2010 may be a great year, hold on for the ride.
Enjoy the article below.
Turning the page on 2009 will be done with great relief almost everywhere in Canada. The past year has been, by far, the toughest since the early 1990s recession and, in some cases, the early 1980s recession. Hardship was evident from coast to coast, even in parts of the country, such as Alberta, that were previously considered almost bullet-proof.
Perhaps more importantly, however, will be the full force of fiscal and monetary stimulus kicking in. Nearly all governments at the federal, provincial and municipal levels have initiated substantial infrastructure spending programs and these will be in high gear during the year ahead.
In most cases, although not all, 2010 will be the peak of stimulus spending.
The easing of monetary policy is already having a visible impact – most notably in housing resale markets across the country – and should continue to do so despite our expectation that the Bank of Canada will gradually take its feet off the gas pedal starting mid-year. Extremely low mortgage rates have been key to the spectacular rebound in housing resale activity in every province since early 2009.
The precipitous decline in activity that started late in 2008 plunged a number of provinces – including Ontario, Alberta and British Columbia – into a deep slump through the better part of the year, which reverberated loudly in regional job markets.
The ranks of the unemployed swelled and unemployment rates surged broadly, reaching the highest levels since the 1990s in Ontario and Alberta.
While many challenges will remain, 2010 promises a widespread turnaround in economic performance, albeit a modest one at first. A more sanguine global context will sharply contrast with the meltdown on the world stage that took place in 2008 and early 2009. With the financial crisis behind us and the U.S. economy on the mend, factors “external” to the provincial economies are expected to contribute positively to growth again.
In turn, this housing resurgence should be seen as evidence that consumers are feeling more upbeat even in areas of the country such as British Columbia, Ontario and Alberta where the recession caused substantial damage.
The price tag for the fiscal stimulus is enormous – huge budget deficits.
Collectively, the provinces are projecting shortfalls totaling $38.2 billion in the 2009-10 fiscal year and at least $30.2 billion in 2010-11 (with two provinces not providing estimates), both records in terms of value. However, relative to GDP, the deficits will be modestly milder than the peaks recorded in the early 1990s.
While running up huge budget shortfalls might cause some discomfort, the alternative was even less attractive given the severity of the economic downturn. Nonetheless, returning to balance during the medium-term will be a challenge involving difficult choices. ECONOMICS I RESEARCHIn this update, there is little change to the big picture from our September Provincial Outlook: the contraction in activity is still seen to be widely spread in 2009 among provinces (with Manitoba and Nova Scotia the only exceptions)
and the expected recovery to be equally generalized in 2010.
On the upside, there have been some upward revisions to New Brunswick and Nova Scotia in both 2009 and 2010 (Nova Scotia is now projected to be flat in 2009), and Quebec and Manitoba in 2009.
In this report, we are also introducing forecasts for 2011, which generally depict provincial economies strengthening further. The western part of the country – led by Saskatchewan – is generally expected to grow faster than the national
average of 3.9% with the exception of British Columbia, which will be feeling some post-Olympics moderation.
However, we have made minor revisions to some provincial forecasts. The most significant change has been for Newfoundland & Labrador, where longer-than-expected production shutdowns in the mining sector have prompted us to deepen the real GDP decline in 2009 by one percentage point to 4.5% and to bump up growth slightly in 2010 to 2.4% from 2%.
Smaller downward revisions have also been made to Alberta (to reflect weaker-than-expected momentum at this stage) in both 2009 and 2010, Saskatchewan in 2009 (in light of the dramatic drop in potash production) and Ontario in 2009 and 2010 (a larger-than-expected decline in the second quarter of 2009 and slightly more subdued recovery in 2010).
I hope this finds you Happy and Healthy!
All the Best!
A. Mark Argentino
P. Eng. Broker
Specializing in Residential & Investment Real Estate
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