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Canadian Housing Data Improves Slightly

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Canadian Housing Data Improves Slightly

Statistics Canada has just released data relating to the March count of new Building Permits issued. Month on month this figure has decreased by 3.0%, this represents a slowing of the decline in February activity of -11.6%, it also beats the market consensus of a 4.6% reading.

The harsh North American winter is primarily responsible for the downturn in house building activity experienced towards the start of the year. It also however masks the true underlying nature of the recovery in the Canadian housing sector. House prices in Canada have been accelerating recently, this is partly due to the weather related slow down in new construction affecting the supply side but also a natural pick up in demand related to economic recovery. It is difficult to quantify the individual effects of these supply and demand factors on pricing in the sector.

The OECD however has just issued a warning to Canada to take measures to dampen the growth in the cost of housing. Despite these risks from the housing sector the OECD had a largely positive outlook on the Canadian economy in its recent report on the country. GDP growth is set to top 2.5% this year and the recovery is likely to broaden to include a pick up in both business investment and exports. The latter is no doubt being aided by weakness in the Canadian Dollar.

The Bank of Canada was also issued with some advice from the OECD, which stated that the monetary authorities should begin a cycle of interest rate rises as soon as inflation approaches the 2% level. A recent price index reading in Canada showed that inflation has jumped to 1.50% from a month earlier reading of 1.10%, if the Bank of Canada gives credence to the OECD advice then it is likely that rate rises could begin as soon as the second half of this year.

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