Canada recovery a long haul, housing leads the way

Thu Nov 5, 2009 12:52pm EST
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By Louise Egan

OTTAWA (Reuters) - Canada's economic recovery is unfolding slowly but surely, new data showed on Thursday, and the housing market in particular appears headed back to growth levels not seen since before the recession started.

Permits for housing construction in Canada surged 9.4 percent to their highest since September 2008, offsetting a decline in nonresidential permits to drive up overall building permits in the month by 1.6 percent, Statistics Canada said.

The upbeat report came as the federal government housing agency, CMHC, forecast a 26 percent rise in housing starts next year in Toronto, Canada's most populous city. Existing home sales, however, are expected to dip.

Housing has been a rare bright spot in the Canadian economy, helped by record low interest rates and a pledge by the Bank of Canada to keep its benchmark rate at rock-bottom until mid-2010.

In another sign the recovery is under way, the Ivey Purchasing Managers Index fell to 61.2 in October from 61.7 in September. A reading higher than 50 indicates an increase in activity from the preceding month.

"This is the second business survey in as many days ... that suggests the economic recovery is building on itself at the start of the fourth quarter -- and fits with our rising trajectory for Canadian GDP in the second half of this year," said Credit Suisse economist Jonathan Basile.

But the news was not uniformly positive and the employment index of the Ivey was disappointing.

"Net net, the index tends to suggest that Canada is on the cusp of robust economic recovery.... Reality, as is often the case, is some what less warm and less fuzzy," said Stewart Hall, markets strategist at HSBC Canada.   Continued...