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Tag Archives: Canada

Chart: Prime Rate and Bank of Canada Overnight Rate (1935 – 2022)

Source : WOWA

Chart: Canada’s Annual Inflation Rate Slowed to 6.9% in September 2022

But slightly above market estimates of 6.8%

Source : Trading Economics

Chart: Toronto Home Prices Are Down 17% As Sales and Listings Plunge

Source : Bloomberg

Canada Unemployment Rate Rose in August 2022

The 5.4% rate is well above the market expectations of 5%.

Source : Trading Economics

Chart: Bank of Canada Hikes 75bps As Expected, Warns Rates Will Need to Rise Further

Source : Bloomberg

Canada Set To Miss Out On A Massive LNG Opportunity

Alex Kimani wrote . . . . . . . . .

Shortly after Russia invaded Ukraine in late February, dozens of Eurozone countries pledged to heavily cut Russian natural gas imports or halt them completely as soon as they could afford to. These countries took several aggressive measures to replenish their natural gas stockpiles ahead of the winter season, including reaching a political agreement to cut gas use by 15% through next winter. It’s, therefore, little wonder that Germany–the country’s worst hit by the Russian energy crisis– is currently on a mad dash to secure alternate sources of gas before the onset of winter. But here’s the biggest irony of them all: Germany and Europe are more likely to secure future gas supplies from Mozambique, one of the world’s poorest nations with scant infrastructure, riddled with terrorism and located 8,140km away from Germany, than Canada, one of the biggest producers of the stuff, with more than a dozen potential LNG sites and a ‘mere’ 6,400km away.

Indeed, this might turn out to be one of the biggest missed opportunities in Canadian history considering that at current prices, just one Canadian port exporting superchilled gas could be adding nine figures to the Canadian GDP each day.

Love-Hate Relationship

Canada is the planet’s fifth largest producer of natural gas and ranks 15th in the world for proven natural gas reserves. The country’s biggest problem simply is lack of infrastructure–and political goodwill.

It’s somewhat shocking to learn that Canada does not own a single LNG export terminal, with virtually all the country’s natural gas exports delivered to the United States via pipeline. It’s not for lack of trying though. In recent years, Natural Resources Canada says it has received proposals for 18 LNG export projects, including five on the East Coast. Currently, just one terminal is under construction, with a second not quite poised to break ground.

In sharp contrast, Mozambique is gearing up for a $100B LNG windfall, with the country poised to ship its first cargo of liquefied natural gas (LNG) overseas at a time when prices have soared to record highs with Europe desperately trying to cut energy ties with Russia.

According to ship-tracking data compiled by Bloomberg, the BP-operated LNG tanker British Mentor was slated to arrive this week at a new floating terminal that Italian energy giant Eni S.p.A. is completing off Mozambique’s northern coastline. Eni has said that commissioning activities at the Coral-Sul FLNG vessel were progressing well, with first exports to be communicated in due course. The Italian company is already planning a second floating export platform in the southern African country that could be completed in less than four years.

All that progress despite the fact that Mozambique has been plagued by terrorism, civil strife and rampant systemic corruption for decades, to a point where it has been unable to exploit its vast fossil fuel reserves leading to its status as the world’s third poorest nation.

You can blame this state of affairs on Canada’s love-hate relationship with fossil fuels.

Despite the Canada–United States Free Trade Agreement in 1988, a sense of ambivalence towards fossil fuels prevails to this day. In the current geopolitical climate, oil and gas are both hated and adored. Hated because of their outsized role as the number one climate change pariah. Adored as an alternative source of natural gas, especially since Russia’s invasion of Ukraine and the attendant threat that Moscow might cut off gas supplies to Europe.

Back in March, Canadian Natural Resources Minister Jonathan Wilkinson announced that Canada has the capacity to increase oil & gas exports by up to 300,000 barrels per day (bpd) by the end of this year to help improve global energy security. He also added that Canada is looking at ways it may be able to displace Russian gas with liquified natural gas (LNG) after requests for help from Europe. Currently, a Shell-led consortium is building a large LNG facility on the west coast at Kitimat which is due for completion around 2025, but the country exports zero LNG.

But it need not be this way. Canada’s energy regulatory framework is notorious for scaring away oil and gas projects, and in February turned down a $10-billion LNG export facility planned for Saguenay, Quebec largely on the grounds that it would increase greenhouse-gas emissions. All five of the now-languishing East Coast projects were in the planning stages as early as 2015 but have been held back by a hostile and byzantine regulatory climate.

At this stage, it’s not 100% clear whether Canada is ready to relax its attitude towards fossil fuels.

Recently, Prime Minister Justin Trudeau went on record saying that exporting LNG from Canada’s east coast to Germany could ease Europe’s gas crunch: “It’s doable, we have infrastructure around that,” he said at a joint press conference with German Chancellor Olaf Scholz though he failed to offer a timeline when asked for one.

However, as Politico notes, doable doesn’t necessarily mean realistic, especially given that Europe wants to slash Russian gas purchases by two-thirds by the end of the year.

In the same vein, Trudeau conceded that weak business cases have kept proposed export facilities from moving forward: “Right now our best capacity is to continue to contribute to the global market to displace gas and energy that then Germany and Europe can locate from other sources,” Trudeau has conceded.

Recent comments by Canadian gas producers are also quite telling. In an interview this week, Enbridge Inc. (NYSE: ENB) CEO Al Monaco hinted at Canada’s infamous industry red tape when he said the country needs to “get out of our own way when it comes to energy and building infrastructure.”

