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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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Wednesday, September 22, 2010

Canadian Labour Force Survey, August 2010 Results

Date: September 10, 2010
Canadian Labour Force Survey, August 2010 Results
Source: Statistics Canada
Link to Release: http://www.statcan.gc.ca/daily-quotidien/100910/dq100910a-eng.htm

Summary: The Canadian economy added 36,000 positions in August following declines in July. Gains in full-time jobs (+80,000) offset a 44,000 position decline in part-time employment. Job gains were concentrated in the services sector, which added 43,900 positions. The goods producing segment of the economy shed 8,200 jobs last month. The national unemployment rate edged up to 8.1 per cent, as job growth was outstripped by growth in the labour force as a whole. The GTA labour market experienced an increase in the level of employment and a slight decrease in the unemployment rate.
Analysis: Employment in Canada has climbed back to the pre-recession peak. This is also the case in the GTA. Employment levels in both the services and goods producing sectors are well-above the levels reported in August 2009. The steady recovery experienced after July of last year was in line with the overall recovery in the economy. However, while the level of employment has recovered, we have not seen a marked recovery in the unemployment rate because the growth in the total labour force (employed and unemployed persons actively searching for work) continued to grow during the recession. In the GTA, for example, the pre-recession unemployment rate ranged between 6.5 and 7.0 per cent. In contrast, GTA unemployment rate stood at 9.1 per cent – an improvement from a high of 10 per cent during the recession, but a long way from what could be called normal. The implication is that with quite a bit of slack remaining in the labour market, income growth will likely remain at or below the rate of inflation through 2011.

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Canadian Housing Starts, August 2010 Results

Date: September 9, 2010
Canadian Housing Starts, August 2010 Results
Source: Canada Mortgage and Housing Corporation (CMHC)
Link to Release: http://www.marketwire.com/press-release/Toronto-Housing-Starts-Rise-in-August-1316077.htm

Summary: Canadian housing starts fell for the fourth consecutive month in August. The seasonally adjusted annual rate for starts dipped three per cent to 183,300 units from 188,900 units in July. Declines in both single detached and multiple-family starts were reported. GTA home builders bucked the national trend, as the annual rate of starts in the Toronto area increased by almost 30 per cent due to a surge in new condominium apartment construction.
Analysis: On the national scale, increased supply in the resale market has resulted in fewer buyers spilling over into pre-construction sales centres. However, in the GTA the new home construction trend has been pointing upward, driven by new unit sales in the high-rise category. Strong high-rise sales over the past year continued to convert into starts in August with multiple-family starts jumping close to 50 per cent compared to July. While high-rise starts have proven to be volatile month-over-month, the condominium apartment segment remains the driving force behind new home onstruction within the City of Toronto and many surrounding municipalities as well.

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United States New Residential Construction, August 2010 Results

Date: September 21, 2010
United States New Residential Construction, August 2010 Results
Source: Joint Release from the United States Census Bureau and the United States Department of Housing and Urban Development
Link to Release: http://www.census.gov/const/newresconst.pdf

Summary: U.S. Housing starts rose 10.5 per cent to a seasonally adjusted annual rate of 598,000 units in August from the downwardly revised rate of 541,000 recorded in July. The August result was the highest rate of starts since April. While the annual rate of single-family starts rose four per cent, most of the August increase came in the more volatile multi-unit category, which experienced a 43 per cent increase. Building permits, which signal future building activity, rose 1.8 per cent.

Analysis: US housing starts remain above the lows reached during the first half of 2009, but remain far below pre-recession levels. In fact, the annual rate of starts in August remained near the lowest levels reported over the past 50 years. The resale home market in the US remains very well supplied with a low level of sales relative to listings. In addition, one-third of resale transactions are distressed in nature (i.e. in foreclosure or in danger of foreclosure), which often translates into discounted selling prices relative to comparable non-distressed properties. The very well-supplied resale market coupled with the availability of distressed properties has meant that very few buyers have been spilling over into pre-construction sales centres. The residential construction sector has suffered as a result. From the perspective of the Canadian economy, the lack of recovery in US home construction is problematic for the export of Canadian-made building materials. The production of these building materials has generally been associated with well paying jobs including those in manufacturing.

