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Canada's housing affordability slips slightly: RBC Economics

TORONTO, Ontario, March 15, 2010 — Homeownership costs in Canada increased slightly across all housing segments in the closing months of 2009, as rising prices made it more expensive to own a home, according to the latest housing report released today by RBC Economics Research.

"While home affordability deteriorated at the national level in the fourth quarter of 2009, the change was relatively modest overall," said Robert Hogue, senior economist, RBC. "The effect of higher prices was largely mitigated by a small decline in mortgage rates and continued gains in household income."

The RBC Housing Affordability measure captures the proportion of pre-tax household income needed to service the costs of owning a home. During the fourth quarter of 2009, measures at the national level rose slightly across all housing types (the higher the measure, the more difficult it is to afford a home).

The detached bungalow benchmark inched 0.3 per cent higher to 40.6 per cent, the standard townhouse rose by 0.2 percentage points to 32.9 per cent, the standard condominium climbed by 0.1 per cent up to 28 per cent and the standard two-storey home increased by 0.3 percentage points to 46.7 per cent. Despite the recent increase, all affordability measures remain well below their levels from a year ago.

The report projects that the cost of owning a home will continue to rise, as strong demand and limited supply of homes for sale sustain the upward trend in prices. Exceptionally low mortgage rates and anticipated rate increases starting mid-year are fuelling demand.

Real estate markets in B.C. and Ontario should see a further boost in demand prior to the introduction of the harmonized sales tax (HST) on July 1, 2010, which will increase the transaction costs associated with a home purchase.

According to the report, the federal government's recent announcement of changes to the mortgage market were aimed at preventing a bubble from forming in Canada and could reduce demand when the new rules take effect in April. However, the precise market effect is unknown at this point.

"The anticipated and gradual rise in interest rates indicates that affordability is likely to gradually get worse as rates return to normal levels," added Hogue. "The significant drop in mortgage rates since late 2008 was the principal factor contributing to the overall improvement in housing affordability in the past year."

RBC's Housing Affordability measure for a detached bungalow for Canada's largest cities is as follows: Vancouver 69 per cent (up 1.4 percentage points), Toronto 49.1 per cent (up 0.1 percentage point), Ottawa 40.4 per cent (down 0.3 percentage points), Montreal 39.1 per cent (up 0.9 percentage points), Calgary 37.1 per cent (up 0.1 percentage point) and Edmonton 32.9 per cent (down 0.4 percentage points).

The RBC Housing Affordability measure, which has been compiled since 1985, is based on the costs of owning a detached bungalow, a reasonable property benchmark for the housing market. Alternative housing types are also presented including a standard two-storey home, a standard townhouse and a standard condominium. The higher the reading, the more costly it is to afford a home. For example, an affordability reading of 50 per cent means that homeownership costs, including mortgage payments, utilities and property taxes, take up 50 per cent of a typical household's monthly pre-tax income.

Highlights from across Canada:

• British Columbia: Homeownership costs are rising in B.C. as very strong demand and a limited supply of homes for sale combine to propel prices substantially higher. All home affordability measures are above long-term averages in the province, a trend that is likely to continue in the near term.
  
  
• Alberta: The lagging economic recovery in Alberta, compared to other provinces, has stabilized housing affordability rates. Excessive supply left over from last year's downturn and housing slump has limited increases in housing prices. Attractive affordability levels and additional economic recovery should boost housing demand over the next year.
  
  
• Saskatchewan: Increased supply and lessened demand has put a damper on the housing market in the province, as the real estate market cooled from the heightened resale activity in the spring and summer. While home affordability improved in the province, the cost of owning a home still remains historically high.
  
  
• Manitoba: Manitoba's real estate market picked up considerably over the last quarter of 2009. Prices for condominiums and two-storey homes rose significantly, causing affordability levels to deteriorate in the province. Despite these increases, affordability levels are in line with long-term averages as Manitobans still see the costs associated with owning a home as manageable.
  
  
• Ontario: The housing market in Ontario has staged a remarkable recovery in the past year. Resale activity has recently reached record levels as prices have rebounded to new heights in most housing categories. This has caused only limited damage to housing affordability in the province as lower mortgage rates and growth in household income kept affordability levels close to long-term averages.
  
