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BoC ends rate hike warning, cuts growth outlook

Date: October 24th, 2013

CBC News

Bank of Canada ends rate hike warning, cuts growth outlook

The Bank of Canada has held its key interest rate at one per cent and cut its outlook for economic growth from now until 2015.

In its monetary policy report released today by Governor Stephen Poloz, the central bank has cut its outlook for economic growth to 1.6 per cent this year, 2.3 per cent in 2014 and 2.6 per cent in 2015, a sizable downgrade from its July outlook. The bank says it sees the economy returning to full capacity by the end of 2015.

The statement also removes the bank’s warning that a rate hike is inevitable, a “major turn in guidance,” according to Andrew Pyle, senior wealth adviser and portfolio manager at Scotia McLeod.

The central bank had adopted a stated bias towards hiking rates in April 2012 to caution consumers about over-borrowing.

The change in guidance has led to the assumption among market watchers that it is just as likely the bank will cut the key one per cent overnight rate in the future as hike it.

At a news conference following the release of the bank’s monetary policy report and rate announcement, Poloz made no effort to dissuade markets from that assumption.

“The statement is making it clear we have balanced the risks,” Poloz said. “If we were to receive more data flow that was more negative for that inflation outlook, then we would need to rethink that balance.”

The Bank of Canada says softer-than-expected U.S. growth pushed its economic forecast lower, but that it expects “a better balance between domestic and foreign demand will be achieved over time and that economic growth will become more self-sustaining.”

In its July report, the bank had predicted the Canadian economy would grow 1.8 per cent this year, followed by 2.7 per cent in 2014 and 2015, returning to full capacity in mid-2015. But Poloz is now more pessimistic.

“In Canada uncertain global and domestic economic conditions are delaying the pick up in exports and business investment, this leaves the level of economic activity lower-than-expected,” he said.

The announcement sent the Canadian dollar plummeting, down 0.92 cents against the U.S. dollar to 96.28 cents US in late afternoon trading.

That won’t be the end, according to Pyle, who says he sees the Canadian dollar falling to 92 cents US within a month, and that he believes Poloz is attempting to push the dollar down to boost exports.

“Exports were supposed to be the engine of growth for the economy, out of 2013, through to 2014. It’s clearly not happening,” Pyle said in an interview with CBC’s Lang & O’Leary Exchange.

“I would bet right now the Bank of Canada would like a little bit of juice from the currency, whether it’s a two to five cent decline, back down to where it’s 90 cents, to get the export sector going.”

The lower economic outlook and stubbornly low inflation mean the Bank of Canada is likely to hold interest rates for at least another two years, Pyle says. For people with variable rate mortgages, that could mean no change until 2016, but he warns that higher bond yields may push up rates for people looking at a mortgage with a five-year term.

TD Bank says it now believes rates will stay unchanged until 2015, according to commentary by economist Diana Petramala.

“Interest rate hikes will be gradual and dependent on economic performance and financial conditions going forward, with the bank keeping a close eye on the evolution of domestic risks,” Petramala

GTA Population, Employment and Household Projections to 2041

Date: September 9th, 2013

I am re-publishing this valuable article created by Metrolis IQ. All rights (and credit) for this article belong to them.

UPDATE: On Monday, June 17 Amendment #2 to the Growth Plan for the Greater Golden Horseshoe was officially adopted by the Province of Ontario.  This amendment includes updated projections for population and employment across the Greater Golden Horseshoe and extends the projection period from 2031 to 2041.

With an estimated population of 6.3 million people, the Greater Toronto Area (GTA) is the largest urban area in Canada and one of the largest in North America.  The GTA continues to experience rapid growth with the region adding nearly 100,000 new residents each year. This growth is expected to continue over the coming decades with the GTA becoming home to nearly 9.4 million people by 2041.

While Official Plans were previously created by individual regions and municipalities to guide development within these jurisdictions, the Government of Ontario released the Growth Plan for the Greater Golden Horseshoe to provide an overarching framework for implementing the Province’s vision for “building strong, prosperous communities by better managing growth in the region to 2031”.


