Inflation Rate Stays Negative

Date: October 16th, 2009

Source: CBC News

Canada’s annual inflation rate stayed well below zero for the fourth consecutive month in September, dropping to –0.9 per cent.

The consumer price index slid by one-10th of a point last month to –0.9 per cent — matching a 53-year low that was also recorded in July, Statistics Canada reported Friday

On a month-to-month, seasonally adjusted basis, there was a 0.1 per cent increase in the consumer price index. The seasonally adjusted monthly CPI has gone up in four of the past five months.

As has been the case for the better part of a year, it was the disparity in gasoline prices between last year and this year that was the main contributor to the negative inflation rate.

The cost of filling up at the pump was 23 per cent less in September than 12 months earlier. That came after a similar 21.2 per cent drop in August.

But the gap is certain to close in the next inflation report because it was at about this time last year that gasoline prices began falling in response to recessionary forces and the collapse in global oil demand.

“There are no major surprises here,” BMO economist Doug Porter wrote in a research note on Friday. “This is likely the low-water mark for inflation, as the steep slide in pump prices late last year will soon fall out of the calculation, and headline inflation is poised to move back into positive terrain possibly by next month.”

No other component of the consumer price index has been as critical in suppressing inflationary pressures as energy, the agency noted.

Excluding the effect of energy prices, the annual inflation in Canada was well above zero in September at 1.3 per cent.

Falling costs

The low inflation rate was also influenced by the falling cost of autos, shelter and transportation.

Canadians paid 5.9 per cent less for purchasing autos last month than a year ago, while shelter costs were 1.8 per cent lower and transportation costs fell 7.2 per cent.

But of the eight major components Statistics Canada uses to gauge inflation, five were in positive territory, including food, household operations, health and personal care, recreation and education, and alcohol and tobacco.

Food prices continued to be the main driver of inflation with a 2.8 per cent annual gain last month, although that is less than the four per cent increase registered in August. The biggest increases came in the price for fish, which rose 8.8 per cent, and for sugar and confectionery, up 8.7 per cent.

There were also price increases of 2.2 per cent in household operations, furnishings and equipment, a 3.9 per cent spike in health and personal care costs, and a 1.1 per cent increase for recreation, education and reading.

The report is unlikely to cause any worries to the Bank of Canada that inflation will be a problem in the near future.

The core inflation index, which excludes volatile items such as gasoline, slipped to 1.5 per cent in September, below the central bank’s target of 2.0 per cent. In August, the rate had been 1.6 per cent.

The core rate is the one that the Bank of Canada pays most attention to in making its policy decisions.

Among provinces, only Saskatchewan recorded positive inflation in September. In Nunavut, the inflation rate was 1.2 per cent, down from 1.6 per cent in the previous month.

The greatest decline came in Prince Edward Island, which fell 1.4 per cent.

Ontario’s Top Investment Towns Named For 2009 – 2014

Date: October 10th, 2009

The Real Estate Investment Network’s (REIN™) release of Top Ontario Investment Towns analyzes the current and future prospects for real estate investment opportunities in Ontario. The 108 page report states that recent market correction provides buying opportunities for home owners and investors; however, only in select regions of the province.It identifies which areas will outperform in the coming decade and finds that the Kitchener Waterloo Cambridge area is the top region in Ontario in which to invest in real estate.

REIN™ is Canada’s leading real estate research, education, and consulting organization for the last 17 years and its latest report is an analysis of key economic fundamentals for investors and home owners across North America. The in-depth research is based on the latest statistics, economic and social trends, and on-the-ground reports from REIN™’s research staff, members and industry professionals.

Today’s Market Turmoil means Opportunity for Investors & First Time Home-Buyers
“Despite today’s continuing market turmoil, our research indicates that there are more buying opportunities now than in the last few years, meaning more investment options and better yields” said report lead author Don R. Campbell, REIN™ President and author of the best-selling books Real Estate Investing in Canada and 97 Tips For Real Estate Investing.

“With today’s mixed market signals it is critical that investors and home-buyers complete that extra level of due diligence. We are no longer in the Tiger Woods years of real estate investing, where you won no matter what you bought. Now we get back to market reality where economic fundamentals, not speculation, will once again play the key role in whether a property increases or drops in value. The years of skyrocketing prices are finally over; however, over the long term the economic fundamentals of these key regions will help their property values dramatically outperform other regions of the province.”

