Calgary Alberta Mortgage and Real Estate News

The Canadian dollar finished at its lowest level in a week against the U.S. dollar on Wednesday as recent concerns about slowing global demand for commodities hovered over the market for the second straight session.Domestic bonds handed back some of the previous day’s sharp gains when a flight from stock markets sparked a parade of buying in safe-haven fixed-income assets.

The Canadian dollar closed at C$1.1698 to the U.S. dollar, or 85.48 U.S. cents, down from C$.1664 to the U.S. dollar, or 85.73 U.S. cents, at Tuesday’s close.

Much of the move was pegged to the aftershock of Tuesday’s global stock selloff as investors continued to weigh concerns about whether cooler growth in China could cut demand for commodities, a key driving force behind the Canadian dollar.

Oil prices managed to recover earlier losses and close higher at $61.79 a barrel as a draw in U.S. fuel inventories countered worries over the economic health of large energy consuming nations.

“There’s a little more of a pessimistic outlook toward the energy and commodity story,” said Michael Gregory, senior economist at BMO Capital Markets. “And I think that kind of weighed a little bit on the Canadian dollar today, given that there are more risks in these two major sources of Canadian economic growth.”

While the focus will be on global markets, traders are also looking ahead to Canadian current account data due on Thursday, and fourth-quarter growth data at the end of the week.

The latter will set the stage for the Bank of Canada’s interest rate decision next week.

The central bank is not expected to move its 4.25 percent overnight rate, but analysts will review its accompanying statement for any hints as to how the bank views recent strong economic signals.

BONDS TURN LOWER

Canadian bond prices were unable to extend the massive gains recorded in the previous session when tumbling stock markets and troubling signs for the U.S. economy boosted the appeal of government paper.

North American stock markets finished higher on Wednesday.

“Obviously the (bond) market rallied strongly yesterday when equities sold off,” said Gregory. “But equities … bounced back a shade and I think it’s a little bit of payback for bonds.”

The two-year bond was down 8 Canadian cents at C$100.44 to yield 3.988 percent, while the 10-year bond eased 32 Canadian cents to C$99.80 to yield 4.026 percent.

The yield spread between the two-year and 10-year bond moved to 3.8 basis points from 4.2 at the previous close.

The 30-year bond slid 77 Canadian cents to C$126.55 to yield 4.080 percent. In the United States, the 30-year treasury yielded 4.676 percent.

The three-month when-issued T-bill yielded 4.20 percent, up from 4.19 percent at the previous close.

Canadian employers added the most jobs in eight months in January and almost seven times what economists forecast, further damping speculation that the central bank will reduce interest rates this year.January’s 88,900 new jobs represent the fifth-straight monthly gain, Statistics Canada said today in Ottawa. The unemployment rate rose to 6.2 percent from December’s 6.1 percent, which matched a 31-year low from May and June.

The figures bear out Bank of Canada predictions that economic growth will rebound after slowing to the least since 2003 in the third quarter. The Canadian dollar soared and bonds weakened on speculation Governor David Dodge will keep borrowing costs unchanged for much of the year, or even increase them.

“It’s good news” for policy makers, said Doug Porter, an economist with BMO Capital Markets in Toronto. “They have a nice combination of full employment and slow wage growth.” Porter predicted in a note to clients that the Bank of Canada’s next move will be a tightening, sometime in 2008.

Average hourly wages rose 2.2 percent from a year earlier, slower than December’s 2.6 percent rate, the agency said.

Economists in a Jan. 31-Feb. 8 Bloomberg News survey forecast a reduction in the main interest rate, from the current 4.25 percent, during the fourth quarter. The next decision is March 6.

In a separate Bloomberg survey, economists forecast 13,500 new jobs for January and a 6.1 percent jobless rate, based on the median of 24 and 26 estimates.

Dollar and Futures

The Canadian dollar rose to 85.32 U.S. cents at 4:17 p.m. in Toronto, the biggest gain in more than seven months, from 84.45 cents before the report. The currency, which touched its lowest since November 2005 yesterday, fell 7 percent since it rose to a 28-year high on May 31, reaching 91.44 U.S. cents.

The yield on the banker’s acceptance contract due in December rose 9 basis points to 4.27 percent on the Montreal Exchange, indicating more investors are betting the central bank won’t cut interest rates before then.

The jobless rate increased because 110,000 people joined the labor force, which was the largest monthly gain since 1981 and a reflection of Canadians’ optimism, Carolyn Kwan, a Scotia Capital Inc. economist in Toronto, wrote to clients.

Still, today’s data illustrate a disconnect between employment and growth that has puzzled central bankers, Porter said. Even as the economy added an average of 47,500 new jobs each month since September, it failed to grow at a commensurate pace, suggesting Statistics Canada isn’t measuring growth properly or that worker productivity has plummeted, he said.