  
• Quebec: The provincial rally in the resale housing market shows few signs of slowing, as property values have fully recovered what little ground was lost during the downturn early last year. Home prices have risen substantially for most housing categories in the fourth quarter in Quebec, causing some of the sharper deteriorations in affordability among provinces.
  
  
• Atlantic Canada: Unlike many other parts of the country, housing affordability on the East Coast generally continued to improve in the fourth quarter. With most measures below long-term averages, activity in the housing resale market should remain elevated.

The full RBC Housing Affordability report is available online, as of 8 a.m. E.D.T. today at www.rbc.com/economics/market/pdf/house.pdf.

Archive: /mortgage-news/archive/2010/2010-03-15_RBC-canadas_housing_affordability.stm
News source: Royal Bank of Canada

Demand and supply coming into balance in resale market

OTTAWA, Ontario, March 15, 2010 — With rising activity in Toronto offset by lower activity in Vancouver, the number of homes sold through the Multiple Listing Service® (MLS®) Systems of Canadian real estate Boards edged lower in February. In recent months, national sales activity has slowed while new listings continue to rise, resulting in a more balanced national resale housing market.

According to statistics released by The Canadian Real Estate Association, seasonally adjusted national home sales totalled 42,799 units in February 2010, edging down 1.5 per cent from January. Activity declined mostly in Vancouver, but this was offset by an equally large gain in Toronto. Sales were also down in a number of other British Columbia housing markets. Since there were no significant gains in sales activity elsewhere in Canada, the national figure for sales activity was pulled slightly lower.

“The Olympic Winter Games may have impacted February sales activity in British Columbia, so activity for the province in March will be closely watched,” said CREA President Dale Ripplinger. “Activity is expected to remain elevated in Ontario and British Columbia over the first half of the year, with buyers looking to beat the introduction of the HST and expected interest rate hikes.”

Across the country, actual (not seasonally adjusted) residential sales activity numbered 36,275 units in February, up 44 per cent from the same month last year. New records for February activity were set in Ontario and Quebec. The year-over-year gain in national activity was smaller than those of the previous three months. Since a year will soon have elapsed following the recessionary decline and subsequent rebound for the Canadian resale market, year-over-year comparisons are expected to continue shrinking.

The average price of all homes sold through Boards’ MLS® Systems in February 2010 was $335,655, up 18.2 per cent from one year ago. As with sales activity, this gain was smaller than in the past four months, and year-over-year gains are expected to become further subdued going forward.

The price trend is similar but less dramatic for the national weighted average price, which compensates for changes in provincial sales activity by taking into account provincial proportions of privately owned housing stock. It climbed 15.6 per cent on a year-over-year basis in February 2010.

The residential average price in Canada’s major markets was up 18.7 per cent year-over-year in February. As with the national counterpart, the price trend is similar but less dramatic for the major market weighted average price, which rose 14.7 per cent from levels reported in February 2009.

The seasonally adjusted number of new listings on Boards’ MLS® Systems across Canada climbed another 2.4 per cent on a month-over-month basis in February to reach 73,849 units, the highest level since October 2008. Five consecutive monthly increases have lifted new listings 16.3 per cent above where they stood last September, when they had fallen to the lowest level since late 2005. As with sales activity, new listings in February 2010 were up most in Ontario and down most in British Columbia. The actual (not seasonally adjusted) number of new residential listings was 71,197 in February, up 10.8 per cent from one year ago.

Strong resale housing demand continues to draw down inventories, but supply is shrinking at a decreasing rate because of slightly softer sales activity and an increase in new listings in recent months. There were 188,334 homes listed for sale on Boards’ MLS® Systems in Canada at the end of February 2010, a decline of 15.4 per cent compared to levels one year ago. This is the smallest year-over-year decline in active listings since last August.

The actual (not seasonally adjusted) number of months of inventory in February 2010 stood at 5.2 months. This is well below where it stood one year ago (8.8 months), but on par with February 2008 and slightly higher than it was in the month of February in the years 2004 through 2007. The number of months of inventory is the number of months it would take to sell current inventories at the current rate of sales activity.

On a seasonally adjusted basis, months of inventory rose nationally for the third consecutive month. There were 4.7 months of inventory in February 2010; up slightly from 4.5 months from the previous month, and 4.3 months in December 2009.