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Sunday, September 19, 2010

Canadian Consumer Price Index, June 2010 Results

Date: July 23, 2010
Canadian Consumer Price Index, June 2010 Results
Source: Statistics Canada
Link to Release: http://www.statcan.gc.ca/daily-quotidien/100723/dq100723a-eng.htm

Summary: The Consumer Price Index (CPI) – Canada’s measure of inflation – rose one per cent annually in June, down from the 1.4 per cent growth rate reported in May. This slowdown was mostly driven by a 2.9 per cent decline in gas prices, with clothing and foot-ware also declining (down 1.9 per cent). The Bank of Canada core CPI, which removes volatile items like gasoline and some foods from its aggregation, rose 1.7 per cent. Ontario experienced the highest provincial rate of increase in the country, with prices climbing 1.6 per cent on price increases for vehicles and vehicle insurance.
Analysis: The consumer price index is the key indicator the Bank of Canada uses in determining the target for its policy interest rate (the Overnight Lending Rate). Over the long-term, the Bank would like to see the CPI grow at two per cent annually. While the rate of CPI growth has been below two per cent for the better part of the last year, the Bank of Canada has raised the Overnight Rate target twice over the past two months. The argument is that economic recovery is well at hand and as growth continues rates must rise to slow consumer spending to ensure that prices for consumer goods and services do not rise at an unsustainable pace. With this said, the Bank has downgraded its forecast for economic growth in 2010 and 2011 along with its outlook for inflation. This suggests that the frequency of interest rate hikes could be less than originally expected when the Bank began raising its rate target in June.

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Friday, September 10, 2010

Canada Not in Danger of US-Style Housing Bust

Date: September 9, 2010
Canada Not in Danger of US-Style Housing Bust
ARTICLE REVIEW: Jim MacGee, August 31, 2010, “Not Here? Housing Market Policy and the Risk of a Housing Bust”, CD Howe Institute.
Link to Release: http://www.cdhowe.org/pdf/ebrief_105.pdf

The CD Howe Institute recently released a study written by Professor Jim MacGee (University of Western Ontario), which poses the question of whether or not the Canadian housing market could experience a US-style bust, including a steep drop-off in the average selling price.
MacGee argues that mortgage underwriting standards evolved much differently in the US and Canada leading up to the economic downturn in both countries. As early as 2003, US sub-prime borrowers (i.e. those with troubled credit histories) were gaining access to more exotic mortgage products that included the option for interest only payments and negative amortization. Riskier borrowers and borrowing terms prompted mortgage defaults and declining average selling prices in advance of the economic downturn in the US. In Canada, in contrast, defaults rose only in conjunction with the economic downturn and remained much lower than in the US (see Chart 1). The lower default rate in Canada, bolstered by the comparatively low percentage of riskier “exotic” mortgage types in this country, helped support home prices and also supports the view that Canada’s Federal Governmentguaranteed mortgage insurance program is not exposed to the same risk as government sponsored and private insurance programs in the US.
Home price growth in the GTA has been supported by a sustained period of affordability, as evidenced by TREB’s Affordability Indicator (see Chart 2). Even with the strong price increases experienced over the better part of the last year, the average combined mortgage, property tax and utility payment as a percentage of average gross household income remains in line with the accepted mortgage lending standard, which requires a gross debt service ratio (GDS) of 32 per cent or less.