Discrepancy

Dodge and Deputy Governor David Longworth have said the discrepancy is confusing, and the statistics agency said Feb. 1 it’s setting up a task force to investigate the numbers.

“It is possible that one of the employment or gross domestic product is being mismeasured, which should show up with revisions, or productivity growth has indeed fallen apart,” Kwan wrote. “In the end, it will take some time before our own conundrum is cleared.”

Canadian Finance Minister Jim Flaherty also cautioned against reading too much into today’s numbers.

“I always take monthly figures with a grain of salt,” Flaherty told reporters in Rome, on his way to a Group of Seven meeting in Essen, Germany. “They don’t depict trends.”

Job Details

Employers in the information, culture and recreation sector hired 29,200 people in January, boosting their payrolls by 4 percent. Also leading the surge were professional, scientific and technical services, with 27,600 new positions, and hotels and restaurants, with 23,800.

The net job gain was almost evenly distributed between full-time and part-time employment, with companies creating 45,900 full-time positions and 42,900 part-time jobs. Employers had already hired a total of 148,900 workers between September and December.

Home Depot Inc.’s Canada operation, which has more than 27,000 employees in the country, said today it will hire another 7,000 to cope with its busiest sales period, which is from March to June. The company will hire part-time, full-time and seasonal workers, according to a statement.

Ubisoft Entertainment SA, Europe’s second-largest video games maker, said in a statement that it will spend as much as C$454 million ($386 million) in Canada over the next six years to hire game developers and create a digital-movie studio.

Natural-resource companies led the gain in the goods- producing sector. Commodity-related companies added 9,600 employees, and manufacturers hired 3,600 people.

Factories, which have contended with higher production costs and a strong currency that makes their goods more expensive abroad, have fired 11,400 people in the past year.

Western Provinces

British Columbia, Canada’s westernmost province, led the overall gain in January, with 31,700 new jobs.

Alberta, the western province where an oil boom has caused labor shortages, added 24,000 jobs. The province’s employment was unchanged at 3.3 percent, as 23,300 joined the workforce.

From January 2006, employers have added 399,200 jobs, or 2.4 percent of their workforce, the statistics agency said.

Canada should cut taxes on investment and personal income, instead of further reducing a national sales tax, and continue paring the federal debt, the International Monetary Fund said.“We welcome the government’s commitment to using interest savings from debt reduction to lower personal income taxes and to reducing effective marginal tax rates on investment, which would provide larger efficiency gains than further cuts to the goods and services tax,” the Washington-based IMF said today in an annual consultation report it prepared in December.

Prime Minister Stephen Harper’s Conservative Party was elected in January 2006 in part on a promise to lower the goods and services tax to 5 percent from 7 percent. The government cut the tax to 6 percent in July. Harper promised in a Feb. 6 speech to introduce legislation to fund tax cuts with the money the government saves on interest as it pays down the debt.

Canada’s economic growth will slow to 2.5 percent this year from 2.8 percent in 2006, the report said. The Bank of Canada’s decision to leave its key interest rate at 4.25 percent “appears appropriate moving forward,” the report said. The central bank had raised rates at seven consecutive meetings ending in May.

Canadian factory shipments rose more than twice as much as forecast in December, led by sales of cars and airplanes.Shipments gained 1.7 percent to C$49.7 billion ($42.6 billion), the highest since July, Statistics Canada said today in Ottawa. Economists expected a 0.7 percent increase, according to the median of 22 estimates in a Bloomberg News survey.

The report suggests the Bank of Canada, which left interest rates unchanged last month, was right in saying factories have adjusted to a currency that rose by a third since 2003. Today’s data, combined with a surge in employment since September and a trade surplus that expanded for two straight months, may remove any need for central bankers to consider cutting interest rates.

“The worst for Canadian manufacturers may be behind us,” Marc Levesque, an economist with TD Securities in Toronto, said in a note to clients. The numbers “certainly punch another big hole in any lingering hopes that the Bank of Canada will be easing monetary policy over the course of 2007.”

Thirteen of the country’s 21 manufacturing industries accounting for 74 percent of factory output posted gains in December, with shipments by carmakers surging 7.2 percent to C$5.6 billion, the statistics agency said. Excluding price changes, overall shipments rose 1.4 percent to C$45.6 billion.

The Canadian dollar rose to 86 U.S. cents, a six-week high, at 4:16 p.m. in Toronto, from yesterday’s 85.77 cents. Manufacturers have had a reprieve on the currency front, with the Canadian dollar dropping 6 percent since touching a 28-year high of 91.44 U.S. cents on May 31.