“Housing markets are becoming more balanced,” said CREA Chief Economist Gregory Klump. “There are still a number of major markets where sales negotiations favour the seller due to a shortage of inventory, but supply has begun rising. Further expected supply increases will continue to take the steam out of housing markets as the year progresses.”

http://www.crea.ca/public/news_stats/pdfs/media_feb10rpt_e.pdf

PLEASE NOTE: The information contained in this news release combines both major market and national MLS® sales information from the previous month. The Canadian Real Estate Association has previously released these separately.

CREA cautions that average price information can be useful in establishing trends over time, but does not indicate actual prices in centres comprised of widely divergent neighborhoods or account for price differential between geographic areas. Statistical information contained in this report includes all housing types.

MLS® is a co-operative marketing system used only by Canada’s real estate Boards to ensure maximum exposure of properties listed for sale.

The Canadian Real Estate Association (CREA) is one of Canada’s largest single-industry trade associations, representing more than 96,000 REALTORS® working through more than 100 real estate Boards and Associations. Further information can be found at www.crea.ca.

Archive: /mortgage-news/archive/2010/2010-03-15_CREA-demand_supply_coming_balance_resale.stm
News source: The Canadian Real Estate Association (CREA)

Minister of Finance to Promote Canada's Competitive Edge to Investors in US, UK and Ireland

OTTAWA, Ontario, March 13, 2010 — The Honourable Jim Flaherty, Minister of Finance, will highlight how Canada is leading the way in the global economy during visits to New York, London and Dublin next week.

In a series of speeches and face-to-face meetings with business and political leaders, Minister Flaherty will spotlight Canada’s growing competitive advantages: the world’s soundest financial system, the effective and temporary stimulus provided by Canada’s Economic Action Plan, an increasingly attractive tax system, and the distinction of becoming the first G20 country to allow manufacturers to operate free of tariff costs. He will also outline Canada’s priorities as President and host of the G8 in Canada’s Muskoka region and host of the Toronto G20 leaders summits in June, and the leading role Canada has played in the global response to the economic crisis.

“Canada’s success in coping with an unprecedented international economic crisis—and emerging even stronger in spite of it—deserves to be told,” said Minister Flaherty. “On so many fronts, our country is sending a clear and compelling message to the world: Canada is open for business.”

Minister Flaherty will travel to New York to address the Canadian Association of New York on Monday, March 15, and lead roundtables on the state of global financial markets and Canada-US trade and investment. The Minister will travel to London the following day, where he will address the Canada-United Kingdom Chamber of Commerce and meet with Chancellor of the Exchequer Alistair Darling and Shadow Chancellor of the Exchequer George Osborne. In Dublin, the Minister will speak to the Ireland Canada Business Association and meet with representatives of the Irish Government’s National Asset Management Agency.

Throughout his visit, Minister Flaherty will emphasize the recent budget and Canada’s Economic Action Plan, and highlight Canada’s ongoing achievements:

• Canada was the last G7 nation to enter recession, and the decline in real gross domestic product (GDP) was virtually the smallest of all G7 countries. Over 2009, Canada has had the strongest rebound in domestic demand.
• Canada has by far the lowest debt-to-GDP ratio in the G7, with a projected increase of less than 6 percentage points between 2007 and 2014, compared to increases of between 24 and 63 percentage points for other G7 countries.
• As a result of federal and provincial tax changes, in 2010 Canada will have an overall tax rate on new business investment that is the lowest in the G7 and below the average of the Organisation for Economic Co-operation and Development, and by 2012 Canada will have the lowest statutory corporate income tax rate in the G7.
• Canada’s financial system has again been deemed the world’s soundest by the World Economic Forum and Moody’s Investors Service, the world’s best prepared by the economics editor of the BBC, and a global role model by U.S. President Barack Obama, Irish Prime Minister Brian Cowen, and Nobel Prize-winning economist Paul Krugman.

Archive: /mortgage-news/archive/2010/2010-03-13_FINANCE-minister_finance_promote_canadas.stm
News source: Department of Finance

Canada's economy shifts into recovery mode: RBC Economics

Increased domestic spending and improved credit markets expected to fuel economic growth in 2010 and 2011

TORONTO, Ontario, March 11, 2010 — With a peak in stimulus investment, improved credit markets and a recovery in consumer spending, Canada’s economy is poised for real GDP growth of 3.1 per cent, according to a new report by RBC Economics.

