Derek Abma
Sun
Canadians will be looking to reports on housing starts and international trade this week for some reassurance the economy is indeed improving.
That’s after recent disappointing figures for employment and gross domestic product — not to mention slumping stock markets up until this past week — put a damper on hopes for a strong economic recovery.
Today, Canada Mortgage and Housing Corp. will announce housing starts for October. Economists, on average, expect an annualized rate of 156,800 homes got their construction underway last month, which would be a gain of about five per cent from September.
The new-home market, while lagging the red-hot resale sector, has shown steady growth in recent months after going as low as an annualized rate of 118,500 starts in April.
With some particularly high expectations for multiple-housing units, TD Securities strategist Millan Mulraine is optimistic about the coming housing-starts report.
“Indeed, with residential-permit approvals rising at a double-digit pace in both August and September, and construction employment rising for the third straight month in October, we expect building activity to rise to 160,000 in October,” he said in a research note Friday. “This will mark the highest level of new residential building activity since December last year.”
CIBC World Markets is expecting the same quantity of housing starts.
“Low interest rates and a return of consumer confidence have boosted demand and resulted in home prices taking off again, encouraging builders to get back to business, as suggested by the steep increase in building permits in recent months,” CIBC economist Krishen Rangasamy wrote in a report.
Relating to the same industry, Statistics Canada’s new-housing price index for September is to be released Thursday. Economists expect a 0.2 per cent gain, which would be the third straight month of higher prices.
This Friday, economists expect the same federal agency to report another trade deficit for September. It would be the seventh shortfall in 10 months. While Canada’s practice of taking in more in trade than it ships out is becoming the norm, one should remember that last December’s deficit marked the end of a string of surpluses that began in 1976. Canada had a trade deficit of $2 billion in August.
“After 33 years of running quarterly merchandise trade surpluses, Canada is now stuck in the red,” said Rangasamy. “September may have seen a small improvement to a deficit of around $1.5 billion, despite the drop in energy prices in the month.”
He cited a better U.S. economy and a pickup in auto sales as helping Canada’s trade performance.
Mulraine expects the trade deficit to have widened in September, partly because of the strong loonie eroding the competitiveness of Canadian goods.
“In September, we expect the Canadian trade deficit to widen to $2.2 billion, which will be the highest level of trade deficit on record,” he said. “During the month, exports are expected to rise marginally, though higher imports should offset any gains in export trade.
“In the months ahead, with the strong Canadian dollar continuing to wreak havoc on the Canadian export base, we expect net exports to remain relatively unsupportive to overall economic activity.”
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