/Posthaste: Why the housing market may not save us from a protracted economic slowdown this time around

Posthaste: Why the housing market may not save us from a protracted economic slowdown this time around

Good Morning!

The standalone monthly seasonally adjusted annual rates of housing starts was 221,202 units in September, down 2.5 per cent from 226,871 units in August, according to Canada Mortgage and Housing Corporation (CMHC).

Economists are pointing to trouble ahead for the economy, amid the lacklustre economic data points.

“While we could get some growth from real estate agents fees and renovations, the pop in GDP growth we got from housing in Q2 is likely to be be less vigorous in the next couple of quarters,” said Avery Shenfeld at CIBC Capital Markets.

Housing is one of the few remaining growth engines in an economy that appears to be running out of steam. The Macdonald-Laurier Institute’s Leading Economic Indicator (LEI), that predicts changes in the Canadian business cycle, rose by 0.2 per cent in August, somewhat lower than previous months but still a six straight month of growth. Indeed, much of the positive economic activity remained concentrated in the housing market, MLI said in a report.

“Growth is continuing despite a slowing trend,” says LEI author and Munk Senior Fellow Philip Cross. “Though the housing market remains the main source of growth in the economy, August’s numbers paint a less optimistic picture than recent months.”

“The effects of the turmoil that took hold in the global economy over the summer may not have fully materialized,” Cross added. “Canada may yet experience a more protracted economic slowdown.”

A housing surge is vital as manufacturing and other areas are faltering. Bank of Nova Scotia analysts believe Canadian suppliers to General Motors Co. are likely to report lower-than-expected profits as the strike by the United Auto Workers union enters its fourth week.

Meanwhile, Canadian heavy oil’s discount to the U.S. benchmark widened to $15.75 Monday, — the biggest differential since May — ahead of an announcement that the Alberta government will ease production limits in exchange for shipping more crude by rail, according to Bloomberg.
Here’s what’s you need to know this morning:


  • Canada Mortgage and Housing Corp. to release preliminary housing start data for September
  • Statistics Canada releases building permit data
  • First week of hearings in the case of Commissioner of Competition Tribunal vs. Ticketmaster and parent company Live Nation Entertainment Inc. for allegedly using deceptive ticket pricing practices, demanding it display the full price up front in Toronto
  • Canadian Wind Energy Association 35th annual CanWEA conference and exhibition in Calgary
  • The fall sitting of the Alberta legislature begins in Edmonton
  • In Leduc, Alberta Premier Jason Kenney and Indigenous Relations Minister Rick Wilson on Indigenous partnerships
  • TransLink CEO Kevin Desmond attends a breakfast meeting to discuss the growing need for more transit, transportation, and commuting options across Metro Vancouver

Most economic indicators point to a slowdown in the Canadian economy. Impeachment concerns, trade tension and now the new NAFTA (or USMCA) ratification in limbo suggests the economy is not firing on all cylinders.

“The ongoing cloud of uncertainty for the USMCA is no friend for the Canadian economic outlook,” said Doug Porter, chief economist at Bank of Montreal. After a powerful rebound in the second quarter, Canada has rapidly adopted the rest of the developed world’s lacklustre growth.Exports are also fading.

“While the August trade deficit narrowed a bit below $1 billion, it was all due to better oil prices—net exports will at best be neutral for Q3, after turbocharging Q2. And, more recent, September auto sales dipped again from year-ago levels, roughly matching this year’s average 4% year-on-year drop,” Porter noted.

Meanwhile, Scotiabank also suggested that merchandise imports in the latest trade data “raises questions” about the strength of domestic demand, as imports of machinery and equipment (-2.81% month-on-month) as well as consumer products (-3.7% month-on-month) declined.

— Send your news, comments and stories to [email protected]postmedia.com. — Yadullah Hussain @YAD_Fpenergy

With files from The Canadian Press, Thomson Reuters and Bloomberg


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