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Thursday, September 9, 2010

Bank of Canada, Overnight Rate Target Announcement

Date: September 8, 2010
Bank of Canada, Overnight Rate Target Announcement
Source: Bank of Canada
Link to Release: http://www.bankofcanada.ca/en/fixed-dates/2010/rate_080910.html

Summary: The Bank Of Canada raised its target for the Overnight Lending Rate 25 basis points (0.25 percentage points) to 1.0 per cent. The Bank reasoned that while economic growth both in Canada and other developed countries like the United States had not unfolded as well as forecast, personal consumption and business expenditure in Canada was progressing more or less in line with expectations. It was against this backdrop that the Bank felt a further rate increase was warranted to ensure that the rate of inflation would remain near its two per cent target. The Bank was non-committal on future rate increases, pointing to “unusual uncertainty” surrounding their economic outlook.
Analysis: The consensus in the Canadian treasury bill market suggests that this latest Bank of Canada hike will be the last until the spring or early summer of 2011. However, if the rate of inflation remains close to the Bank’s two per cent target and consumer and business spending continues to track the Bank of Canada’s outlook, it is possible that the further rate hikes could be brought on line either this year or earlier than expected in 2011. The recent rate hike will impact mortgages and lines of credit which have floating interest rates based on the prime lending rate. Fixed rate mortgage products will not necessarily be affected, given that the market has already priced in expectations for future Bank of Canada interest rate decisions. For example, the yield on five-year government of Canada bonds, which influence five-year fixed mortgage rates, has been dropping in recent months. This reflects the market view that the Bank will not raise its policy rate as much or as quickly as anticipated earlier this year.

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US Employment Situation, July 2010 Results

Date: September 3, 2010
US Employment Situation, July 2010 Results
Source: United States Department of Labor, Bureau of Labor Statistics
Link to Release: http://www.bls.gov/news.release/pdf/empsit.pdf

Summary: The American economy shed 54,000 jobs in August as temporary workers hired for the US census continued to complete their work and were subsequently laid off. In total, census-related layoffs drove a 114,000 job decline in the government sector. Private sector employment actually edged up by 67,000 positions. The largest private sector gains were in healthcare and construction. It should be noted, however, that the majority of construction job gains were due to workers returning to their jobs following a strike. The manufacturing sector shed 27,000 jobs.
Analysis: The US labour market situation report for August presented a good news/bad new story. Obviously three straight months of declines following a short lived period of recovery was not good news. At the same time, however, the job losses in August were much smaller than most commentators were expecting following disappointing economic growth in recent months. The fact that the private sector actually saw positions increase was another positive storyline. With this said, the US economy needs to create 300,000+ jobs on a monthly basis for a sustained period of time before the unemployment rate will trend downward in any meaningful way. Personal consumption, which historically accounts for over 70 per cent of US GDP, is being hampered by the lack of confidence brought about by the high unemployment rate, which in turn hampers job creation. This drag on US GDP growth is problematic for US trading partners like Canada, who provide raw materials, finished goods and services to meet US consumer demand. The potential ripple effect of sluggish US recovery on Canadian economic fortunes is clear.

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Tuesday, September 7, 2010

Canadian Gross Domestic Product, Second Quarter and June 2010

Date: August 31, 2010
Canadian Gross Domestic Product, Second Quarter and June 2010
Source: Statistics Canada
Link to Release: http://www.statcan.gc.ca/daily-quotidien/100831/dq100831a-eng.htm

Summary: Canada’s Real Gross Domestic Product (GDP), the most common measure of economic growth, increased 0.5 per cent in the second quarter for an annualized growth rate of 2.0 per cent. This is well below the 5.8 per cent annualized growth rate reported for the first quarter of this year. In June, Canadian GDP rose 0.2 per cent over May for the strongest monthly gain of the second quarter. The goods producing sector led second quarter economic growth, while service sector output remained flat.
Analysis: The decline in the GDP growth rate between the first and second quarters can be traced to several sources, but the impact of housing-related sectors was quite notable. Housing investment, which drove GDP growth through much of the initial 2009 recovery, increased by only 0.3 per cent in the second quarter. Economic activity specifically related to real estate agents and brokers was down. Renovation activity also declined. Declines related to residential real estate contributed to an overall dip in consumer spending. A slowdown in the consumer-driven side of the economy was not necessarily unexpected, as second quarter interest rate increases and stricter mortgage lending guidelines came on line. With this said, the second quarter GDP result was well below the Bank of Canada’s latest published forecast of three per cent annualized growth. This coupled with less than stellar employment releases in recent months increases the odds that we could see an earlier than expected interruption in Bank of Canada interest rate hikes.

