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Friday, October 15, 2010

US Gross Domestic Product, Second Quarter 2010

Date: September 30, 2010

US Gross Domestic Product, Second Quarter 2010

Source: United States Bureau of Economic Analysis

Link to Release: http://www.bea.gov/newsreleases/national/gdp/2010/pdf/gdp2q10_3rd.pdf

Summary: US Real Gross Domestic Product grew at an annualized rate of 1.7 per cent in the second quarter of 2010, down from an annualized rate of 3.7 per cent reported during the first three months of the year. This deceleration in growth was driven mostly by a decline in private (i.e. businesses’) inventory investment and a sharp increase in imports, which offset the consumption of domestically produced goods and services. The output declines in the above category partially offset increased government spending and an upturn in fixed investments by businesses (i.e. capital investments other than inventory).

Analysis: While the second quarter growth rate was considerably lower than what was reported for the first three months of 2010, the result masked some good news from both the consumer and business sectors in the US. Personal consumption, fixed business investment ( i.e. capital investments other than inventory) and fixed residential construction (i.e. new home construction and related) all increased at greater rates than reported for the first quarter. The fact that more than one sector of the economy is driving growth helps to allay fears of a double-dip recession. However, an annualized increase of less than two per cent points to a more prolonged recovery period than was initially predicted. Slower growth in the US was one contributing factor to slower growth in the Canadian economy in the second quarter as well as the month of July. The Bank of Canada has pointed to growth in the US economy as an important factor that will feed into decisions regarding their policy interest rate.



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Thursday, September 30, 2010

Canadian Leading Indicators, August 2010 Results

Date: September 21, 2010

Canadian Leading Indicators, August 2010 Results

Source: Statistics Canada

Link to Release: http://www.statcan.gc.ca/daily-quotidien/100922/dq100922b-eng.htm

Summary: The Canadian Composite Index of Leading Indicators generally points to the direction of economic growth two months in advance of Statistics Canada’s Gross Domestic Product (GDP) release. The Index increased by 0.5 per cent in August, up slightly from July’s 0.4 per cent rise. The manufacturing sector continued to show strength overall, driven by 5.2 per cent increase in orders for durable goods. Notable declines were in the housing component of the index, which dipped by four per cent, and housing-related index components such as furniture and appliance sales.

Analysis: The above average economic growth in the fourth quarter of 2009 and first quarter of 2010 was driven to a great degree by home sales and associated housing-related transactions. Record low interest rates spurred a record number of transactions in many metropolitan areas across the country, including the GTA. Consumer spending on large ticket items like homes and related goods and services was the Bank of Canada’s intent when it lowered interest rates. While we are experiencing a balancing out from the extremely strong housing market activity experienced through the first quarter of 2010, the leading indicator suggests that we will continue to see GDP growth reported by Statistics Canada in the second half of the year. This growth, however, will be more the result of private sector business investment, rather than consumer spending and housing investment. GDP growth for the remainder of 2010 will likely be below the long-term average.



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US Existing Home Sales, August 2010

Date: September 23,2010

US Existing Home Sales, August 2010 Results

Source: National Association of REALTORS

Link to Release: http://www.realtor.org/press_room/news_releases/2010/09/ehs_move

Summary: U.S. existing home transactions climbed 7.6 per cent in August to a seasonally adjusted annual rate of 4.13 million sales from July’s upwardly revised figure of 3.84 million. This figure was down 19.0 percent the rate of 5.1 million reported for August of 2009. The median selling price also increased last month – up 0.8 per cent year-over-year to $178,600. Distressed properties continued to account for approximately one-third of total sales.

Analysis: Record low interest rates coupled with the median selling price wellbelow pre-recession levels has presented very affordable home ownership opportunity for many households in the US. Unfortunately, even with the positive affordability picture, many households are not confident in their ability to purchase and pay for a home over the long term. This lack of consumer confidence has been reinforced recently by a number of less-than-stellar economic releases. This is why, even with strong month-over-month growth in transactions, the annual rate of sales remains well below annual totals reported for 2009, 2008 and 2007. The median selling price has remained flat due to high inventory levels relative to sales and a high proportion of distressed properties that generally sell at a discount to similar non-distressed homes.


