Little if any growth seen in coming few months
Eric Beauchesne
Province
OK, not so affordable… The Trump International Hotel & Tower rises behind the Wrigley Building in Chicago. The 92-storey condo development sits on the north side of the Chicago River. When completed, it will be the second-tallest building in the U.S. — Getty Images
OTTAWA — The Canadian economy may have escaped a recession so far but it exited the spring and entered the summer with a whimper not a bang, say the latest reports on consumer spending and leading economic indicators.
But the good news, at least for homebuyers, is that the weakness in the economy should continue to make housing more affordable, according to a separate report by a Canadian financial institution.
Retail sales rose 0.5 per cent in June, the fifth-straight monthly gain, Statistics Canada reported yesterday, with all parts of the country posting gains.
But once the rise in prices, especially a 4.3-per-cent surge at the gas pumps, is stripped out, the volume of sales, led by a slump in auto purchases, fell 0.4 per cent, the first drop since February.
“Canadians stayed away from car dealer lots in June, forced to spend much more of their hard-earned cash at gas stations,” said CIBC World Markets economist Krishen Rangasamy.
And the outlook is for a further retrenchment by consumers despite lower gasoline prices, said BMO Capital Markets economist Douglas Porter.
“Softer job conditions, a cooling housing market, still-high gas prices and a raft of dire headlines have hammered consumer confidence, pointing to more modest spending growth in the months ahead,” he said. “Even so, the outlook remains less downbeat than that facing the ultra-stressed U.S. consumer.”
Statistics Canada also reported that its barometer of the short-term outlook for the economy was “flat” in July, the second-straight month of no change following small increases in the previous two months, suggesting there will be little if any economic growth in the coming few months.
While only two components in the basket of 10 leading economic indicators fell last month, compared with six that fell in June, the July declines in housing and in the average workweek in manufacturing were large enough to offset small increases in the seven components that increased, Statistics Canada said.
The 2.9-per-cent drop in the housing index was its steepest in seven years, and reflected the slump in the pace of housing construction, it noted.
However, as with consumer spending, the weakness in the Canadian housing market is still nowhere near the deepening depression in the U.S. housing market, analysts noted.
The dollar briefly slipped back below 94 cents US in the wake of the anemic economic reports.
But Canadian stock markets rose, buoyed by speculation about increased tar-sands investment following news reports of a visit to the tar sands this week by multibillionaires Bill Gates and Warren Buffett, as well as the announcement of the Hebron offshore-oil deal by Newfoundland and Labrador Premier Danny Williams.
And the upside of the downside of the Canadian economy is more affordable housing..
© The Vancouver Province 2008