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US Existing Home Sales, July 2010 Results

Date: August 24, 2010
US Existing Home Sales, July 2010 Results
Source: National Association of REALTORS
Link to Release: http://www.realtor.org/press_room/news_releases/2010/08/ehs_fall

Summary: U.S. existing home sales were sharply lower in July, down 27.2 percent to a seasonally adjusted annual rate of 3.83 million units compared to the downwardly revised June rate of 5.26 million. Compared to June 2009, sales were also down approximately 27 per cent. The annual rate of sales was at the lowest level since 1999. The median selling price rose 0.7 per cent over year-ago levels to $182,600. The percentage of sales accounted for by distressed properties remained at 32 per cent.
Analysis: U.S. existing home sales continued to decline in July as high unemployment, rising economic uncertainty and the expiry of the federal government’s first time buyer’s tax rebate dampened the confidence of potential home-buyers. While prices continued upward in July, a spike in active listings to 3.98 million existing homes available for sale (resulting in months of supply measure jumping to 12.5 months) suggests that sustained price growth may not be a safe bet moving forward.

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Monday, August 23, 2010

Canadian Consumer Price Index, July 2010 Results

Date: August 20, 2010
Canadian Consumer Price Index, July 2010 Results
Source: Statistics Canada
Link to Release: http://www.statcan.gc.ca/daily-quotidien/100820/dq100820a-eng.htm

Summary: The Consumer Price Index (CPI) increased by 1.8 per cent yearover – year in July – a higher annual rate compared to the one per cent growth reported for June. However, this increase was driven largely by the onset of the harmonized sales tax (HST) in Ontario and British Columbia In addition to the taxation changes, gasoline prices rose 4.8 per cent in July and the broader energy category rose 7.9 per cent. The Bank of Canada core rate, which strips out volatile components including gasoline and sales taxes, rose by 1.6 per cent.
Analysis: Both the “All Items” and “Core” indices increased below the rates forecasted by the Bank of Canada in their most recent Monetary Policy Report. This is reflective, at least in part, of slower than expected economic growth since the end of the first quarter. With this in mind, the Bank arguably has more flexibility than originally anticipated related to the level of its target for the Overnight Lending Rate and the frequency of interest rate hikes moving forward. While the market consensus still supports further 25 basis point hikes in September, October and December, the possibility of the Bank taking a break from raising rates sooner than expected has increased.

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United States New Residential Construction, July 2010 Results

Date: August 16, 2010
United States New Residential Construction, July 2010 Results
Source: Joint Release from the United States Census Bureau and the United States Department of Housing and Urban Development
Link to Release: http://www.census.gov/const/newresconst.pdf

Summary: U.S. Housing starts rose to 546,000 units in July, a 1.7 per cent increase from the downwardly revised annual rate of 537,000 units recorded in June. The increase came entirely from within the volatile multiple family category, which rose 17.3 per cent to an annual rate of 95,000 units. Singlefamily starts, a more reliable indicator of the underlying health of the market, fell 4.2 per cent in July to an annual rate of 432,000 units. The annual rate of building permits, which signal future activity, dropped 3.1 per cent to the lowest level of the year. On an unadjusted basis, total starts were also down almost ten per cent annually.
Analysis: The level of residential home construction has been “flat-lining” since the latter half of 2009, and July building permit data does not point to stronger growth in the fall. A key issue adversely affecting the demand for new homes is the state of the US resale housing market. Because distressed sales account for more than a third of existing home inventory, many home buyers are taking advantage of value that cannot be found at new home sales centres. The value represented by distressed listings coupled with fact that the resale market remains well supplied explains why a small number of households, from a historic perspective, are spilling into the new home market. The US construction sector has strong economic linkages to other sectors of the economy, both in the US and Canada. For Canada in particular, the US construction lull adversely affects the export of raw materials and manufactured goods and the associated creation of well paying jobs.