Greater Golden Horseshoe Map

The first version of the Growth Plan was released in 2006 and included a Growth Outlook for the Greater Golden Horseshoe to 2031.  This Outlook, which was based in large part on the 2001 Census, was completed in 2005. Now seven years, two Censuses and numerous economic and demographic changes later, the Province of Ontario (Ministry of Infrastructure) has adopted the aforementioned Amendment #2 to the Growth Plan for the Greater Golden Horseshoe which provides population and employment projections to the year 2041. 


The projections were completed by Hemson Consulting, the same consultant that created the original Growth Outlook.  In preparing their report Hemson used standard demographic “cohort component” methodology. The methodology used in the 2005 and 2012 Outlooks are consistent, however certain assumptions have been updated to better reflect changes that have occurred over the past seven years.

While we do not examine the methodology in detail the following are some of the general assumptions that have been incorporated into the 2012 forecast:

  1. Immigration continues to drive overall growth
  2. Long-term economic growth remains positive (an average GDP growth rate of 2.6% is used)
  3. Manufacturing still an important part of the economy, but will continue to decline
  4. Fertility rates are increasing
  5. Life expectancy will continue to rise
  6. The average age in the GTA will not rise as quickly as in other area
  7. Household growth will be slower than previously expected

NOTE: Population and employment projections shown below are for the Greater Toronto Area only.  All other parts of the Greater Golden Horseshoe are not shown on this summary.


The updated projections contained in Amendment #2 show the Greater Toronto Area being home to 8.33 million people and 4.07 million jobs by 2031, approximately 380,000 more people and 50,000 more jobs than was projected in the original Growth Plan.  These changes are reflective of the fact that additional data (two Census’, etc) was available allowing Hemson Consulting to refine their projection models.


Projection Differences for 2031


Population by 2041

By the year 2041, the Greater Toronto Area is projected to be home to roughly 9,368,000, an increase of 3,070,000 from 2011.


GTA Population Projections

To put this in perspective the here is a list of projected populations for Canada’s six largest urban areas in 2041:

Canada's Six Largest Cities 2041

Within the GTA the City of Toronto will remain the largest municipality with 3.4 million residents. Toronto will be followed by Peel Region at 2.0 million, York Region at 1.8 million, Durham Region at 1.2 million and Halton Region at 1.0 million. 


Over the next 30 years, close to 3.1 million new residents will call the GTA home, an increase of 48.5% from 2011.  York Region will see the largest increase in population, growing by 716,000 residents (+66.8%), second is the City of Toronto at an increase of 675,000 residents (+24.8%), followed by Peel Region at 618,000 (+45.8%), Durham Region at 559,000 (+88.6%) and Halton Region at 484,000 (+93.1%).


GTA Population Projections Graph

100,000 per Year

While growth is expected to average about 100,000 people per year, annual increases are projected to fluctuate with the GTA adding an average of 97,400 residents per year between 2011-2016, 98,800 residents per year between 2016-2021, 108,000 residents per year between 2026-2031, 106,000 residents per year between 2031-2036 and 98,200 residents per year from 2036-2041.


Average GTA Population Growth

Toronto’s Declining Share

While all parts of the GTA are expected to experience strong growth, 78% of this increase is expected to occur in the suburban “905” Regions of Peel, York, Durham and Halton with the remaining 22% of growth occurring in the City of Toronto.  This distribution of growth will lead to the City of Toronto’s share of the total GTA population declining from 43.3% in 2011 to 36.3% in 2041. Peel Region will also see a slight decline in its share of population growth decreasing from 21.4% in 2011 to 21.1% in 2041.  The remaining three regions will each see increases in the share of population with York Region increasing from 17.0% in 2011 to 19.1% in 2041, Durham Region from 10.0% in 2011 to 12.7% in 2041 and Halton Region from 8.3% in 2011 to 10.8% in 2041.


Population Share by Region - 2011


Population Share by Region - 2041

Beyond the GTA

Substantial growth is not only projected to occur in the Greater Toronto Area, but also the surrounding areas of the Greater Golden Horseshoe as well.  The Greater Golden Horseshoe, which includes the GTA as well as the City of Hamilton, Waterloo Region, Niagara Region, City of Barrie, City of Guelph and several other regions and municipalities, is expected to be home to nearly 13.5 million residents by 2041 an increase of close to 4.5 million people. 

