Bank of Canada, Overnight Rate Target Announcement

Date: January 18, 2011

Bank of Canada, Overnight Rate Target Announcement

Source: Bank of Canada

Link to Release: http://www.bankofcanada.ca/en/fixed-dates/2011/rate_180111.html

Summary: At its January 2011 meeting, the Bank of Canada announced that it is maintaining its target for the overnight rate at one per cent, citing “elevated risks” to an economy that is growing slightly faster than predicted last October. The Bank gave no indication of when rate hikes might resume, instead noting that “any further reduction in monetary policy stimulus [i.e. interest rate hikes] would need to be carefully considered.”

Analysis: In its Monetary Policy Report (MPR) that followed the Bank’s January interest rate announcement, the Bank unveiled a slightly modified economic outlook, with the Canadian economy growing slightly faster 2011 than was previously forecast. While growth is expected to be more brisk in the coming year, the Bank also acknowledged that the gap between current economic output and potential output in Canada is wider than estimated in their October (MPR). This prompted the Bank to make a slight downward revision in their outlook for inflation. Against this backdrop, the consensus view of credit market participants is that we will see a resumption of interest rate hikes in the spring or summer to ensure that consumer spending does not grow so quickly as to push the growth rate of consumer prices beyond the Bank of Canada’s long-term target of two per cent. It is important to note that there are diverging views as to the timing of future interest rate hikes. Some commentators have suggested that hikes will not resume until the winter of 2011, whereas others were calling for a hike in January.

Source: Toronto Real Estate Board

New Motor Vehicle Sales, November 2010 Release

Release Date: January 14, 2010

New Motor Vehicle Sales, November 2010 Release

Source: Statistics Canada

Link to Release: http://www.statcan.gc.ca/daily-quotidien/110114/dq110114a-eng.htm

Summary: In November, Canadian new motor vehicle sales rose 0.3 per cent to 135,823 sales, reversing October’s 0.3 per cent decline. Truck sales increased 1.2 per cent to 75,916 units in November, overcoming a 0.8 per cent decline in car sales. Sales of North American made vehicles fell by two per cent while foreign made vehicle sales rose 0.8 per cent. Sales in Ontario were up 0.4 per cent to 51,037 units.

Analysis: The trend for Canadian new motor vehicle sales flattened in 2010 as the number of monthly transactions moved into the range experienced in the three years leading up to the recession. Motor vehicle sales are often used as an indicator of consumer confidence. With this in mind, the fact that Ontario vehicle sales reached and remained at pre-recession levels in 2010, suggests that consumers remain confident in their future employment and income situations. Robust consumer confidence bodes well for the housing market, because people want to be relatively certain about their ability to pay for their home over the long-term through the use of a mortgage.

Source: Toronto Real Estate Board

Canadian Housing Starts, December 2010 Results

Release Date: January 11, 2010

Canadian Housing Starts, December 2010 Results

Source: Canada Mortgage and Housing Corporation (CMHC)

Link to Releases:

For CMHC’s GTA release: http://www.cmhc-schl.gc.ca/odpub/press/2010/2010_12_08_0815_EOT.pdf

For CMHC’s national release: http://www.cmhc-schl.gc.ca/en/corp/nero/nere/2011/2011-01-11-0815.cfm

Summary: In December, Canadian housing starts fell 13 per cent to a seasonally adjusted annual rate of 171,500 units from an upwardly revised November figure of 198,200 units. The drop was driven by a decline in the volatile multiple-family component, especially within Ontario, where the overall decline was 45 per cent. In Toronto, the annual rate of starts fell by 65 per cent to 17,800.

Analysis: We experienced a volatile end to 2010 home construction in the GTA. In the Toronto area, condominium apartments accounted for almost 40 per cent of total construction activity. The timing of condominium apartment starts is more erratic compared to low rise starts, which means that in some months GTA starts will spike well above trend and in other months the level of starts will move below trend. With this said, it is important to note that overall home construction was up in 2010 as a whole, making a positive contribution to the local, provincial and national economies. Looking forward through 2011, it appears that housing starts in the GTA will include an even larger share of condominium apartments, as new high-rise sales (as reported by RealNet Canada Inc.)

Source: Toronto Real Estate Board

Canadian Labour Force Survey, December 2010 Results

Date: January 7, 2011

Canadian Labour Force Survey, December 2010 Results

Source: Statistics Canada

Link to Release: http://www.statcan.gc.ca/daily-quotidien/110107/dq110107a-eng.htm

Summary: In December, the Canadian economy added 22,000 jobs, with a 38,000 position gain in full-time positions offsetting losses in part-time jobs. The unemployment rate remained steady at 7.6 per cent. Manufacturing added 66,000 jobs, mostly in Quebec and Ontario, after little overall change in the preceding 18 months. In the Toronto Census Metropolitan Area (CMA), the number of people employed increased and the unemployment rate continued to trend lower.

Analysis: December’s labour report pointed toward continued improvement in the Canadian economy. The large pickup in goods production and related sectors like transportation and warehousing add credence to the Bank of Canada argument that a greater share of economic growth moving forward will come from exports and business investment. This notion was further bolstered by the fact that job gains were in the full-time category in the private sector. Because a substantial portion of goods production and export-related employment is centred in central Canada, with the GTA as the hub, this latest announcement bodes well for continued improvement in Toronto and surrounding areas. The unemployment rate is expected to decline further in 2011. Tightening labour market conditions will result in sustain growth in earnings.

Source: Toronto Real Estate Board

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