Author Archives: Melanie Cons

Loonie falls after Poloz suggests he’s not ready to take away ‘punch bowl’ (CBC News)

By Rajeshni Naidu-Ghelani, CBC News

The dollar came under renewed selling pressure on Tuesday morning, falling half a cent after Bank of Canada Governor Stephen Poloz’s speech suggested the pace of interest rates hikes may become more gradual as the economy expands without triggering inflation.

The loonie fell from 77.87 cents US to 77.37 cents after Poloz started giving a speech about the labour market at Queen’s University in Kingston, Ont., in the morning.

That’s a loss of half a cent, and comes as the dollar is already the worst performing major currency in the world this year.

It has been hit by a stronger U.S. dollar, lower oil prices and fears of a trade war, and is down almost three per cent against the greenback in 2018.

Poloz’s positive description of the Canadian economy being in a “sweet spot” where investment usually takes over as the lead engine of growth, and in a phase “worth nurturing” had market watchers wondering if the central bank is more inclined now to sit on the sidelines after raising interest rates three times since last year.

“The Canadian economy is carrying untapped potential that could prolong the expansion without causing inflation pressures,” said Poloz.

‘Unambiguous’

Brian DePratto, senior economist at TD Economics said the policy message in the speech was “unambiguous” that accommodative monetary policy is not going away any time soon. In other words, don’t expect rates to go up very quickly, very soon.

“Whether it is the expansionary investment phase ‘worth nurturing’ or the repeated references to the disinflationary effects of rising potential output, Poloz has made it clear that he will not be yanking away the punch bowl anytime soon,” DePratto said in the note.

‘A gradual pace of hikes is likely going forward.’— Brian DePratto, TD Economics 

“We remain of the view that in contrast to the relatively rapid-fire pace of tightening between July of last year and this January, a gradual pace of hikes is likely going forward,” he added.

On Tuesday, the chance of an interest rate hike at the central bank’s next meeting in April fell 14 per cent from Monday to 29 per cent, with chances of rate hikes in the second half of the year now more likely, according to traders who bet on the Canadian dollar.

Don Curren, strategist at Cambridge Global Payments, said Poloz’s speech didn’t suggest any substantial changes to the central bank’s policy of raising rates in a cautious fashion, but his emphasis on “subdued inflation” was enough to push the “already-struggling” loonie even lower.

‘Untapped’ potential

Poloz continued to talk about the “untapped” potential of Canada’s labour market — as more youth, women, Indigenous and disabled people enter it — and why the central bank was paying such close attention to that economic driver.

“It is not much of a stretch to imagine that Canada’s labour force could expand by another half a million workers,” Poloz said.

“To put this thought experiment into perspective, this could increase Canada’s potential output by as much as 1.5 per cent, or about $30 billion per year.”

Poloz said that was equal to a permanent increase in output of almost $1,000 per Canadian every year “even before you factor in the possible investment and productivity gains that would come with such an increase in labour supply.”

Strategists at TD Securities said, while it’s true that there would be economic gains if the participation of women and youth in the labour market increased, they doubted that monetary policy could do much to change that.

Instead, they pointed out that the central bank is more data-driven and Poloz’s speech was a reminder to the markets that the central bank is not in a rush to hike rates anytime soon.

“We have recently noted that the market needs to curb its enthusiasm in the Canadian dollar; economic growth should decelerate while Canada’s largest trading partner is leaning towards more protectionist policies,” foreign exchange strategist Mazen Issa told CBC News.

“NAFTA negotiations remain unresolved and still far apart on the contentious issues. Recall that the Bank has highlighted in its last monetary policy report that protectionism is the greatest risk to its outlook, and that fear appears to be unfolding.”

Until those trade fears start to wane, they expect the Canadian dollar to see more weakness and have a hard time moving much higher in the near term.

Vancouver And Abbotsford-Mission Sweep Top Spots in Economic Growth In 2018 (Newswire)

NEWS PROVIDED BY Conference Board of Canada

OTTAWA, March 13, 2018 /CNW/ – Vancouver and Abbotsford–Mission are forecast to be the fastest growing census metropolitan areas (CMAs) in Canada this year, and Victoria is also expected to rank in the top 10, according to The Conference Board of Canada’s Metropolitan Outlook: Winter 2018.