NOTE: As the entire region continues to grow we can expect further integration to a occur and at some point we will likely start referring to our region as the Greater Golden Horseshoe as opposed to the Greater Toronto Area.

Ministry of Finance Population Projections

In addition to the projections calculated by the Ministry of Infrastructure (via Hemson Consulting) for the Growth Outlook, the Ontario Ministry of Finance has also completed an update to its Ontario Population Projections which the Ministry uses for economic planning purposes.  According to these estimates the GTA is expected to be home to nearly 9.2 million people by 2036 which is about 280,000 more than the Ministry of Infrastructure’s Growth Outlook.    Why the difference?  While most of the methodology used to create the Ministry of Finance report was used in the creation of the update Growth Outlook, several items including the fertility rate, are slightly different in the Ministry of Finance projections which when projected out over 30 years can lead to differences.


The GTA economy is also expected to grow significantly over the next 30 years.  While there will be traditional economic expansions and contractions an average GDP growth rate of 2.6% is projected to 2041.  Given this economic growth and the aforementioned population projections the GTA is expected to be home to approximately 1.2 million new jobs by 2041, an increase of 27.9%. 

By 2041, the City of Toronto is expected to be home to total employment of over 1.7 million followed by Peel Region at nearly 1 million jobs, York Region at over 900,000 jobs, Halton Region at close to 500,000 jobs and Durham Region at over 400,000 jobs.


GTA Employment Projections


York Region is expected to see the biggest growth in employment adding 358,000 jobs (+39.9%), followed by Peel Region at 283,000 jobs (+29.3%), Halton Region at 212,000 jobs (+45.4%), the City of Toronto at 200,000 jobs (+11.7%) and Durham Region at 186,000 jobs (+43.7%).  


GTA Employment Projections Graph

Job Creation Will Decline

Growth in employment is expected to slow over the coming decades due to a slowdown in the growth of the working age population. This essentially means the increase in the number of working age people in the GTA will not rise as quickly as the population of those who do not or cannot work (i.e. children and the elderly).  Employment is projected to grow at an average rate of over 50,000 jobs per year between 2011 and 2021, fall to 32,400 jobs per year from 2021 to 2026 and gradually increase back towards 44,000 between 2036 to 2041.  This slowdown is between 2021 and 2031 can be largely attributed to the continued rapid growth in the GTA’s senior population and will likely mean that starting in 2026, less than half of the total GTA population will be employed.


Percentage of GTA Population Employed

Toronto’s Declining Share

Much like the population growth, most employment growth is expected to occur in the suburban “905” Regions of Peel, York, Halton and Durham with the 905 accommodating 84% of all employment growth compared to 16% in Toronto.  This distribution of employment growth will see the City of Toronto’s share of total GTA employment decrease from 46.9% in 2011 to 38.3% in 2041. All other regions will see their share of employment grow with Peel Region increasing from 21.1% in 2011 to 21.6% in 2016, York Region increasing from 16.7% to 20.1%, Halton Region increasing from 7.9% in 2011 to 10.4% in 2041 and Durham Region increasing from 7.4% in 2011 to 9.6% in 2041.

NOTE: The employment forecasts were tabulated by applying assumptions for labour force participation rates, unemployment rates, and net in-commuting to the population forecast.


Employment Share by Region - 2011


Employment Share by Region - 2041


The Growth Outlook also includes projections for the number of households that will be required to accommodate the nearly 9.4 million people expected to be living in the GTA by 2041.  Based on average household size and formation rates, estimates put the number of housing units required at 3.3 million.  

The City of Toronto is expected to be home to 1.3 million units followed by Peel Region at nearly 600,000, York Region at 560,000, Durham Region at 415,000 and Halton Region at 361,000.