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Canadian Retail Sales, July 2010 Release

Date: September 21, 2010

Canadian Retail Sales, July 2010 Release

Source: Statistics Canada

Link to Release: http://www.statcan.gc.ca/daily-quotidien/100922/dq100922a-eng.htm

Summary: The dollar value of retail sales fell 0.1 per cent in July after increasing 0.1 per cent in June. Five of the eleven major retail sub-sectors experienced declines. Declines in sales for housing-related goods were notable, with an 8.4 per cent dip in sales at furniture and home furnishing stores and the value of building and garden materials sales was down 2.3 percent. Regionally, Ontario experienced a 0.3 per cent drop in the value of sales, and BC a decline of 0.4 per cent.

Analysis: Retail sales generally exhibit some volatility on a month-over-month basis. Sales remain well-above last year’s levels in Canada and Ontario, but the annual growth rate in retail sales has edged lower. Economic recovery was initially driven by consumer spending spurred on by low borrowing costs. Home sales were a key driver in this regard, which in turn drove a substantial amount of retail spending. As interest rates have started to rise, it makes sense that growth in some consumer-driven sectors has slowed. Because personal expenditure has historically accounted for approximately two-thirds of Canadian Gross Domestic Product (GDP), it makes sense that GDP growth is expected to be more subdued moving forward.


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Thursday, September 23, 2010

Canadian Consumer Price Index, August 2010 Results

Date: September 21, 2010
Canadian Consumer Price Index, August 2010 Results
Source: Statistics Canada
Summary: Canada’s Consumer Price Index (CPI) – the most commonly quoted measure of price inflation – increased by 1.7 per cent year-over-year in August after a 1.8 per cent annual increase in July. The August result was driven largely by a five per cent rise in energy prices, but prices were higher for seven of the eight major index components. The Bank of Canada’s Core CPI, which strips out the most volatile components in the index, climbed 1.6 per cent in August. The annual rate of inflation was highest in Ontario, where a 2.9 per cent increase in prices was experienced. The annual CPI increase in Ontario was driven by higher prices for gas, electricity, passenger vehicle insurance premiums and estimated  omeowner's replacement costs.
Analysis: Annual growth in both the “All Items” and “Core” Consumer Price Indices were below the Bank of Canada’s projection for the third quarter. With this in mind, the latest CPI release adds fuel to the interest rate debate in Canada. The calls for the Bank of Canada to halt interest rate hikes until we have a better idea of the economic growth trajectory in Canada will likely become louder. The argument will be that with inflation below the two per cent target we are not experiencing strong upward pressure on consumer prices, so there is no need to hike rates in order to slow spending. However, in recent statements the Bank has argued that consumer and business spending is in line with expectations. This suggests that the Bank may still be considering further rate hikes this year and/or in 2011.

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New Motor Vehicle Sales, July 2010 Release

Date: September 14, 2010
New Motor Vehicle Sales, July 2010 Release
Source: Statistics Canada States Department of Housing and Urban Development
Link to Release: http://www.statcan.gc.ca/daily-quotidien/100914/dq100914b-eng.htm

Summary: Canadian new motor vehicle sales rose 2.4 per cent in July to 135,514 units. These gains were led by truck sales (SUVs included), which were up 3.1 per cent to 76,994 units, accounting for 56.8 per cent of total sales – the highest proportion ever. Car sales also rose in July, up 1.6 per cent to 58,520 units. By province, sales increased in eight of provinces last month, including Ontario which experienced a four per cent gain to 51,425 units.
Analysis: July’s new vehicle sales result continued a trend that began at the beginning of last year: gradually increasing sales with some month-to-month volatility along the way. The trend in new vehicle sales basically followed the improvement in consumer confidence that took place over the same period of time. This makes sense given that an individual would have to feel confident in their employment and income prospects over the longer term before they would make a large cash outlay or enter into a financing commitment. For many households, the willingness to purchase on a car or truck could also be associated with a willingness to make other large ticket purchases, including the purchase of a home.

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