Monday, April 16, 2007

Economy's upward momentum fades a bit - RBC comments

Toronto Real Estate Board (TREB) Average Prices and Graph RBC comments: Economy's upward momentum fades a bit

The economy’s strong upward momentum in late 2006 faded a bit in early 2007 — pulling back to 0.1% in January from December’s robust 0.4% pace. However, output was still running at a 2.1% annualized rate in January and the three-month running rate clocked in at a 2.4% annualized pace, a solid pick-up from the sub-2% pace recorded in the previous seven months.

The economy churned out another 54,900 jobs in March, building on the blockbuster 88,900 gain in January and 14,200 in February. This was the strongest quarterly increase in job growth since 2002. Full-time jobs rose 30,500 while part-time employment increased by 24,500.

Retail sales declined 0.2% in January entirely due to weakness in the auto sector. Excluding autos, retail sales were firmer, rising 0.3%. There were widespread gains in all other sectors and eight of 10 provinces had sales gains.

Housing starts rebounded in March at a 210,900 annual rate from the 196,000 annualized pace in February. Starts averaged a 218,500 unit pace in the first quarter, slower than the 222,200 average rate in the fourth and 8.8% lower than in the first quarter of 2006, suggesting that residential construction will be a mild drag on overall economic growth in the first quarter.

The merchandise trade surplus narrowed to C$4.8 billion in February. Exports contracted 2.1%, reflecting the impact of the rail strike on shipments, while imports rose 0.3% following January's 2% decline. Real exports were running at a 3.1% annualized rate in January-February, while real imports contracted at a 2.1% annualized rate. As a result, the trade sector will still support first-quarter economic growth, although at a more modest rate than the 2.2 percentage-point boost in the fourth quarter.

The all-items inflation index rose 0.7% on a monthly basis in February, the biggest jump since a Katrina-related spike in September 2005. The Bank of Canada’s core rate reached 2.4% year-over-year, which could prove worrisome for policymakers.

Courtesy of RBC financial

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