The new year is now 12 days old, and 2012 feels a lot like 2011. Few of the core issues have been addressed in any meaningful way. Here in Canada the debate is about the possible price deflation in housing, for although Canada is one of the few OECD countries that has seen reasonable growth since 2007, there is a feeling that the party is overdue to end.
First and foremost is the now 13 year old housing boom; as a participant in this sector until recently, my feeling are that on average 7% annual price growth is not sustainable. Although national income has risen continually over that period (bar for a brief period in 2008) it remains that Canadian house prices are driven by ultra low (and in the long term unsustainable) low interest rates. The question is not so much on the likelihood of a correction, but rather a question of timing and size!
Other issue of interest last week was IPPI
Remove fuel from the equation (not that this is entirely justifiable) and a picture emerges of an economy that has prices under control for its production process. On the employment side of the equation, the data last week was very weak; whereas an rise in the number of employed Canadians was expected, what we got instead was a reduction (unlike in America which saw surprisingly resilient employment numbers).
Canada is, and will remain, a second derivative economy; its health is less driven by endogenous factors and more driven by exogenous forces to which the economy has to adapt.
For once I will refrain from making any predictions on the economy -- I was wrong on GDP growth, I was wrong on the bond market and I was wrong on the equity market (too optimistic, to pessimistic and to pessimistic).
I'm back, and I still don't know
First and foremost is the now 13 year old housing boom; as a participant in this sector until recently, my feeling are that on average 7% annual price growth is not sustainable. Although national income has risen continually over that period (bar for a brief period in 2008) it remains that Canadian house prices are driven by ultra low (and in the long term unsustainable) low interest rates. The question is not so much on the likelihood of a correction, but rather a question of timing and size!
Other issue of interest last week was IPPI
Remove fuel from the equation (not that this is entirely justifiable) and a picture emerges of an economy that has prices under control for its production process. On the employment side of the equation, the data last week was very weak; whereas an rise in the number of employed Canadians was expected, what we got instead was a reduction (unlike in America which saw surprisingly resilient employment numbers).
Canada is, and will remain, a second derivative economy; its health is less driven by endogenous factors and more driven by exogenous forces to which the economy has to adapt.
For once I will refrain from making any predictions on the economy -- I was wrong on GDP growth, I was wrong on the bond market and I was wrong on the equity market (too optimistic, to pessimistic and to pessimistic).
I'm back, and I still don't know
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