“An economic recovery is solidly taking root in Canada with the full impact of stimulus spending, historically low interest rates and improved credit markets all taking effect this year,” said Craig Wright, senior vice-president and chief economist, RBC. “Going forward, additional growth should be sustained by strength in the housing market and investment by the private sector, as corporations increase payrolls and investment.”

The report indicates that Canada’s economy is expected to grow at a more moderate pace, after a five per cent surge in the final quarter of 2009. Stability in the auto sector and rising commodity prices should continue to support a gradual improvement in the labour market, as unemployment rates are expected to average 8.4 per cent in 2010 before falling to 7.7 per cent in 2011.

According to the report, consumer spending is expected to continue to expand next year by 2.8 per cent, matching 2010’s pace with business investment set to rise by more than seven per cent. This should result in Canada’s GDP expanding by an even greater 3.9 per cent in 2011.

Recent indicators for the housing market have suggested a strong recovery in activity, with housing starts expected to grow to 184,000 in 2010, representing a significant increase over 2009 (149,000).

“The housing market should remain strong as improved labour conditions and low mortgage rates fuel demand,” added Wright. “We expect the market to slow by the second half of the year as interest rates begin to rise and affordability declines.

With recent U.S. data showing a clear improving trend, RBC expects U.S. GDP to increase by 2.9 per cent in 2010 and 3.4 per cent in 2011. The report notes that U.S. domestic demand is increasing, along with rising consumer spending and improvements in residential construction and exports.

Among Canadian provinces, economic growth in 2010 will be boosted by gains in Newfoundland and Labrador (4.1 per cent), Saskatchewan (3.6 per cent), B.C. (3.4 per cent) and Ontario (3.3 per cent). Growth in Alberta will rise only 2.5 per cent this year but strengthen to 4.4 per cent in 2011, the second highest rate of growth behind Saskatchewan (at 4.6 per cent).

A complete copy of the forecast is available as of 8 a.m. EST, at
www.rbc.com/economics/market/pdf/fcst.pdf. A separate publication, RBC Economics Provincial Outlook, assesses the provinces according to economic growth, employment growth, unemployment rates, retail sales and housing starts.

Archive: /mortgage-news/archive/2010/2010-03-11_RBC-canadas_economy_shifts_recovery.stm
News source: Royal Bank of Canada

Home purchase intentions full steam ahead: RBC poll

Vast majority of Canadians view buying a home as a good investment

TORONTO, Ontario, March 08, 2010 — Homebuying momentum in Canada continues to gain steam with the portion of Canadians who are very likely to purchase a home in the next two years rising to 10 per cent from seven per cent two years ago, according to the 17th Annual RBC Homeownership Study. Younger Canadians, aged 18 to 24, will lead the charge this year, with those very likely to buy almost doubling to 15 per cent from eight per cent in 2009.

The RBC study conducted by Ipsos Reid found that 91 per cent of Canadian homeowners believe a home is a good investment, the highest level in 12 years, and one-quarter (26 per cent) expect their home to be their primary source of income when they retire.

"With the Canadian housing market showing continued vigour, it's not surprising that Canadians feel more confident in the long-term value of owning a home," said Robert Hogue, senior economist, RBC. "Exceptionally low mortgage rates and improved affordability have been key reasons for the resurgence in the housing market this past year."

Most Canadians who intend to buy a new home in the next two years are planning to take a fixed rate mortgage (44 per cent). However, combination mortgages had the highest increase in popularity this year, with 40 per cent intending to take both a variable and fixed rate component, up from 32 per cent last year.

For Canadians planning to take a fixed rate or combination mortgage, seven-in-10 intend to take a term of five years or longer. Sixteen per cent said they intend to take a variable rate mortgage, down from 20 per cent in 2009.

"Canadians seem to be opting for more caution this year and may be factoring in potential rate increases down the road," said Marcia Moffat, RBC's head of home equity financing. "Choosing a combination mortgage can take some of the guesswork out of making a decision between whether it is better to lock in to a longer-term or stay in a variable rate."