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Canadian Leading Indicators, July 2010 Results

Date: August 19, 2010
Canadian Leading Indicators, July 2010 Results
Source: Statistics Canada
Link to Release: http://www.statcan.gc.ca/daily-quotidien/100819/dq100819c-eng.htm

Summary: The Canadian Composite Index of Leading Indicators advanced 0.4 per cent in July. While positive, the monthly growth rate slowed considerably from the 0.7 percent increase recorded in June. Growth in the manufacturing components of the index remained strong as new orders for durables rose 2.2 per cent for the sixth consecutive monthly increase. However, the housing index fell 4.1 per cent on declines of both starts and sales. The decline in home purchases was likely linked to a 0.6 per cent drop in furniture and appliance sales.
Analysis: The Composite Index of Leading Indicators can be used to estimate monthly GDP results several months ahead of their actual release. July’s report suggests that the economy may have grown at a slower pace compared to monthly growth rates experienced earlier in the year, which is in line with the Bank of Canada’s recent downgrade of its expectations for Canadian economic growth. Increased borrowing costs and more stringent lending guidelines for insured mortgages led to a slower pace of sales in the second quarter. While strong home sales and related economic activity played a key role in the initial recovery from recession, the drivers of growth over the longer term will be more diverse with a greater contribution from goods production.

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Tuesday, August 17, 2010

New Motor Vehicle Sales, June 2010 Release

Date: August 13, 2010
New Motor Vehicle Sales, June 2010 Release
Source: Statistics Canada
Link to Release: http://www.statcan.gc.ca/daily-quotidien/100813/dq100813a-eng.htm

Summary: Canadian new motor vehicle sales increased 2.5 per cent in June, to 130,135units. Truck sales (SUVs included) led the way, rising 3.2 per cent to 72,709 units. Passenger car sales also rose 1.6 per cent to 57,426 units. Sales improved in eight of ten provinces, including Ontario, where sales increased 1.4 per cent to 48,783 units. Statistics Canada also noted that preliminary figures for July suggest another one per cent increase in sales.
Analysis: The trend for new vehicle sales in Canada has generally been pointing upward since the beginning of 2009, albeit with some month-to-month volatility along the way. Motor vehicle sales are often taken as one indicator of consumer sentiment. The argument is that if an individual is confident in their financial situation (including employment prospects) moving forward, they will be confident in their ability either to make a large cash outlay on a vehicle or make regular payments on a vehicle loan over time without default. With this in mind, it seems reasonable to suggest that more Canadian households feel confident in their financial situation today than they did at the beginning of 2009. Added to this is the fact that increased vehicle sales also serve to reinforce the notion that the fortunes of auto makers have improved over the same period. This is especially important to southern Ontario, where many households still rely employment income related to the motor vehicle sector.

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Monday, August 16, 2010

Canadian Housing Starts, July 2010 Results

Date: August 10, 2010
Canadian Housing Starts, July 2010 Results
Source: Canada Mortgage and Housing Corporation (CMHC)
Link to Release: http://www.cmhc-schl.gc.ca/odpub/esub/64695/64695_2010_M08.pdf

Summary: Canadian housing starts fell 1.6 per cent in July to a seasonally adjusted annualized rate of 189,200 units from an upwardly revised June figure of 192,300 units. Single-family urban starts accounted for much of the decrease, down 11.3 per cent to 67,900 units. Rural starts also fell. A 13.4 per cent increase in multiple-family starts was not enough to offset these declines. Starts in the GTA fell by four per cent to an annualized rate of 26,100 units. On a year-overyear basis, however, both the national and local figures for July were above 2009 levels.
Analysis: The July housing starts figures show that new home construction activity remains above 2009 levels, but the annual rate of starts still remains well below the average for the past decade. At the current level of population in the GTA, an annual housing starts total between 35,000 and 40,000 would make sense for 2010. This justified total is higher than the current annual rate. We are likely experiencing a balancing out in the level of residential construction after very high starts in the years leading up to the recession, when the level of starts was above the level of household growth in many years.