“The pace of growth in Vancouver and Victoria’s economies are expected to moderate this year, with the slowdown led by housing and consumer spending, but strength in other areas will keep the pace of expansion above 2 per cent in each metro area,” said Alan Arcand, Associate Director, Centre for Municipal Studies, The Conference Board of Canada. “In contrast, Abbotsford–Mission is projected to see real GDP growth accelerate this year, bouncing back from a subpar 2017 when it notched its weakest performance since 2009.”

Highlights

  • Vancouver’s real GDP growth is forecast to ease to 2.7 per cent in 2018, but the CMA will remain Canada’s fastest-growing this year.
  • Abbotsford–Mission’s real GDP growth is forecast to accelerate to 2.5 per cent this year, making it Canada’s second-fastest expanding CMA.
  • Victoria’s real GDP growth will moderate from 2.9 per cent last year to 2.2 per cent in 2018.

Vancouver

Following an increase of 3.7 per cent in 2017, Vancouver’s real GDP growth is expected to moderate to a nation-leading 2.7 per cent this year. A cooling housing market, due to rising interest rates and the expansion of a mortgage stress test, is central to our expectation of the slowdown. This will shave growth in construction and in finance, insurance, and real estate. These were two of the region’s top-performing sectors, but will throttle back along with Vancouver’s housing market. Housing starts are anticipated to decline over the next two years, but will remain comfortably above the average of the last 10 years. Growth is also poised to slow in wholesale and retail trade, as highly indebted consumers feel the pinch of rising interest rates. Employment growth is expected to slow to 0.9 per cent this year too, in step with the more moderate GDP gains.

Abbotsford–Mission

Abbotsford–Mission’s real GDP growth is forecast to improve from 1.9 per cent last year to 2.5 per cent this year. Abbotsford–Mission’s goods-producing sector will lead the way over the next two years, thanks to growing business opportunities, a lower Canadian dollar, and a solid U.S. economy. Manufacturing activity is expected to remain healthy, especially in the key wood products industry. Although the U.S. has levied duties on exports of Canadian softwood lumber, value-added softwood lumber products, such as those produced locally, are not subject to these new duties. The outlook for the construction sector is also bright, with housing starts and non-residential investment both poised to be strong. However, slower services sector output growth is on tap, particularly in wholesale and retail trade, as shoppers tighten their purse strings in the face of rising interest rates.

Victoria

Victoria’s real GDP is forecast to rise a solid 2.2 per cent this year, although this pace will be the slowest in four years. Sustained gains in most industries will underpin this ongoing growth. Robust housing starts drive solid construction output growth over the next two years, while federal shipbuilding contracts issued to Seaspan’s Victoria Shipyards will keep the manufacturing sector expanding. On the services side, slow but steady gains are anticipated in the all-important public administration sector, in line with a healthy provincial government fiscal outlook. At the same time, Victoria’s burgeoning high-tech sector will help drive solid output gains in the professional, scientific and technical services industry.

The local job market has been booming, with employment growth exceeding 3 per cent for two consecutive years. Thus, we think a pull back is inevitable, so our call is for a 0.5 per cent decline this year. The unemployment rate is projected to increase this year too, but only to 4.3 per cent.

This forecast was completed prior to the recent B.C. budget that included additional housing market cooling measures and their impacts are not included in the forecast.

Alan Arcand will present these findings during Western Business Outlook events in Vancouver on April 10 and in Victoriaon April 12.

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SOURCE Conference Board of Canada

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Higher public debt helping slow household debt momentum: Bank of Canada (BNN)

OTTAWA — The federal government’s steps to amass more public debt have helped Canadians avoid an even faster build-up of their personal debt loads, even though such household burdens have still managed to hit historic highs, the Bank of Canada governor said Tuesday.

Stephen Poloz said Ottawa’s spending in the last couple of years on programs such as enhanced child benefits and infrastructure, have contributed to economic growth.

The extra public investments have also helped push interest rates up to a level higher than they would have been without the government stimulus, he said.

From there, those higher rates have helped slow the accumulation of household debt and, while it’s still climbed to record levels, it’s lower than it otherwise would have been had Canada continued with government belt-tightening approaches of the past, Poloz said.

“It’s always hard to imagine the counterfactual, but if rates had to stay lower for longer that would mean more household debt — and the federal government has accumulated some fiscal debt instead,” Poloz said as he responded to questions following his speech at Queen’s University in Kingston, Ont.