In the wake of the recent housing rebound, most Canadians (six-in-10) also believe housing prices will rise in 2010, up significantly from 25 per cent in 2009. Similarly, a majority (64 per cent) believe mortgage rates will be higher over the next year, also up from 33 per cent a year ago.

"The expectation of higher mortgage rates on the horizon could be motivating buying intentions this year. But it's important that homeowners - especially first time buyers - get solid advice about what they can afford, not only today, but down the road," added Moffat.

In addition to seeking customized advice from a financial advisor, Moffat provides the following tips:

For homebuyers:

1. Lock in your rate when you apply for your mortgage.
Depending on your situation, there are rate guarantees that allow you to lock in your mortgage rate for up to 120 days.

2. "Stress test" your mortgage for rate increases.
If you are concerned about affordability down the road, knowing what your payments would be with a one - three per cent rate increase will give you greater peace of mind that your new home is affordable both today and in a few years time, when rates might be higher.

3. For first time homebuyers, leave some wiggle room.
With a pre-approved mortgage you will know what you can afford today. But before making a decision to find a home at the top of your pre-approval amount, also consider your current lifestyle preferences and how future changes in your circumstances could impact your payment comfort zone.

For homeowners renewing their mortgage:

1. Take advantage of early renewal options.
Some mortgages allow you to renew up to 120 days before the end of your term. This means you can lock in your new mortgage rate early.

2. Consider a combination (hybrid) mortgage to manage your interest costs.
If you are unsure of where rates are headed, consider splitting your mortgage into part fixed and part variable. You will have rate protection on the fixed rate mortgage portion, while you benefit from today's low interest rates on the variable rate mortgage portion.

Canadians can visit the new RBC Advice Centre www.rbcadvicecentre.com to stress test their mortgage for potential rate increases. The RBC Advice Centre is an online resource that gives Canadians access to advice about all aspects of their finances including their homeownership goals - whether they are buying their first home, planning their next move, renovating or managing their current home financing. Advice videos are updated regularly to reflect current housing trends and to answer the questions that are top of mind with Canadian homeowners. Interactive tools and calculators provide customized information covering all facets of homeownership. With the guidance of RBC mortgage specialists, Canadians have access to free, no-obligation professional advice and personalized one-on-one service about RBC mortgage products and services.

RBC is the largest residential mortgage lender in Canada. As the country's number one source of financial advice on homeownership, RBC conducts consumer surveys as one way to provide insight to Canadians about the marketplace in which they live. These are some of the findings of the RBC's 17th Annual Homeownership poll conducted by Ipsos Reid between January 8 to 13, 2010. The annual online survey tracks Canadians attitudes and behaviours around homebuying and home ownership. It is based on a randomly selected representative sample of 2,047 adult Canadians that was statistically weighted by region, age and sex composition according to the 2006 Census data. The results are considered accurate to within ±2.2 percentage points,
19 times out of 20, of what they would have been had the entire adult Canadian population been polled. The margin of error will be larger within regions and for other sub-groupings of the survey population.

Archive: /mortgage-news/archive/2010/2010-03-08_RBC-home_purchase_intentions_full.stm
News source: Royal Bank of Canada

February Housing Starts

OTTAWA, Ontario, March 08, 2010 — The seasonally adjusted annual rate¹ of housing starts reached 196,700 units in February 2010. This is an increase from an annual rate of 185,400 units in January 2010, according to Canada Mortgage and Housing Corporation (CMHC).

“The gain in February housing starts was concentrated in the multiple starts segment, particularly in Toronto,” said Bob Dugan, Chief Economist at CMHC’s Market Analysis Centre.

The seasonally adjusted annual rate of urban starts increased by 9.0 per cent to 179,100 units in February. Urban multiple starts increased by 19.1 per cent to 89,900 units while single urban starts increased by 0.5 per cent to 89,200 units.

February’s seasonally adjusted annual rate of urban starts increased by 28.6 per cent in Ontario, by 14.3 per cent in Atlantic Canada, by 10.8 per cent in the Prairie region and by 8.0 per cent in British Columbia. In Quebec, the seasonally adjusted annual rate of urban starts decreased by 14.1 per cent.

Rural starts were estimated at a seasonally adjusted annual rate of 17,600 units in February².