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Tuesday, August 10, 2010

US Employment Situation, July 2010 Results

Date: August 6, 2010
US Employment Situation, July 2010 Results
Source: United States Department of Labor, Bureau of Labor Statistics
Link to Release: http://www.bls.gov/news.release/pdf/empsit.pdf

Summary: The American economy shed 131,000 positions in July as temporary workers hired for the decennial census completed their work and were laid off. Private-sector employment edged up by 71,000. The manufacturing sector added 36,000 positions in July and health care created 27,000 jobs. Private sector gains were more than offset by the 202,000 federal government positions eliminated during the month. The unemployment rate remained unchanged at 9.5 per cent suggesting that the size of the labour force shrank as fewer people looked for work.
Analysis: The US labour market continued to disappoint in July. Before analyzing the results, however, it is important to remove the effect of the temporary Census jobs that resulted in a large positive spike earlier in the year, which is now balancing out. The real story (or issue) is the slow growth in private sector jobs, whether in goods production or the service sector. Growth in US private sector employment needs to be at least three times the July result to make a dent in the unemployment rate. Moving forward, the prospects for sustained private sector job growth have been clouded by slower than expected GDP growth and declining consumer confidence in the second quarter.

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Canadian Gross Domestic Product, May 2010

Date: July 30, 2010
Canadian Gross Domestic Product, May 2010
Source: Statistics Canada
Link to Release: http://www.statcan.gc.ca/daily-quotidien/100730/dq100730a-eng.htm

Summary: Canada’s real Gross Domestic Product (GDP) edged up 0.1 per cent in May compared to June, which amounts to 1.5 per cent on an annualized basis. This small increase followed virtually no growth in April. While the GDP contribution from the goods producing sector climbed 0.6 per cent during the month, the service sector contribution fell 0.1 per cent. The service sector dip was due to lower activity in wholesale trade and by real estate agents and brokers, where activity was down 11.3 per cent. The construction component of GDP also fell 1.6% in May, led by a 3.8% drop in residential construction.
Analysis: Following seven months of very strong economic growth in Canada, the April and May GDP results were certainly below expectations. These less than stellar results are calling into question most forecasts for second quarter GDP, including the Bank of Canada’s revised forecast of a 3.0 per cent annualized rate of growth. For this forecast to be realized, annualized GDP growth in June would have to be approximately 8.0 per cent, or one of the strongest monthly rates of growth on record. Lower than expected GDP growth may suggest that that future consumer price growth (inflation) may not be as strong as currently forecast. Given that the Bank of Canada bases its target for interest rates on future inflation expectations, it is possible that the pace at which the Bank raises its target for the Overnight Lending Rate may turn out to be slower than expected.

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Tuesday, August 3, 2010

Canadian Retail Sales, May 2010 Release

Date: July 22, 2010
Canadian Retail Sales, May 2010 Release
Source: Statistics Canada
Link to Release: http://www.statcan.gc.ca/daily-quotidien/100722/dq100722a-eng.htm

Summary: In May, Canadian retail sales in dollar terms fell by 0.2 per cent compared to April – the second straight monthly decline. Transactions fell in six of the eleven retail subsectors. The largest decline came from the housing related building materials and garden equipment segment, with sales falling by four per cent. Sales were up in other housing-related categories, with furniture sales climbing 0.8 per cent. Sales fell on a month-over-month basis in five provinces, but edged up 0.1 per cent in Ontario. Compared to May 2009, sales were up 5.5 per cent, with year-over-year advances in 10 of 11 major retail categories.
Analysis: Retail sales remain on the upward trend, the two recent monthly declines notwithstanding. These declines represented, at least in part, a balancing out from the spike in retail sales experienced in March. With this said, however, the rate of year-over-year growth in retail sales will moderate over the next year. This moderation will play a large role in the return to sustainable rates of growth for the Canadian economy. For the better part of the last year, Canadian gross domestic product (GDP) was growing at rates well-above the expected long-term norm. A lot of this growth was based on the rapid recovery of the housing market and the related spin-off expenditures that accrued to the retail sector. As the growth in home sales balances out over the next year and moves more in line with population growth, the growth in retail sales will moderate as well.QJPMFPC8PYBD

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