Interest Rates

Policy makers kept the benchmark lending rate at 4.25 percent for the fifth-straight meeting Jan. 16, and later said they saw no need to cut interest rates to boost demand. The economy will expand 2.4 percent in the first quarter and 2.6 percent in the second quarter, after slowing to a 1.5 percent annualized rate in the fourth quarter, central bankers say.

A majority of 12 economists surveyed by Bloomberg News between Jan. 31 and Feb. 8 said they saw that forecast as too optimistic and predicted a fourth-quarter rate cut.

The manufacturing numbers follow a Feb. 13 report showing Canada’s trade surplus widened more than expected in December to the largest since February 2006, as exports of cars and energy products gained.

The surplus widened to C$4.98 billion from a C$4.72 billion in November, Statistics Canada said. Exports rose 3.8 percent to C$40.4 billion and imports advanced 3.6 percent to C$35.4 billion, the agency said.

Durable Goods

Today’s report showed durable goods shipments rose 3 percent to C$27.5 billion in December, including a 4.1 percent gain in shipments by aerospace companies.

Excluding cars, manufacturing shipments increased 1 percent to C$41.7 billion, the statistics agency said.

Inventories fell 0.6 percent to C$63.1 billion, while new orders increased 2.1 percent to C$50.6 billion. Unfilled orders gained 2.1 percent to C$42.9 billion.

For all of 2006, shipments fell 0.6 percent from 2005’s record level, to C$587 billion on a nominal basis. Adjusting for price changes, they dropped 1.6 percent to C$539 billion.

Canadian manufacturing shipments ended 2006 on a strong note, rising a higher-than-expected 1.7 percent in December after a dismal year, cementing expectations of a comeback in economic growth in early 2007.Statistics Canada said on Thursday a revival of Canadian motor vehicle shipments helped boost overall factory shipments in December from November, topping analysts’ forecasts of a 0.9 percent rise.

The gain came after a 2.4 percent increase in November and as the transportation sector, led by automobiles, shipped C$10.2 billion worth of products in December, the highest monthly total in 2006.

“The details do suggest that there is reason for optimism heading into the new year, and at a minimum, should help boost GDP and provide a good handoff into 2007,” said Carolyn Kwan, senior economist at Scotia Capital in Toronto.

The manufacturing data, combined with weaker U.S. jobless claims and capital flows data, pushed the Canadian dollar higher versus the U.S. currency. The dollar climbed to C$1.1642, or 85.90 U.S. cents, up from C$1.1651, or 85.82 U.S. cents, at Wednesday’s close.

Canada’s economy grew a weaker-than-expected 0.2 percent in November and stagnated in October but a string of strong data suggest December will be stronger. Third-quarter growth came in at 1.7 percent.

The expected upturn in growth, combined with inflation under control, led the Bank of Canada to suggest it will keep borrowing costs unchanged for some time. It has kept its overnight interest rate at 4.25 percent since last May following seven hikes.

“Evidence continues to build that the Canadian economy rebounded with purpose around the turn of the year after a squishy soft autumn and summer,” said Doug Porter, deputy chief economist at BMO Capital Markets in Toronto.

The strong showing in the auto sector boosted shipments of durable goods by 3.0 percent while non-durable goods shipments crawled 0.2 percent higher as declines in chemicals offset gains in petroleum and coal.

In all of 2006, however, shipments were down 0.6 percent from the 2005 peak and in line with 2003 levels. “The year-end rally was not enough to offset several months of weak performances earlier in the year,” Statscan said.

That rally drove new orders for manufactured goods up 2.1 percent in December to their highest level since January 2006 while unfilled orders jumped by the same amount to their highest in four years — both as a result of strong demand for motor vehicles and aerospace equipment. Inventories were drawn down by 0.6 percent.

Resale housing activity in Canada’s major markets set a new record in January 2007 according to statistics released by The Canadian Real Estate Association (CREA).Seasonally adjusted MLS® home sales in Canada’s major markets totaled 30,359 units in January 2007. Led by gains in Vancouver, Edmonton and Toronto, seasonally adjusted activity rose by 3.4 per cent from December 2006 and surpassed the previous monthly record set in August 2005 by three per cent.

Seasonally adjusted activity set new records in Edmonton, Saskatoon, Ottawa and Saint John. Sales also reached their second highest monthly level on record in Calgary, and their third highest level on record in Toronto.

Seasonally adjusted MLS® residential new listings numbered 48,035 units in January, up 3.1 per cent from 46,579 units in December. The monthly increase resulted largely from an increase in new listings in Vancouver and Toronto.

