This week's mortgage market update contains:
- Loonie jumps after rate decision
- Housing starts jump
- Central bank opens door to rate hike
- Hot housing drives economy
This week's highlights:- US Employment Growth Improves in June
- Canadian Employment in June Builds Further on Strong Gains in Earlier Months
- Bank of Canada Holds Rates Steady, But is Poised to Tighten Soon
This week's Quote:
"If you'll not settle for anything less than your best, you will be amazed at what you can accomplish in your lives."
Vincent Thomas
WEEKLY ARTICLES OF INTEREST
Loonie jumps after rate decision 2005-07-12 15:12:41 [Business]
OTTAWA ~ Indications that the Bank of Canada is set to raise interest rates sparked a wave of buying into the Canadian dollar today, sending the currency up almost a full cent in afternoon trading. Also supporting the Canadian dollar today was another bout of weakness in the U.S. currency, which fell against the euro and other major currencies amid waning optimism about the U.S. economy.
read more...
Housing starts jump TAVIA GRANT Online Edition: Monday, July 11, 2005 09:52 AM
Canadian starts hit highest level this year, while non-residential investment reaches record
read more...
Central bank opens door to rate hike JOHN PARTRIDGE Today's Paper: Wednesday, July 13, 2005 12:00 AM Page B3
Bet your mortgage on it: The Bank of Canada will finally raise interest rates again in September, barring a major catastrophe.That's because the central bank is now apparently more concerned about the economy overheating than it is about the steroidal strength of the Canadian dollar and the damage it has done to Canadian exporters by making their prices less competitive abroad.
read more...
Hot housing drives economy ELIZABETH CHURCH Today's Paper: Tuesday, July 12, 2005 12:00 AM Page B4
The booming construction industry is continuing its role as a force for growth in the Canadian economy, two reports released yesterday show. Housing starts hit their highest levels of the year in June, helped by an unexpected drop in mortgage rates this spring and a spike in condominium projects in Toronto.
read more...
THIS WEEK'S HIGHLIGHTS
- US Employment Growth Improves in June
- Canadian Employment in June Builds Further on Strong Gains in Earlier Months
- Bank of Canada Holds Rates Steady, But is Poised to Tighten Soon
US nonfarm payrolls expanded 146,000 in June, less than anticipated, though gains in earlier months were revised higher (to 104,000 in May versus 78,000 previously, and to 292,000 in April versus 274,000). As well, the unemployment rate declined 0.1 percentage point to 5.0% (its lowest level since September 2001) due to a negligible expansion of the workforce in the month. The job gains in June were concentrated in the services-producing sector (up a net 150,000), led by a 56,000 advance in the number of professional and business positions. In contrast, the goods-producing sector lost 4,000 jobs, with factories shedding 24,000 positions in the month. One area of ongoing strength, however, was construction (up 18,000) as a result of red-hot demand for housing.
Employment in Canada rose a moderate 14,200 (0.1%) in June. However, this followed solid gains of 35,400 (0.2%) and 29,300 (0.2%) in May and April, respectively. StatCan commented that the cumulative gain in the second quarter of 78,900 was three times as large as the increase in the first quarter. The job gain in June lowered the unemployment rate to 6.7% from 6.8% in May as the labour force shrank slightly. The earlier strong job gains had already moved this rate down from 7.0% at the start of the year. Another encouraging sign was that all of the increase in June was in full-time employment which soared by 52,200 jobs in the month that more than offset part-time employment plummeting 38,000.
As widely expected, the Bank of Canada kept its target rate for overnight funds unchanged at 2.50%. This rate has been held steady since October 2004. The Bank's press statement, however, left little doubt that rates would rise soon, stating bluntly that "some reduction in the amount of monetary stimulus will be required in the near term." Previously, the Bank was saying that the reduction could take place "over time." The statement expressed little concern about the economic impact of the high Canadian dollar, one factor keeping the Bank on the sidelines in the last nine months. Most importantly, the statement said that the economy is now "operating close to its production capacity." While rates are poised to head higher, the pace of tightening will likely be kept gradual (much like the Fed's recent course). This is because the Bank expects economic growth to trend around its potential pace (of about 3%) in the year ahead, so excess demand pressures should not emerge. As a result, the Bank still expects inflation to return to the 2 per cent target by the end of 2006. As always, we will keep our ear to the ground and make you aware of developments as they occur.
|