The Top Ontario Investment Towns report list:
1. Technology Triangle:Kitchener, Waterloo, Cambridge
2. Hamilton
3. Simcoe Shores:Barrie- Orillia
4. Brampton
5. Durham Region – Whitby, Pickering, and Ajax
6. Ottawa
7. Brantford
8. Toronto
9. Vaughan
10. Whitchurch-Stouffville

KWC on Top of the list. The communities of Kitchener, Waterloo, and Cambridge, known collectively as Canada’s Technology Triangle, are becoming known as a competitive area in which to build high-tech businesses. The area is so strong economically that the Real Estate Investment Network™ in its past research has dubbed it the “Economic Alberta of Ontario”. This continues to prove true as the region was once again selected as the number-one investment town in Ontario. Within a 24 hours drive, the Technology Triangle has access to more than 60% of Canada’s population and 40% of the U.S. population. The reinvention of the region’s economy in the last few years has lead to investment in the information technology sector, a venture which has protected the Triangle from the steep increase in job losses experienced in many other Ontario communities. A commitment to infrastructure improvements and transportation projects will also help drive the economy and the real estate market in this area.

Breaking through its past, Hamilton jumps up with a bright future. Hamilton is poised to outperform most the province as it breaks through its past reputation and grabs a hold of the future. The continuing diversification of the City’s economy coupled with the increase in accessibility provided by the transportation improvements provides a strong economic base from which to work. Hamilton’s economy, in just a few short years will be unrecognizable when compared to the past decades. This renewal will help drive demand for real estate (rentals as well as ownership) in the City, especially in older neighborhoods going through transition.

Vaughan will benefit tremendously from increased housing values due to transportation projects. With the largest job growth in all of Canada between 2001 and 2006, the economy of Vaughan is becoming increasingly more diverse. Its extensive transportation network, available land, and the lowest commercial and industrial property taxes in the GTA continue to attract new businesses to the area. The City of Vaughan has become a preferred location for investment, leading the country’s cities in the per capita of building permits issued. Once all the region’s transportation and other infrastructure projects are completed (like the expansion of the TTC Spadina Line and the construction of the Vaughan Corporate Centre), Vaughan will be among the most accessible regions in the Greater Toronto Area; this combined with the fact that the City has the lowest commercial and industrial taxes in the GTA, will drive demand for both residential and commercial/industrial property.

Scarborough has the best opportunities in the City of Toronto. Toronto continues to be a major economic engine for Canada, as it continues to be the financial and head office capital of the country. This, combined with a strong growth of immigration to the city will help to provide an ongoing source of both rental and ownership demand in the housing market. Some regions of the city will prove to be provincial leaders, while other regions will lag sadly behind. Investors in the Toronto market must focus on areas with future potential, while at the same time ignoring past neighborhood reputations. One breakout region in coming years will be Scarborough. With home prices consistently below other regions of Toronto and a planned Rapid Transit expansion, the region will experience rapid growth.

2.5% bank rate by 2011: economist

Date: October 9th, 2009

Source: CBC News

The Bank of Canada will push its benchmark interest rate to 2.5 per cent in the next year and a half, an economist with the Central 1 Credit Union predicted Friday.

Central 1 Credit Union is the umbrella organization for the credit union systems in British Columbia and Ontario.

The central bank rate is now at 0.25 per cent and the bank has said it will likely stay there until the spring of 2010. Helmut Pastrick, chief economist with Central 1, told CBC News the recovery remains on track, with only occasional data suggesting a setback.

He looked at gains in U.S. housing, manufacturing and government stimulus and predicted the next report on U.S. gross domestic product will show the American economy started growing again this fall, perhaps by as much as four per cent, for the first time in more than a year.

“The general direction of the North American economy is on an improving trend,” Pastrick said. “We can certainly expect industrial production in the U.S. and in Canada to continue to increase in September and October.

“Certainly the Cash for Clunkers program has had a substantial impact, albeit temporary, on car sales but manufacturers now will be in the process of rebuilding their production to help restock new-car dealer inventories.”

Pastrick’s prediction came one day after the chair of the U.S. Federal Reserve, Ben Bernanke, said again he was in no hurry to start increasing interest rates. He expected the rate would stay at present levels for an “extended period,” Bernanke said in a speech in Washington.

The Canadian dollar rose after those remarks, to close up .71 of a cent at 95.75 cents US Friday.

Australia’s central bank surprised everyone on Oct. 10 when it became the first G20 country to raise rates.

Much of the growth will have been the result of government stimulus, especially low interest rates, Pastrick admitted but predicted the private sector would jump in with increased investment and job creation.

“Over time, the private sector begins to take the main role in economic growth and that should play out this time as well. However, it appears that it’ll be more of a longer drawn process, particularly in the U.S. since there’s still some ongoing problems in credit markets,” he said.

Bank of Canada anxious about low rates

Once the recovery is underway, he said, the central bank will be anxious to move away from rates near zero. Pastrick predicted the bank will likely raise rates by half a percentage point at a time perhaps three times through the fall-to-spring period from 2010 to 2011.

“That would allow them some room to cut rates at some future point should the economic recovery falter.”

One wild card would be the sudden rise in the Canadian dollar against the U.S. currency.

“Should the dollar continue to appreciate further, then growth would be restrained and the Bank of Canada’s first move, or move towards rate normalization, would be delayed, he said. “It may not occur perhaps until sometime in 2011.”

