“The evidence is not there that Canada has a housing bubble. In fact, the evidence with respect to affordability of mortgages in Canada is solid and we have a stable market”
This is the man who history will judge as the great enabler of our housing boom, as he has presided over the unwarranted expansion in amortization terms and lowering of minimum down payment requirements. More than anyone else, he is responsible for encouraging the poor financial decisions of most new home buyers. He knows this.
In addition to being a terrible finance minister, his track record of economic prognostications leaves much to be desired:
Flaherty see economic growth ahead– August 2008
Flaherty expects surplus– September, 2008
No recession coming to Canada– October, 2008
Flaherty vows no deficit on his watch- October, 2008
Flaherty says families need financial literacy – May 2008 (He then relaxes lending standards and downpayment requirements)
Job growth will continue….economy fundamentally sound – October, 2008
Ah yes….Flaherty’s predictive brilliance and grasp of economics is clear to all!
‘Head scratcher’ inflation reading
Canadian CPI reading for October came in above expectations on the back of increased
speculation inflationary pressures in the energy sector.
As I’ve said before, I think that energy prices will likely fall over the short term, but there’s no denying the supply/demand fundamentals heavily favour increased energy prices, even if monetary inflation is not present. All this will do is eat into the disposable incomes of families as inflation is not passed on through wage growth without an increase in the overall monetary aggregate. Bad news.
But even at that, I’m somewhat surprised at the strength of the reading. Evidently I’m not alone. From TD:
“In truth, the outcome in October is a bit of a head scratcher. The acceleration of inflation is at odds with the underlying economic environment and the strength in the Canadian dollar this year. As already mentioned, the pace of economic growth has slowed below trend and considerable slack remains in the economy. For example, the unemployment remains elevated at 7.9% and the odds are that job creation in the near-term will be lacklustre.”
“Looking ahead, the pace of inflation should moderate. Given the slowing in global economic growth, energy prices are not expected to continue climbing in the near term. Meanwhile, prices on discretionary consumer goods (i.e. furniture, appliances, recreation equipment, clothing and footware) should also come under pressure as consumer spending growth remains modest and competition remains fierce.”
I think that consumer spending growth remaining ‘modest’ would be a best case scenario. I don’t see it.
“In other words, the uptick of inflation is likely an aberration and will not last.”
I don’t always agree with TD’s analysis, but I do think they nailed this one.