WRAPUP 1-Canada factories, housing on steady growth track

Categories: Real Estate News
Comments: 1 Comment
Published on: December 16, 2010

* 1.7 pct growth in October factory sales beats estimates

* November home resales rise for fourth straight month

* October GDP seen growing after September contraction

* Home resales seen stable until rates rise

By Louise Egan and Ka Yan Ng

OTTAWA/TORONTO, Dec 15 (Reuters) – Canadian factory sales grew faster than expected in October while the home resale market appeared stable in November, setting the stage for steady but tame economic growth in the final months of this year.

Manufacturers’ sales rose 1.7 percent in October after falling 0.5 percent in September, Statistics Canada said on Wednesday. The result beat market forecasts for 1.1 percent growth due to price-led strength in petroleum and coal products as well as solid gains in primary metals and motor vehicles.

Manufacturers, hard hit by a strong Canadian dollar and weak U.S. demand for their goods, have seen sales expand only slowly since May following a rapid rebound in the previous 12 months.

Sales at the factory gate were up 9 percent in October from a year earlier but were still well below the peak they hit in 2008 before the global financial crisis.

However, surging exports in October combined with the manufacturing data suggest a return to economic growth in October after a small contraction in September.

“As a result, we expect monthly GDP rebounded a solid 0.4 percent in October after the disappointing 0.1 percent dip in September,” said Nathan Janzen, economist at Royal Bank of Canada.

The performance is consistent with RBC’s updated outlook for gross domestic product to rise 3.1 percent this year, speeding up to 3.2 percent in 2011 and easing back to 3.1 percent in 2012. [ID:nN14295134]

The unenthusiastic growth in the latter half of this year stopped the Bank of Canada in its tracks after it raised interest rates three times earlier this year to 1 percent. The bank held rates steady last week for the second time and is seen staying on the sidelines until at least the second quarter of next year, if not longer. [ID:nN07106511]

SOFT LANDING

Low borrowing costs have continued to be a key factor in the renewed strength seen in the housing market. The sector registered red-hot growth that powered the economic recovery in its initial phase, before staging a fairly soft landing.

Data on November home resales released on Wednesday by the Canadian Real Estate Association (CREA) suggested the sector was returning to more normal levels.

The number of existing homes that changed hands in the month rose 4.8 percent for a fourth consecutive monthly gain, CREA said. Compared with November 2009, sales were down 9.3 percent. [ID:N15135081]

Policymakers have been fretting aloud this week that Canadians are overextending themselves with mortgage debt due to historic low interest rates. Finance Minister Jim Flaherty said on Wednesday he was monitoring several factors.

“We look for stability in the (housing) market, we look for continuing employment in the residential construction business … And we look for affordability issues, and we watch ability to pay issues, among others,” he told reporters.

Analysts said the likelihood that the Bank of Canada will lift interest rates in the latter part of next year could dampen home resale activity in 2011, as well as slow economic growth.

“We expect home sales to remain well supported over the next couple of quarters before increases in borrowing rates eventually begin to ease the pace of sales,” said Pascal Gauthier, senior economist at TD Bank.

CREA said the national average price in November rose to C$344,268 ($342,555), up 2 percent from November last year.

($1=$1.004 Canadian) (Reporting by Louise Egan, Howaida Sorour and Ka Yan Ng; editing by Peter Galloway)

Source: Reuters

1 Comment - Leave a comment
  1. nice factual info, very appreciated

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