GTA Household Projections


Over the next 30 years, just over 1.1 million new residential units are expected to be built across the GTA, an increase of 33.8% from the number of units in 2011.  The City of Toronto is projected to see the biggest growth in the number of households, adding 293,310 units (+21.9%) by 2041 followed by York Region at 235,720 units (+42.2%), Durham Region at 200,440 units (+48.4%), Peel Region at 194,930 units (+32.6%) and Halton Region at 180,100 units (+50.2%). 


GTA Household Projections Graph

Increasing Density…more Condos and Townhouses

Not unlike what has been occurring over the past 5-10 years, planning policy, economics and demographic trends will help push the continued increase in density of real estate development with the number of households living in medium and high density units rising faster than the number of households living in low density units.  By 2041 the share of households living in apartments expected to rise to 40.6% and share of households living in townhouses is expected to increase to 11.6%.  As the proportion of medium and high density units increases the share of households living in single detached units will fall to 41.2% and the share of households living in semi-detached units will drop to 6.7%.

NOTE: The housing mix information presented here is for the Greater Toronto Area and Hamilton (GTAH).


GTAH Housing Mix - 2011


GTAH Housing Mix - 2041

DATA SOURCES: Hemson Consulting, Ontario Ministry of Finance, Ontario Ministry of Infrastructure and MetropolisIQ Urban Data Ltd.

Bank of Canada Pledges Steady Rates Under Explicit Conditions

Date: July 17th, 2013

Reuters – By Randall Palmer and Louise Egan

OTTAWA (Reuters) – The Bank of Canada said on Wednesday it will hold its benchmark interest rate steady at 1 percent while the economy remains fragile and inflation stays low, but that it sees rates rising if the economy performs in line with expectations.

The policy announcement, the first under new Governor Stephen Poloz, delivered roughly the same message as those of his predecessor, Mark Carney, over the past year: The next move is a rate hike, not a cut, although it won’t be any time soon.

Still, Poloz, who took over at the helm of the central bank in June, was more explicit in stating that the continuation of steady rates depended on three key trends.

“As long as there is significant slack in the Canadian economy, the inflation outlook remains muted, and imbalances in the household sector continue to evolve constructively, the considerable monetary policy stimulus currently in place will remain appropriate,” Poloz said at a news conference to announce the bank’s decision.

“Over time, as the normalization of these conditions unfolds, a gradual normalization of policy interest rates can also be expected, consistent with achieving the 2 percent inflation target.”

But he downplayed the so-called hawkish bias in the statement and made it clear any move was still far in the future.

“We never saw that as some sort of signal that we were on an imminent tightening phase or anything like that,” he said. “Rather it was to help people understand that these are not normal times. So you need to be more prepared for a gradual return to normality.”

Canada’s export-reliant economy has struggled to stay on a growth track after a relatively speedy recovery from the world economic crisis. Inflationary pressures remain muted.

The bank did not provide specific thresholds that could trigger a rate increase.

Poloz listed an array of factors the bank would watch, including more U.S. and global growth momentum, but said it would mostly be a judgment call by the bank.

His comments came as Federal Reserve Chairman Ben Bernanke said the U.S. central bank still planned to start scaling back its massive bond purchase program later this year, but it could change those plans if the outlook shifted.

Poloz said Bernanke’s recent remarks on the so-called tapering of the Fed’s stimulus measures were helpful.

“Markets are learning from that, as are we,” he said.


Following the decision and the new governor’s comments, traders slightly bid up the price of shorter-term bonds, sending yields lower, showing there was little concern the central bank would rush to boost interest rates.

“They tweaked – very, very slightly – the eventual tightening bias, but not in any meaningful way, I don’t think,” said Mark Chandler, head of fixed income and currency strategy at the Royal Bank of Canada.

“Overall, I think it was quite cautious. I’d hate to paint it specifically dovish or hawkish.”

The Canadian dollar weakened to a session low against the U.S. dollar after the statement, sliding to C$1.0445 versus the greenback, or 95.74 U.S. cents. But it quickly regained most of the lost ground.

The central bank has held its overnight rate at 1 percent since September 2010, the longest period between rate changes since the 1950s. Since April 2012, it has been hinting at rate hikes to come, making it the only central bank in the Group of Seven major economies to have a hawkish bias, albeit a mild one.