The monthly increase in sales was slightly larger than for new listings, which caused the resale housing market to become slightly tighter in January compared to the previous month. Markets in Toronto and Montreal became tighter in January than in any other month in the past year.

The major market MLS® residential average price in January rose 11.2 per cent year over year to $299,318. Average price reached its highest monthly level on record in Calgary, Edmonton, Saskatoon, Hamilton-Burlington, London & St. Thomas, and Quebec City.

“Unseasonably warm weather in some regions may have boosted MLS® home sales activity in January,” said CREA Chief Economist Gregory Klump. “Transactions also rose in each of the three previous months. That clearly shows that resale housing activity continues to be supported by the same factors that have boosted the housing market over the past several years.”

“Low mortgage interest rates, high employment, rising incomes and upbeat consumer sentiment will keep the housing market on a strong footing for the foreseeable future,” he added.

Canada’s trade surplus widened unexpectedly in December to the largest since February, as exports of cars and energy products gained.The surplus widened for a second-straight month to C$4.98 billion ($4.24 billion), from a revised C$4.72 billion in November, Statistics Canada said today in Ottawa. Exports rose 3.8 percent to C$40.4 billion, and imports gained 3.6 percent to C$35.4 billion.

The wider trade surplus, combined with January employment data that showed almost seven times more new jobs than forecast, suggests Canada’s economy rebounded after slowing in the second and third quarters. The country’s currency has fallen since touching a 28-year high in May, helping factory exports abroad and reducing the need for the Bank of Canada to lower interest rates.

The trade sector “had its best performance in over two years” between October and December, Stefane Marion, an economist with National Bank Financial in Montreal, said in an interview. The December data means trade contributed two percentage points to growth during the quarter, Marion said.

Economists had forecast the December trade surplus to come in at C$4.7 billion, according to the median of 23 estimates in a Bloomberg News survey.

The Canadian dollar rose to 85.73 U.S. cents at 4:11 p.m. in Toronto. The currency gained the most in seven months on Feb. 9 after the employment report, reaching 85.30 U.S. cents.

The yield on the banker’s acceptance contract due in December rose 3 basis points to 4.32 percent on the Montreal Exchange, indicating more investors are betting the central bank won’t cut interest rates before then.

`Widespread Strength’

“The widespread strength in both exports and imports in December suggests that overall gross domestic product also ended the year on a strong note,” Doug Porter, an economist with BMO Capital Markets in Toronto, said in a note to clients. It’s the second time in two-and-a-half years that a widening trade surplus has contributed to quarterly growth, he wrote.

Statistics Canada reports economic growth figures for December and the fourth quarter on March 2.

The Bank of Canada predicted last month the economy would expand 2.4 percent in the first quarter and 2.6 percent in the second quarter, after slowing to a 1.5 percent annualized rate in the fourth quarter. Should that scenario bear out, the central bank won’t need to cut interest rates to boost demand, Bank of Canada Deputy Governor David Longworth said Feb. 6.

Canadian employers added 88,900 jobs in January, Statistics Canada said Feb. 9. Still, a majority of 12 economists surveyed by Bloomberg News between Jan. 31 and Feb. 8 see the bank’s forecast as too optimistic and predict a fourth-quarter rate cut.

2006 Surplus

For all of 2006, the size of the trade surplus shrank C$11.2 billion to C$53.6 billion, the smallest annual surplus since 1999, the statistics agency said.

The trade surplus with the U.S., which buys about 75 percent of Canada’s exports, widened to C$7.92 billion, from November’s C$7.48 billion, the statistics agency said today.

Carmakers’ sales abroad rose 8.4 percent to C$7.54 billion, the third-straight gain, the statistics agency said.

Canadian energy exports increased 5.8 percent to C$7.28 billion during the month, led by natural gas. Canada sits on the largest oil reserves outside the Middle East and is the world’s No. 2 exporter of natural gas.

Exports of machinery and equipment rose 2 percent to C$8.75 billion and those of consumer goods other than cars surged 9.2 percent to C$1.79 billion.

Cars, Energy

Factory exports have benefited as the Canadian dollar fell almost 7 percent since touching 91.44 U.S. cents on May 31. Overall though, exports will probably drop in the first quarter of this year, as carmakers shut down plants and commodity prices fall, National Bank’s Marion said.

Cars and energy products such as crude oil and heating and diesel fuel led the imports’ gain. Energy imports advanced 7.9 percent increase to C$2.95 billion and cars imports rose 6.5 percent to C$7.13 billion.

Excluding the effects of price changes, exports rose 2.5 percent during the month, and imports gained 2.1 percent, the statistics agency said.

The U.S. trade deficit widened more than expected in December, rising 5.3 percent to $61.2 billion on higher prices for crude oil imports, the Commerce Department said today in Washington.