Dealing with Mortgage Payment Difficulties

Date: October 8th, 2009

When unforeseen financial circumstances impact your ability to make regular mortgage payments, it’s important for you to take quick action. With early intervention, cooperation, and a well executed plan, you can work together with your mortgage professional to find a solution to your financial difficulties.

What Can I Do to Help?

If you find yourself facing financial difficulties, as a result of job loss, family income reduction, or for other reasons, it can be an overwhelming experience leaving you feeling uncomfortable and unsure of what to do. By following these three simple steps, you can make a big difference in resolving your financial difficulties.

1. Talk to your mortgage professional

  • To increase the chance of successfully managing your financial situation through early intervention, call your mortgage professional at the first sign of financial difficulty;
  • Ask the mortgage professional about information on the options available for managing your financial situation; and
  • Keep the mortgage professional informed as circumstances evolve.

2. Clarify the financial picture

In order to help your mortgage professional fully understand your financial situation, before meeting with them, prepare a detailed list of financial obligations including any credit cards, loans, household bills with the amounts owing and their due dates. Be sure to include information about your current income, savings accounts, investments, and any other assets.

3. Stay informed

The more information you have at your disposal on managing your finances, the easier it will be to make the right decisions.

Take Charge of Your Debts is an online tool from the Government of Canada that is designed to help borrowers like you understand debt problems, and includes information on making a budget, budget counselling, collection agencies, credit, and credit repair. To view this tool, log on to (Industry Canada) and search for “Take Charge of Your Debts”.

How Can Mortgage Professionals and CMHC Help?

Your mortgage professional wants to establish and maintain a positive relationship with you over the long term, and is fully trained and equipped with the tools to help you deal with the temporary financial setbacks that you may be facing.

For mortgages insured by Canada Mortgage and Housing Corporation (CMHC), CMHC provides mortgage professionals with tools and the flexibility to make timely decisions when working with you to find a solution to your unique financial situation. These tools include:

  • Converting a variable interest rate mortgage to a fixed interest rate mortgage in order to protect you from a sudden interest rate increase, should one occur.
  • Offering a temporary short-term payment deferral. Your mortgage professional may be prepared to offer greater payment flexibilities, particularly if previous lump sum prepayments have been made, or if you have previously chosen an accelerated payment schedule.
  • Extending the original repayment period (amortization) in order to lower your monthly mortgage payments.
  • Adding any missed payments (arrears) to the mortgage balance and spreading them over the remaining mortgage repayment period.
  • Offering a special payment arrangement unique to your particular financial situation.

CMHC is also willing to consider other alternatives proposed by the mortgage professional to resolve or avoid mortgage payment default. In every case, the options available will depend upon your individual financial circumstances.

CMHC is Canada’s national housing agency. For over 60 years CMHC has shared a wealth of knowledge and housing expertise to help create an informed and reassured homeownership experience for Canadians. 

BOC leaves interest rates unchanged, reiterates commitment.

Date: September 10th, 2009
Bank of Canada maintains overnight rate target at 1/4 per cent and reiterates conditional commitment to hold current policy rate until the end of the second quarter of 2010

OTTAWA – The Bank of Canada today announced (Sept 10th 2009) that it is maintaining its target for the overnight rate at 1/4 per cent. The Bank Rate is unchanged at 1/2 per cent and the deposit rate is 1/4 per cent.

Global economic and financial developments have been broadly in line with the Bank’s expectations. Following a deep, synchronous recession, recent indicators point to the start of recovery in major economies, supported by aggressive policy stimulus and the stabilization of global financial markets. In Canada, economic growth, the output gap, and inflation in the first half of 2009 have evolved largely as expected in the Bank’s July Monetary Policy Report (MPR).

Stimulative monetary and fiscal policies, improved financial conditions, firmer commodity prices, and a rebound in business and consumer confidence are supporting domestic demand growth in Canada. Combined with recent information on inventory adjustments and automotive production, this suggests that GDP growth in the second half of 2009 could be stronger than the Bank projected in July. Total CPI inflation is still expected to trough in the current quarter before returning to the 2 per cent target in the second quarter of 2011 as aggregate supply and demand return to balance.

Conditional on the outlook for inflation, the target overnight rate can be expected to remain at its current level until the end of the second quarter of 2010 in order to achieve the inflation target.

While the underlying macroeconomic risks to the projection are roughly balanced, the Bank judges that, as a consequence of operating at the effective lower bound, the overall risks to its inflation projection are tilted slightly to the downside.

Persistent strength in the Canadian dollar remains a risk to growth and to the return of inflation to target. In its conduct of monetary policy at low interest rates, the Bank retains considerable flexibility, consistent with the framework outlined in the April MPR.

Information note:

The next scheduled date for announcing the overnight rate target is 20 October 2009. A full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the MPR on 22 October 2009.