“And I think that’s a trade-off that, of course, you have to make in policy-making space.”

All things considered, Poloz added that this “mix has worked better for the economy than the old mix.”

He said he didn’t want to comment on the merits of specific fiscal policies of the past. But he noted the current approach has helped guide Canada’s economy closer to reaching its full capacity, or “home,” as Poloz calls it.

His remarks come a couple of weeks after the Trudeau government tabled a federal budget that has faced criticism for its plan to continue running annual multibillion-dollar deficits across the five-year projection horizon — despite the country’s surprisingly strong economic performance.

The government opted to use billions of dollars worth of fresh fiscal space for new investments, a decision that left it with no timeline to return to balance.

Finance Minister Bill Morneau argues the new spending will lift long-term growth and insists his earlier investments have already produced encouraging economic results. Morneau has also made efforts to reassure the public that the new commitments will be carried out in a responsible way.

In response to a journalist’s question, Poloz said Tuesday he agreed with the view consumers are now facing high debt loads because that took over a debt-accumulation void left by governments. Many governments shifted to austerity mode once they had shut down the massive stimulus measures put in place after the 2008 financial crisis.

“Because we were in a place where the economy was facing significant head winds, downward shocks, somebody was going to accumulate some debt if we were to keep the economy closer to full employment,” Poloz said.

He said household debt has been one of the central bank’s top concerns for quite some time and it’s figuring prominently in the list of issues he’s watching closely as the economy adjusts to higher rates.

The bank estimates the economy may be as much as 50 per cent more sensitive to a given rate of interest than it was about a decade ago, he added.

Still, despite record levels of household debt, he said default levels remain very low and the system is performing well.

Citing trade-policy uncertainties, such as those related to the United States, the bank held off moving its trend-setting rate last week. It has hiked the benchmark three times since last summer thanks to a stronger-than-expected economy.

“Even I don’t know when interest rates may go up again,” Poloz said.

“That’s because we’re truly dependent on the data as they evolve in the economy because that will help us in real time to understand where we really are relative to what I call home.”

GTA, Oakville and Hamilton luxury home sales fell by 60%: RE/MAX (BNN)

TORONTO — Luxury home sales in the Greater Toronto Area, Oakville and Hamilton-Burlington have fallen by almost 60 per cent year-over-year, according to a RE/MAX report.

The real estate company says 76 freehold and condominium properties in the GTA sold for more than $3 million between Jan. 1 and Feb. 28, down from 180 sales during the same period last year.

In Oakville, six homes in the same price range sold early this year, in comparison to 15 a year ago.

Homes priced above $1 million in Hamilton-Burlington saw a 55 per cent drop to 59 homes sold at the start of the year from 133 in 2017.

Though RE/MAX says the luxury market’s record-breaking pace from last year has slowed, it is still expecting plenty of activity this year.

Already RE/MAX says it has seen increases in luxury home sales in the GTA’s Kingsway/Princess Anne Manor and Rosedale neighbourhoods, where 10 homes have sold so far this year, including the most expensive one for $8.4 million.

Forage on: Less cost for higher yields for dairy and beef production

Farmers are always operating on thin margins, looking for the best and most effective way to cut costs. According to a study from Michigan State University Extension, one of the best ways to do this is through foraging.

Foraging is a good way to increase a farms profitability, whether it’s through higher production of beef and dairy or through cash sales and make the most of your farm credit for the year. The gap between a high producing and low producing forage feed can range as much as 50% in alfalfa and as much as 26% in corn.

Foraging can also help with the cow’s health. High quality feed, knowing exactly what your cows are eating and where it comes from helps you have a more hands on approach to your cow’s nutrition. This can aid in a decrease of disease and any vet bills you may incur as a result. Some farmers have also reported a rise in their milk prices due to an increase in butterfat and protein.

These margins can drastically affect profits. Taking proper advantages of foraging can become more and more self-sufficient and rely less on purchasing feed from outside sources. According to the MSU study, farmers have purchased 10% less feed in 2016 and 17% in 2015. But the higher production all comes down to harvest time. Getting steered in the right direction with relation to what and when to plant is how you make the most of every acre.

Talk to an Ag mortgage specialist for more information and assistance with making foraging a new staple of your farming production.