they would like, they have been borrowing. Real household credit expanded rapidly throughout the recession, in contrast to previous downturns, and has continued to grow through the recovery. Canadian households have now collectively run a net financial deficit for 37 consecutive quarters. That is, their investment in housing has outstripped their total savings for over nine straight years. In effect, households are demanding funds from the rest of the economy, rather than providing them, as had been the case through the 1960s, 1970s, 1980s and 1990s.”
Externally, he said, the world is facing a restructuring that could take 10 years and subdue growth in the advanced economies. Even Canada’s supposedly strong jobs recovery is not as shining as it looks. The unemployment rate remains high at 8.1 per cent and many of the jobs created since July have come in the public service and what he called involuntary part-time work.