As Canada's national housing agency, CMHC draws on more than 60 years of experience to help Canadians access a variety of quality, environmentally sustainable and affordable homes. CMHC also provides reliable, impartial and up-to-date housing market reports, analysis and knowledge to support and assist consumers and the housing industry in making vital decisions.

For more information, call 1-800-668-2642.

¹ All starts figures in this release, other than actual starts, are seasonally adjusted annual rates (SAAR) — that is, monthly figures adjusted to remove normal seasonal variation and multiplied by 12 to reflect annual levels.

² CMHC estimates the level of rural starts for each of the three months of the quarter, at the beginning of each quarter. During the last month of the quarter, CMHC conducts the survey in rural areas and revises the estimate.

Archive: /mortgage-news/archive/2010/2010-03-08_CMHC-february_housing_starts.stm
News source: Canada Mortgage and Housing Corporation (CMHC)

Housing Activity Stronger in 2010

OTTAWA, Ontario, March 02, 2010 — Housing starts rebounded in the second half of 2009 and will strengthen in 2010, according to Canada Mortgage and Housing Corporation’s first quarter Housing Market Outlook, Canada Edition*.

Following a total of 149,081 units in 2009, housing starts are expected to be in the range of 152,000 to 189,300 units in 2010, with a point forecast of 171,250 units. In 2011, housing starts will be in the range of 156,400 to 205,600 units, with a point forecast of 175,150 units.

“Canadian housing markets will benefit from improving economic conditions and low mortgage rates,” said Bob Dugan, Chief Economist for CMHC. “As well, measures recently announced by the Government of Canada to support the long-term stability of Canada's housing market will help moderate housing activity as some potential buyers will have to save a larger down payment or consider a less expensive home.”

Mr. Dugan also noted that the existing home market has shifted from a buyers’ market, at the beginning of 2009, to a sellers’ market. The relative lack of new listings for existing homes has pushed some of the demand into the new home market, which helps explain the forecast for higher housing starts activity in 2010.

The strong pace of MLS^®1 sales seen in the second to fourth quarters of 2009 reflects, in part, activity that was delayed in the previous two quarters. The pace is not likely to be sustained as pent-up demand is exhausted and financing costs increase with anticipated higher interest rates later in 2010. As a result, existing home sales will be in the range of 455,350 to 509,900 units in 2010, with a point forecast of 486,700 units, and then move slightly lower in 2011 to be in the range of 426,300 to 494,600 units, with a point forecast of 469,950 units.

With an improved balance between demand and supply, the average MLS^® price is expected to remain close to the average in the last quarter of 2009, for most of 2010, and then rise modestly in 2011.

As Canada's national housing agency, CMHC draws on more than 60 years of experience to help Canadians access a variety of quality, environmentally sustainable and affordable homes. CMHC also provides reliable, impartial and up-to-date housing market reports, analysis and knowledge to support and assist consumers and the housing industry in making vital decisions.

* The forecasts included in the Housing Market Outlook are based on information available as of February 16, 2010. Where applicable, forecast ranges are also presented in order to reflect economic uncertainty.

Archive: /mortgage-news/archive/2010/2010-03-02_CMHC-housing_activity_stronger_2010.stm
News source: Canada Mortgage and Housing Corporation (CMHC)

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, Ontario, March 02, 2010 — The Bank of Canada today announced 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.

The ongoing global economic recovery is being driven largely by strong domestic demand growth in many emerging-market economies and supported in advanced economies by exceptional monetary and fiscal stimulus, as well as extraordinary measures taken to support financial systems.

The level of economic activity in Canada has been slightly higher than the Bank had projected in its January Monetary Policy Report (MPR). The economy grew at an annual rate of 5 per cent in the fourth quarter of 2009, spurred by vigorous domestic spending and further recovery in exports. The underlying factors supporting Canada's recovery are largely unchanged - policy stimulus, increased confidence, improved financial conditions, global growth, and higher terms of trade. At the same time, the persistent strength of the Canadian dollar and the low absolute level of U.S. demand continue to act as significant drags on economic activity in Canada.

Core inflation has been slightly firmer than projected, the result of both transitory factors and the higher level of economic activity. The outlook for inflation should continue to reflect the combined influences of stronger domestic demand, slowing wage growth, and overall excess supply.

