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Canada’s Housing Costs Continue To Rise

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Canada’s Housing Costs Continue To Rise

The Canadian New Housing Price Index has just been published for February. Month on month this showed growth of 0.2% against a January figure of 0.3% and a consensus estimate of just 0.1%. The year on year reading remained static at 1.5% as it was in January.

The International Monetary Fund (IMF) has recently upgraded Canadian growth forecasts from 2.2% to 2.3% for 2014 but in doing so also warned Canada to be vigilant.
IMF chief economist, Olivier Blanchard, noted that “The recovery which was starting to take hold in October is becoming not only stronger, but also broader” he went on to add that “although we are far short of a full recovery, the normalization of monetary policy — both conventional and unconventional — is now on the agenda”.

In sounding this optimistic note on Canadian economic prospects the IMF was also quick to caution against pulling back too soon on the economic stimulus program. Of key concern to the IMF is the level of household debt and rising house price costs, the IMF economist was quick to state that “despite the recent moderation in the housing market, elevated household leverage and house prices remain a key vulnerability”. In addition the reduced level of Canadian exports is proving troublesome to IMF economists.

Canada is third only to the UK and the US in terms of GDP growth among developed economies. The IMF’s assessment of Canadian growth prospects is considered slightly bearish, although falls far short of being pessimistic. Privately, economists are in fact forecasting Canadian growth in 2014 to be closer to the 2.5% mark. The IMF is however leaving itself a little room to manoeuvre on the growth forecasts, it acknowledges that the “external demand could surprise on the upside” and that if this were to occur it would trigger it to raise it’s target for Canada’s growth.

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