Canadian economy to spring back into life

Canadian economy to spring back into life

Once again, Canada looks to the US for signs of life and after more than three years, the U.S. is poised for economic recovery.

As dependent as the country is on the economic health of the United States, and indeed, the rest of the world, the government’s fiscal policy and the Bank of Canada’s astute predictions, have put us in a solid position for future growth, despite the slowdown in the real estate sector and manufacturing sectors.

On a positive note, U.S. housing starts surged 12.1 per cent in December, the fastest since June 2008.  Economic recoveries are usually led by a surge in home building. Banks offer low interest rates, and consumers take advantage to buy big items like houses. Then they buy furniture and other items to put into their homes. Construction companies start to hire, which bumps up consumer demand for goods and services, then economic growth bops along at a nice pace.

The U.S. Fed chairman Ben Bernanke said that 2013 could be a “very good” year. The early signals are good ones, which is also a good sign for the Canadian economy and the jobs market and the real estate market.

In Canadian real estate, there has been a slowdown in a few areas of the country — Vancouver is one — with prices and sales cooling, especially in the condo market.  However, the surrounding areas of Vancouver are already showing signs of activity.

Alberta is still expected to see strong growth despite a slight slowdown in major centres. Areas outside Edmonton and Calgary are active as well.

Saskatchewan and Manitoba have not really seen a slow down, but are experiencing a lack of inventory.

Ontario is a smorgasbord of activity – slow in some areas and strong in others. Reports have Toronto’s condo sales slowing, which Finance Minister Jim Flaherty was most concerned about in Toronto as well as in Vancouver.  Mid-month figures released by the Toronto real Estate Board show a 2.5 per cent rise in home sales compared to the year-ago period.

In the Atlantic Provinces Nova Scotia is still strong.  RBC Economics predicts that Newfoundland’s economy will swing from a bottom position in the 2012 provincial growth rankings to top spot in 2013. PEI is expected to remain the same.

It will be important to watch two things. The first is employment gains. More jobs mean an increase in economic growth. Second: real estate sales trends as we move through the first quarter. The stricter guidelines imposed by the government last year had home buyers move to the sidelines. Over the next few months, we’ll be able to see if they remain there or decide to move forward towards purchasing a home.

Wednesday, January 23, 2013

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