Economic Challenges Research

Four of Canada’s biggest banks are once again lowering residential mortgage rates at a time when falling government bond yields are cutting funding costs for financial institutions.

Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia and Bank of Montreal are all trimming their posted rates on popular five-year fixed-rate mortgages by 0.1 percentage point to 5.49 per cent among other reductions.

The last time they did so was on May 19 when rates for five-year closed mortgages fell by 0.1 percentage point to 5.59 per cent.

Canadian companies facing stiff competition from better-capitalized, more efficient facilities stateside

The economic recovery will add more manufacturing jobs in Canada relative to the U.S., but the gains may be shortlived amid stiffening competition south of the border

the improvement in the U.S. is not only stronger, but also much more capital intensive - a trend that will hinder Canada's competitive position in the post recession economy

Already at record levels, Canadians now owe just under $26,000 on average on their lines of credit, credit cards and auto loans, according to credit rating agency, TransUnion.

That’s an increase of 4.5 per cent, or another $1,000, over the same period last year.

The fear is that higher rates could push more consumers beyond their ability to repay their loans

there’s been a massive transfer of income and wealth from Canada’s middle and lower class to the rich.

some degree of inequality is inevitable and even desirable (allowing bigger rewards for those making bigger contributions), the level of inequality that exists today in the Anglo-American countries — the United States, Britain and Canada — is extreme

virtually all the income growth in the last 30 years has gone to the top.

Weak business confidence coming out of the global credit crisis is playing a major part in keeping jobless rates at painful levels – U.S. unemployment is nine per cent while Canada is stuck above 7.5 per cent in large part because companies are wary of hiring long-term.

Canada’s employment-services industry is mostly temporary staffing along with permanent placements and contract staffing, according to Statscan. Revenue has climbed steadily in the past decade, and employment in the sector has jumped six per cent in the past year alone, to 158,000 people.

But as the industry grows around the world – staffing firms are expanding in Europe and in emerging markets such as India and China – there’s an intensifying debate over the merits of an increasingly fluid work force. Proponents say it helps both employers and workers be nimble in globally competitive markets; opponents argue it’s part of a shift toward precarious, lower-pay work.

Canada's jobless rate is projected to be 7.7 per cent this year, down from the 2010 level, and will ease gradually to 7.4 per cent in 2012, 7.2 per cent in 2013, and 7 per cent in 2012, Toronto-Dominion Bank economists said Tuesday in a new forecast.

Noting Canada's stronger-than-expected economic growth to date, TD economists said in a new quarterly report that they expected more modest growth for the rest of this year and next. "The end to federal government stimulus remains a wild card to the outlook in the second half of 2011," they said.

"We have incorporated a moderate drag on growth as stimulus programs are set to expire in March of this year. However, there is a risk that government spending could contract much more significantly in the second half of 2011."

Instead of soaring food and energy prices encouraging food and energy producers to export more, they may export less and divert more of their output to domestic markets. The reason is simple: to keep domestic prices from matching soaring world prices.

But when it is food and energy prices, the political pressures become immense. They are so immense you can toss your economics textbook out the window.

Instead, no less than 29 food-exporting countries responded by banning food exports and kept their crop production for a hungry domestic market.

The world might be able to learn something from Canada about avoiding another housing-related financial meltdown, as the government recently announced several changes to the rules governing government insured residential mortgages. These changes are designed to reduce leverage in the system and promote housing market stability in the country.

This is the third time since 2008 that the government has tinkered with the system in an effort to reduce leverage and risk in the Canadian housing market.

The Canadian government has instituted several changes related to government-insured mortgages in an effort to promote housing market stability. These changes will reduce leverage in the system and are part of an effort to increase home ownership in Canada.

At the same time, America’s biggest foreign creditor wants assurances that its $1.2-trillion in U.S. Treasury holdings are safe despite uncertainty in Washington over how much money the U.S. can borrow to pay its bills. If Congress fails to increase that borrowing limit before August, that would likely send interest rates soaring and reduce the value of those Chinese investments

China’s expanding economic might will give it greater leverage now.

Nearly one in two clients – 46 per cent of those polled in the bank's private banking division – are using leverage as an investment strategy.

Using borrowed money to mini- mize taxes has also become common. Changing the mindset of the investor has been key, said Robert Doyle, head of client structures for RBC. In the past, such leverage was generally used as a short-term strategy rather than a long-term foundation for building wealth.

At the time, the average household debt level including mortgages had reached a record 146 per cent of personal disposable income.

Ottawa also moved to lower the amount Canadians borrow against their home, reducing the amount homeowners can leverage in a mortgage refinancing to 85 per cent of the property’s value, from 90 per cent.

Even though Canada’s economic downturn was shorter and less brutal than in many countries, rising debt could be a problem in a future downturn, particularly if housing prices are hit.

Between 1990 and 2010, the Canadian prime rate declined by more than 10 percentage points, while inflation fell significantly. The result was a near-perfect environment for financial assets, pushing values for stocks and bonds ever higher.

Empowered by the regulator, the Canadian banks have leveraged their massive size and distribution powers to dominate virtually all the financial services sector.

The combined outcome was an explosion in trading and market-sensitive revenues, which grew by more than 15 per cent a year for two decades, and today are approximately 20 per cent of gross revenues. Although the process is not quite complete, the banks are also well on their way to dominating the domestic mutual fund business.

The president of Canada Pork International warns the lack of a Canada-South Korea free trade agreement threatens to cost Canada a pork export market worth over 100 million dollars a year.

Representatives of the Canadian pork industry have asked Prime Minister Stephen Harper to become directly involved in getting free trade discussions back on track.

Canada pork International president Jacques Pomerleau says Canada’s trading partners in South Korea have warned, without a free trade agreement, Canada will be out of that market within two years.

ed. The United States accounted for 75 per cent of total exports last year, down from 85

The United States accounted for 75 per cent of total exports last year, down from 85 per cent in the mid-1990s.

United States will still be our dominant merchandise export destination in 2040

If Canada's energy firms don't start exporting to China now, others might beat them to it, according to an Enbridge Inc. vice-president.

They argued the window of opportunity to sell to China won't always be open largely due to competition and the chance the world's second largest economy may cease growing at its current staggering pace - reducing the money its investors can spend.

Colombian oil producer Ecopetrol plans to shift the majority of its oil exports from the United States to Asia in a decade due to higher sales profitability on the latter continent.Enbridge is on a similar quest.The company is seeking regulatory approval for its $5.5-billion Northern Gateway pipeline project to connect Canadian oilsands and natural gas fields to the West Coast, where liquefied natural gas could be shipped to Asia.

“One scenario is that interest rates rise, house prices drop, and more people begin defaulting on their credit card debt and mortgage obligations. An equally worrying – and perhaps more likely scenario – is that interest rates go up a little, and more of people’s disposable income goes to repaying their debt, leading to a significant reduction in consumer spending. Since personal spending on consumer goods and services accounts for 58 per cent of the Canadian gross domestic product, this decrease would provoke a ‘made in Canada’ recession.”

Total household debt in Canada now tops $1.5-trillion, or three times the national debt, MIT said in a statement outlining the paper by Mr. Dunfield and his colleagues in the Action Canada fellowship. That means that while Mr. Flaherty is being fiscally responsible, many of us may not be following suit.

“Canada has also avoided the wide regional performance differences seen in the U.S., where states such as Nevada, California and Florida suffered significantly larger declines than the nation overall,” Mr. Goldin added. “In Canada, house prices in Calgary and Vancouver fell further than those across the nation, but the variance was relatively minor by comparison