Just a quick post to detail a few developments over the past couple days
New home prices rise
Stats Canada released its New Home Price Index earlier in the week. New home prices were up 0.2% in September.
Just a couple of thoughts for before the real estate bulls blow this out of proportion. The data is from September. We’re seeing a deceleration in home buying activity to the tune of -20 to -40% in all major boards, as detailed in an earlier post. This is not an insignificant drop in sales.
The latest housing starts data showed ‘surprising’ (if you haven’t been reading this blog) weakness in much of the country. David Rosenberg weighed in on this data point in his daily commentary yesterday:
“Canadian housing starts tumbled 9.2% MoM, to 167,900 units (annualized), the lowest since July 2009. To add insult to injury, September’s tally was revised slightly down to 185,000 from 186,400. The details of the report were just as dreadful as the headline. The volatile multi-unit component plunged 15% MoM. Recent trends haven’t been great — three-month, six-month and year-over-year trends all turned negative in October (to -56%, -8% and -4% YoY, respectively) .
Single-family starts can be a better gauge of underlying developments and here the trends turned negative as well. The single-starts component fell 8% on the month, the fourth monthly decline in a row. Relative to a year ago, starts are down 24%, an acceleration from the -13% YoY reading in September.”
Taken together, falling sales and falling starts raise two questions:
1) If the trend continues in falling sales, who will the buyers be?
2) What do builders see in the future? Developers arguably have the best feel for the pulse of demand for new construction yet are pulling back substantially. Rats fleeing a sinking ship? We’ll find out soon.
Tough budget coming
In another sign of coming austerity, Stephen Harper is sending his minions out across Canada in an attempt to warm people up to the reality of coming budgets.
“In the run-up to what promises to be the most contentious federal budget in years, Prime Minister Stephen Harper is launching a round of national public consultations Tuesday in Winnipeg, asking Canadians to tell his government what should be cut and what should be saved.”
“Liberal Leader Michael Ignatieff is promising to make targeted investments in health care, education and other social policies, while also constraining federal spending. The Tories are offering a very different approach, focusing almost entirely on restraint.”
Wow! A ‘conservative’ government advancing an actual conservative position. Been a while since we’ve seen that in Canada.
Canada’s trade deficit widens
Canada’s trade deficit is approaching its record high as demand for our exports continue to wane, particularly from our largest trading partner.
“The deficit widened more than expected to $2.49-billion in the month from $1.49-billion in August, Statistics Canada said Wednesday. Exports tumbled 1.7 per cent on lower volumes while imports rose 1.2 per cent, and have been relatively flat all year.”
“The trade picture weakened as demand from Canada’s largest trading partner remains tepid. Exports to the U.S. fell 3.6 per cent to their lowest level since last November.”
These headwinds limiting Canadian growth prospects have been discussed here for some time, so this is no shock.
Until the US is through its deleveraging phase, don’t expect strong demand to help bolster our exports.