Perhaps not even sky-high natural gas and LNG prices are enough to persuade Trudeau’s administration to change its stance on oil and gas. But as they say, you never really know, considering that the U.S. only began exporting LNG in 2016, and has managed to become the world’s leading LNG exporter in such a short space of time.

Source : Oil Price

Read also at Fraser Institute

Canada’s lost LNG opportunities due to dearth of export facilities . . . . .

Canadian Real Estate Affordability Hits Worst Level Since the 90s

Canada’s central bank found housing affordability eroded further in the first quarter. The Bank of Canada (BoC) Housing Affordability Index (HAI) showed a sharp jump in Q1 2022. Affordability is now the worst in 3 decades, with the most recent erosion due to rising financing costs. However, this is likely to be temporary as home prices adjust to more expensive borrowing costs. The index will see a short-term increase, but the trend can reverse as early as this year.

The Housing Affordability Index (HAI)

The BoC HAI looks at housing affordability as the basic carrying costs for a home compared to income. Carrying costs are mortgage payments and utilities. Mortgage payments are calculated using a basket of discounted rates, weighted by use. Income is disposable income, which is what’s left after mandatory transfers. The result is the share of income needed to carry these payments, with higher being worse.

Canadian Real Estate Is The Least Affordable Since The 1991 Bubble

The BoC HAI ripped to the highest level in a generation, and the highest share in 3 decades. The HAI shows a household needs 42.8% of their disposable income to carry a home in Q1 2022. It’s an increase of more than 3 points from the previous quarter and 8.1 points from last year. The HAI hasn’t been this high since Q3 1991, which was the previous peak of the real estate cycle (i.e. the bubble peak).

Demographic Distribution Means It’s Harder To Catch Up Without Price Corrections

Age distribution and demographics are important to understand why it’s different this time. Back in the early 90s, the median Canadian was in their early 30s. Today the median person in Canada is a third older — in their early 40s. Half the population in the 90s was below their peak earnings years, making it easier to stomach the costs. This helped to prevent the need for prices to fall as much.

Today, Millennials are expected to reach their demographic peak in the next few years. They’re already past or approaching peak earnings growth, meaning there’s not much income relief. Most of the affordability improvement has to come from falling home prices. They also can’t depend on interest rates to drop 14 points to help alleviate pain and inflate the asset.

Then there’s the whole down payment issue at extended valuations, not factored in by the HAI. The 90s had extreme valuations, with Toronto’s average home sold at 6x the median income. Today that number is closer to 10x, so there’s a considerable gap compared to that period. This isn’t about who had it worse, but the fact that things haven’t improved over the past 30 years.

The BoC HAI is likely to pop even higher over the next quarter but the direction is expected to change fast. Financing costs surged in Q2 2022 while home prices only made a minimal decline in the quarter. This will result in the ratio rising, but more recent activity shows this can change fairly fast.

In June, home prices across Canada fell by the equivalent of a third of a median household’s annual income. They didn’t make that drop over the past year, but just in that month. July’s data for Toronto and Vancouver also has experts seeing further national price drops. As early as Q3 or Q4, affordability can start improving — RBC is calling a “historic price correction,” while BMO recently revised their Canadian real estate outlook much lower, expecting big drops in the future.

Source : Better Dwelling

Chart: Canada Federal Debt by Prime Ministers

Source : Fraser Institute

Chart: Canada Central Bank Raised Interest Rate by 1%

Largest Bank of Canada rate hike since 1998

The Bank of Canada joins more than 30 other central banks around the world that have raised interest rates by a full percentage or more this year.

Source : Bloomberg

Canadian Cities Like Vancouver and Hamilton Top L.A. and Chicago As More Expensive Places to Live

Tyler Durden wrote . . . . . . . . .

Canada’s most expensive cities to live are starting to officially overtake the U.S.’s most expensive cities to live.

In fact, Mississauga, Vancouver, and Hamilton are more expensive than well known expensive U.S. cities like Los Angeles and Chicago, according to a new study from Canadian insurance provider PolicyAdvisor.

The study looked at the “10 biggest cities by population in each of Canada and the US based on the average cost of eight items in each – a cinema ticket, a meal out, a bottle of water, a cappuccino, one month of gym membership, a one way ticket and a monthly ticket on public transport as well as a month’s rent”.

Topping the list remains New York, which is the most expensive city when “considering cost of living in relation with salary”. The combined cost of the basket of 8 items that the study looked at accounted for 57% of the average salary in New York, the study found.

New York was followed by Mississauga, Canada, at 56.4% of salary, and Vancouver, Canada, at 50% of salary. Both Hamilton and Toronto, Canada beat out well known expensive U.S. cities like Los Angeles and San Diego.

New York had the “highest price of rent, at an average of $3,381.88 per month, as well as the highest gym membership cost ($103.35), monthly transportation pass ($129.5) and cost of a meal at an inexpensive restaurant ($25),” the study found.

Toronto had the “second highest cost of monthly transport pass after New York” and Hamilton also a high monthly travel pass, at $85. Vancouver was toward the top of the list because of its far lower salary than other cities – people earned just $3,804.53 per month there.

“The impact of the pandemic has made a lot of people reconsider their priorities for both their careers and where they want to live. This data contains some surprising results, as even though some major cities in North America might be perceived as having lower living costs – when factoring in the average salary in the area, it’s not as clear cut,” a PolicyAdvisor spokesperson said.

Source : ZeroHedge