Market players don’t expect a move until the fourth quarter of 2014.


The bank cut its forecast for second-quarter growth sharply – to 1 percent from 1.8 percent – largely due to the impact of catastrophic flooding in Alberta and a strike by construction workers in Quebec. But it said third-quarter growth would more than compensate for that decline. It forecast third-quarter growth of 3.8 percent, up from its previous estimate of 2.3 percent.

That meant the volatility of the two quarters would not play into its policy choices.

The bank said the economy would grow 1.8 percent this year, up from its previous estimate of 1.5 percent. It expected growth of 2.7 percent each year in 2014 and 2015. The 2014 forecast was lowered from the 2.8 percent previously estimated.

The overall growth outlook is little changed from its April forecast, and the bank sees a return to full capacity and inflation rising to its 2 percent target by mid-2015.

On Canada’s once-hot housing market, Poloz did not rule out a rebound even after signs of cooling earlier this year. Household debt has eased but could also pick up again, he said.

“As I read the situation right now, the new data that we have from the housing sector is just as consistent with a soft landing as they might be with a rebound,” he said.

While past statements have referred to the “persistent strength of the Canadian dollar,” the currency has weakened in recent weeks and the bank avoided the phrase.

“In general, we would prefer not to offer a running commentary on the dollar in any case,” Poloz said.

Housing + Economic Outlook for Canada and the Provinces

Date: June 25th, 2013

Today provided the release of two reports for the housing and conomic outlook for Canada and the provinces from the third quarter of 2013 looking forward. Well worth the read. Both indicate a much better 2014 than 2013.

Housing Market Outlook – Second Quarter 2013 –
Metropolitan Housing Outlook – Spring 2013 –

Bank of Canada holds rate steady as Carney exits

Date: May 29th, 2013

CBC News

The Bank of Canada held its benchmark interest rate steady at one per cent today, the last policy decision the bank will make before governor Mark Carney leaves to head the Bank of England.

The bank kept its target for the overnight rate steady at one per cent Wednesday. That’s the same level it has been at for 22 consecutive policy meetings, dating back to September 2010.

The central bank’s rate is the rate at which retail banks borrow money from each other for short-term loans. It’s the basis for the saving and lending rates that they pass on to customers.

In a statement, the bank noted that the Canadian economy performed better than the bank expected in the first part of 2013. But it expects growth to moderate through the year, expanding by about 1.5 per cent as a whole.

That likely isn’t enough to compel the bank to raise rates to slow things down and rein in inflation, nor is it sluggish enough to lower the benchmark rate to stimulate the economy further and spur borrowing.

No changes expected

“Consumer spending is expected to grow at a moderate pace, business investment to grow solidly, and residential investment to decline further from historically high levels,” the bank said. “Growth in total household credit is slowing and the bank continues to expect that the household debt-to-income ratio will stabilize near current levels.”

Next week, former Export Development Canada head Stephen Poloz will begin his tenure at the top of the bank. Most analysts don’t expect any major deviations from policy when that happens.

“We do not expect a change in bias when incoming governor Stephen Poloz begins his tenure,” TD Bank economist Francis Fong said in a note. “We expect a continuation of … policy.”

The central bank hinted that few changes are expected any time soon, saying in its statement that “with continued slack in the Canadian economy, the muted outlook for inflation, and the constructive evolution of imbalances in the household sector, the considerable monetary policy stimulus currently in place will likely remain appropriate for a period of time, after which some modest withdrawal will likely be required.”

That’s the central bank’s way of saying not to expect rates to move anywhere — up or down — any time soon, but it’s leaning toward a slight rate hike at some point.

One possibly game-changer to that plan could be housing.

“I think housing is coming in softer than the Bank of Canada anticipated over the past year in light of, for example, the steep drop in Toronto’s new home sales that will result in much weaker housing starts going forward,” Scotiabank economist Derek Holt said.

“What the [bank[ flags as “the constructive evolution of imbalances in the household sector” may well turn toward a somewhat harsher assessment of housing risks going forward.”

The bank is slated to release its next policy decision in mid-July.

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