Conditional on the current 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.

The risks to the outlook for inflation continue to be those outlined in the January MPR. On the upside, the main risks are stronger-than-projected global and domestic demand. On the downside, the main risks are a more protracted global recovery and persistent strength of the Canadian dollar. The Bank judges that the main macroeconomic risks to the inflation projection are roughly balanced.

Archive: /mortgage-news/archive/2010/2010-03-02_BOC-bank_canada_maintains_overnight.stm
News source: Bank of Canada

RBC Canadian Consumer Outlook Index rises in February as Canadians feel more positive about the national economy

Job anxiety remains steady at 25 per cent

TORONTO, Ontario, March 01, 2010 — The February RBC Canadian Consumer Outlook Index rose three points to 109 from 106 in January, as consumers were more positive about their outlook for the Canadian economy. This is the highest level the index has reached since it was established in November 2009.

Canadians remain divided when considering the overall state of the economy. However, the balance has shifted into positive territory with 53 per cent of Canadians describing the economy as good and 47 per cent describing it as bad in February. In January, 52 per cent described the Canadian economy as bad, while 48 per cent described it as good.

Job anxiety remained relatively steady in February, with one-in-four Canadians (25 per cent) saying that a member of their household is worried about losing their job or being laid off, compared to 26 per cent in January. Job anxiety levels increased in Ontario (30 per cent, up five percentage points) and Atlantic Canada (24 per cent, up six percentage points), while they fell in all other regions of the country. The lowest levels of job anxiety were found in Manitoba and Saskatchewan (13 per cent) and Quebec (17 per cent).

"We know that 21 per cent of Canadians are planning 'staycations' this month, primarily for financial reasons. The continuing high levels of concern about job loss are likely a factor in those financial reasons," said David McKay, group head, Canadian Banking, RBC. "The best way to deal with uncertainty and potential challenges is to create a financial plan. It helps gain control over day to day finances and build a path to financial security in the long run."

Other national highlights include:

• Canadian Economy: Looking ahead, more Canadians expect the national economy to improve over the next year (62 per cent in February compared to 56 per cent in January), while the percentage who expect it to get worse fell to 13 per cent in February from 17 per cent in January. This increase in optimism was also reflected in Canadians' short term expectations for improvement in the national economy, which was up four percentage points from January. Four-in-ten (41 per cent) Canadians expect the Canadian economy to improve in the next three months.
  
  
• Personal Financial Situation (Overall): The percentage of Canadians who think that their personal financial situation will improve in the next three months has fallen slightly to 30 per cent in February compared to 32 per cent in January. Canadians remain more optimistic in the longer term, with more than four-in-ten Canadians (45 per cent) expecting their personal economic situation to improve over the next year (unchanged from January).
  
  
• Interest Rates: Canadians expect interest rates to go up in the next six months (65 per cent in February compared to 68 per cent in January). One-in-three Canadians (33 per cent) expects that interest rates will remain unchanged over the same period.

"Canadians may be feeling more positive about the economy because job growth numbers were released in early February. We expect to see a sustained improvement in the labour market over the course of the year," said Robert Hogue, senior economist, RBC. "According to Statistics Canada, employment increased by 43,000 in January, which pushed the unemployment rate down to 8.3 per cent. While this figure has been steadily improving, there are still 280,000 fewer Canadians employed than there were in October 2008. This could be responsible for Canadians' relatively high level of job anxiety."

About The RBC Canadian Consumer Outlook Index
The RBC Canadian Consumer Outlook Index, benchmarked as of November 2009, is based on the results of an online survey of 1,064 Canadians, ages 18 and over, conducted by Ipsos Reid between February 9 and 12, 2010. This data represents the most timely and comprehensive snapshot of consumer attitudes regarding their finances and the economy in Canada. Weighting was then employed to balance demographics and ensure that the sample's composition reflects that of the adult population according to Census data and to provide results intended to approximate the sample universe. A survey with an unweighted probability sample of this size and a 100 per cent response rate would have an estimated margin of error of ±3.1 percentage points, 19 times out of 20, of what the results would have been had the entire population of adults in Canada been polled.

Archive: /mortgage-news/archive/2010/2010-03-01_RBC-rbc_canadian_consumer_outlook.stm
News source: Royal Bank of Canada