GRUMPY CONSUMERS DON'T HELP ECONOMIC RECOVERY
Despite Finance Minister Jim Flaherty's recent declaration that "these are happy times," there is growing evidence that consumers in Canada and the United States actually aren't very happy these days. And grumpy consumers make for a difficult economic recovery.
Analysts have been counting on Washington's tax rebates to start flowing as a means to jump-start the sputtering U.S. economy. But consumer confidence has taken a nosedive. And the University of Michigan recently found that only 30 per cent of consumers plan to spend any of their rebate this year, opting to put the money toward debt or savings instead.
"This fiscal stimulus may prove to be a damp squib," say economists at Capital Economics.
In Canada, the central bank recently pointed to fading consumer confidence as one of the key risks to Canada's already-slowing economy. Research by CIBC World Markets suggests the fears may be materializing.
A new paper says Canadian investors, fleeing volatile markets, are selling their equities and hoarding a record $45-billion in cash. About $35-billion in equity mutual funds were redeemed in the past six months and the liquidity position in Canadian households is now rising at an annual pace of 15 per cent. That's the fastest in six years, CIBC says.
"Investors are in a bad mood," commented author Benjamin Tal. Heather Scoffield
SOURCES:CAPITAL ECONOMICS, THOMSON DATASTREAM, CIBC WORLD MARKETS, BANK OF CANADA, INVESTMENT FUNDS INSTITUTE OF CANADA, STATISTICS CANADA
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HOUSING MARKET COOLING BUT NOT CRASHING
The week was full of indications that the Canadian housing boom has truly come to an end, but also replete with assurances from analysts that the slowing activity is healthy, and nothing like the crisis seizing the United States or parts of Europe.
Building permits for both residential and non-residential construction fell in February, by 4.5 per cent from a month earlier. The spin: The data series is often volatile; and most of February's drop can be traced to Alberta.
Housing starts sank about 12 per cent in April from March to an annualized, seasonally adjusted 213,900 new units. The declines were seen in most types of housing and most regions. The spin: The weakness comes after a strangely robust first quarter; and Canada is still well above the 200,000 mark seen as the benchmark for strength.
The Canadian Real Estate Association forecasts an 11.5-per-cent drop in home sales this year from last year, and another 4-per-cent decline in 2009. The spin: Home prices will continue to rise in every province; and Saskatchewan and Newfoundland and Labrador are still on fire.
All told, economists say Canada's housing market is cooling off, but gradually, and in a way that will help keep inflation low while not driving homeowners into bankruptcy. Heather Scoffield
HOUSE PRICES PROJECTED TO CONTINUE RISING
| 2007 | 2008 | 2008 | 2009 | 2009 | ||
| 2007 | change | forecast | change | forecast | change | |
| Canada | $307,265 | 11.0% | $323,500 | 5.3% | $337,000 | 4.2% |
| British Columbia | $439,123 | 12.3% | $485,900 | 10.7% | $514,500 | 5.9% |
| Alberta | $356,235 | 24.8% | $373,000 | 4.7% | $383,300 | 2.8% |
| Saskatchewan | $174,405 | 32.0% | $208,400 | 19.5% | $226,200 | 8.5% |
| Manitoba | $169,189 | 12.6% | $187,800 | 11.0% | $206,200 | 9.8% |
| Ontario | $299,544 | 7.6% | $312,400 | 4.3% | $322,000 | 3.1% |
| Quebec | $208,240 | 7.3% | $218,000 | 4.7% | $224,900 | 3.2% |
| New Brunswick | $136,603 | 7.7% | $142,800 | 4.5% | $148,200 | 3.8% |
| Nova Scotia | $180,989 | 7.3% | $189,100 | 4.5% | $196,400 | 3.9% |
| PEI | $133,457 | 6.4% | $141,000 | 5.7% | $146,300 | 3.8% |
| Newfoundland | $149,258 | 7.0% | $159,200 | 6.7% | $167,700 | 5.3% |
SOURCE: CANADIAN REAL ESTATE ASSOCIATION
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SINGLE MOTHERS DOING BETTER THAN IN THE '90S
After much debate this week about whether or not the average Canadian has benefited at all from the economic boom of the past decade, the latest income data from Statistics Canada show some encouraging trends for at least one group of people: Single moms nowadays are doing much better than in the 1990s, although their poverty levels are still high enough to add a sober note on Mother's Day.
A decade ago, more than half of Canada's single mothers lived in poverty, as defined by Statistics Canada's low-income cut-off calculations. That percentage has fallen steadily (except for a small surge in 2002). By 2006, just 28.2 per cent of single moms were below the poverty line.
Of the children who live with single mothers, about one-third are below the poverty line, but this is significantly lower than in 1996, when it was 55.8 per cent.
As for their take-home pay, single mothers didn't make much more in 2006 than they did in 2005. The median after-tax income was $31,700, compared to $30,900 a year earlier (adjusted for inflation). Government transfers to single mothers went up slightly in 2006, but that was offset by higher income taxes.
Generally, the gains in income for single mothers over the past decade can be traced to higher employment and salaries, Statscan said.
Heather Scoffield
SOURCE: STATISTICS CANADA
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