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Best Canadian GDP Growth in Six Months Led by Manufacturing Comeback

Jackson Middleton • Feb 01, 2018

Real Gross Domestic Product (GDP) increased 0.4% in November, bouncing back from a disappointingly flat economy in October.

The improvement reflected a rebound in most factory sectors as goods-producing industries rose 0.8% after declining 0.5% in October. November’s gain was mainly due to increases in the manufacturing and mining, quarrying and oil and gas extraction sectors. Maintenance shutdowns had depressed these areas in October. The services-producing industries rose 0.3%, led by the real estate and retail trade sectors.

Manufacturing posted its strongest growth in three years, indicative of an economy that continues to grow at an above-potential pace despite NAFTA uncertainties. Durable goods production surged, led by a 6.5% rise in the manufacture of transportation equipment. The auto sector was on fire following a 21.5% decline in the prior four months. Automotive vehicle assembly increased in part due to the return to production of some plant capacity following shutdowns in September and October. This increased activity was also a factor in the 8.7% rise in motor vehicle parts manufacturing in November. Chemical manufacturing bounced back as well.

On the services side, the real estate sector piloted the gain, mainly reflecting vigorous activity in real estate agencies and mortgage brokers. The output of offices of real estate agents and mortgage brokers (+4.0%) was up for the fourth consecutive month owing to increased home resale activity in Ontario and Alberta. However, the level of activity of this subsector remains below its March 2017 level, following provincial government changes to housing regulations in Ontario that came into effect in April of that year. Resales picked up in the fourth quarter in advance of the pending new mortgage qualification rules coming in at the start of 2018.

These data suggest that the Canadian economy will remain close to full-employment output as the Bank of Canada weighs higher interest rates. The fourth quarter growth in Canada was likely just shy of 2%. Growth will likely remain at around that pace in 2018. With inflation still well-behaved, the Bank of Canada’s Governor Stephen Poloz has said he will be cautious in assessing new data to determine future moves. The economy is quite sensitive to interest rate hikes because of elevated levels of household debt and the outsized role of housing in recent years.

Canada is headed for 3% growth for 2017, more than double the 2016 pace and expected to be fastest among Group of Seven nations. Other signs Canada’s economy is close to full output include the lowest jobless rate in modern records and consumer price inflation that’s close to the central bank’s 2 percent target.

The Bank is well aware of the risks associated with the NAFTA negotiations, although it appears the U.S. will not pull out of the deal and progress has recently been made at the Montreal meetings. Nevertheless, interest rates are widely expected to rise as monetary policy is gradually tightened.

U.S. News: Federal Reserve Decision

Today marks Janet Yellen’s last meeting as Fed Chair, with Jerome Powell taking the position when her term ends on Feb. 3. The Fed held rates steady at today’s meeting as was widely expected, but the policy statement signalled a rate increase in March, marking the sixth such hike since late 2015.

“The committee expects that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate,” the policy-setting Federal Open Market Committee said in a statement Wednesday in Washington, adding the word “further” twice to the previous language of the statement.

Powell takes over an economy that expanded at an annualized 2.6% pace in the fourth quarter, boosted by a rise in business investment and consumer spending. Tax cuts signed into law by Trump in December are also likely to increase growth in 2018, though the Fed and most analysts believe the lift will be temporary. There was no mention of the tax cut in the policy statement.


This article was originally published by DLC Chief Economist Dr. Sherry Cooper on her newsletter.But for all those fans of tracking GDP growth and moving 3 month averages, we thought this would be make a nice and tidy inclusion on our blog. You’re most welcome.

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RRSP As A Downpayment

By DLC Canadian Mortgage Experts • 28 Dec, 2022
Did you know there’s a program that allows you to use your RRSP to help come up with your downpayment to buy a home? It’s called the Home Buyer’s Plan (or HBP for short), and it’s made possible by the government of Canada. While the program is pretty straightforward, there are a few things you need to know. Your first home (with some exceptions) To qualify, you need to be buying your first home. However, when you look into the fine print, you find that technically, you must not have owned a home in the last four years or have lived in a house that your spouse owned in the previous four years. Another exception is for those with a disability or those helping someone with a disability. In this case, you can withdraw from an RRSP for a home purchase at any time. You have to pay back the RRSP You have 15 years to pay back the RRSP, and you start the second year after the withdrawal. While you won’t pay any tax on this particular withdrawal, it does come with some conditions. You’ll have to pay back the total amount you withdrew over 15 years. The CRA will send you an HBP Statement of Account every year to advise how much you owe the RRSP that year. Your repayments will not count as contributions as you’ve already received the tax break from those funds. Access to funds The funds you withdraw from the RRSP must have been there for at least 90 days. You can still technically withdraw the money from your RRSP and use it for your down-payment, but it won’t be tax-deductible and won’t be part of the HBP. You can access up to $35,000 individually or $70,00 per couple through the HBP. Please connect anytime if you’d like to know more about the HBP and how it could work for you as you plan your downpayment. It would be a pleasure to work with you.

Is There A Difference Between A Deposit And Downpayment

By DLC Canadian Mortgage Experts • 21 Dec, 2022
If you’re new to the home buying process, it’s easy to get confused by some of the terms used. The purpose of this article is to clear up any confusion between the deposit and downpayment. What is a deposit? The deposit is the money included with a purchase contract as a sign of good faith when you offer to purchase a property. It’s the “consideration” that helps make up the contract and binds you to the agreement. Typically, you include a certified cheque or a bank draft that your real estate brokerage holds while negotiations are finalized when you offer to purchase a property. If your offer is accepted, your deposit is held in your Realtor’s trust account. If your offer is accepted and you commit to buying the property, your deposit is transferred to the lawyer’s trust account and included in your downpayment. If you aren’t able to reach an agreement, the deposit is refunded to you. However, if you commit to buying the property and don’t complete the transaction, your deposit could be forfeit to the seller. Your deposit goes ahead of the downpayment but makes up part of the downpayment. The amount you put forward as a deposit when negotiating the terms of a purchase contract is arbitrary, meaning there is no predefined or standard amount. Instead, it’s best to discuss this with your real estate professional as your deposit can be a negotiating factor in and of itself. A larger deposit may give you a better chance of having your offer accepted in a competitive situation. It also puts you on the hook for more if something changes down the line and you cannot complete the purchase. What is a downpayment? Your downpayment refers to the initial payment you make when buying a property through mortgage financing. In Canada, the minimum downpayment amount is 5%, as lenders can only lend up to 95% of the property’s value. Securing mortgage financing with anything less than 20% down is only made possible through mortgage default insurance. You can source your downpayment from your resources, the sale of a property, an RRSP, a gift from a family member, or borrowed funds. Example scenario Let’s say that you are looking to purchase a property worth $400k. You’re planning on making a downpayment of 10% or $40k. When you make the initial offer to buy the property, you put forward $10k as a deposit your real estate brokerage holds in their trust account. If everything checks out with the home inspection and you’re satisfied with financing, you can remove all conditions. Your $10k deposit is transferred to the lawyer’s trust account, where will add the remaining $30k for the downpayment. With your $40k downpayment made, once you sign the mortgage documents and cover the legal and closing costs, the lender will forward the remaining 90% in the form of a mortgage registered to your title, and you have officially purchased the property! If you have any questions about the difference between the deposit and the downpayment or any other mortgage terms, please connect anytime. It would be a pleasure to work with you.
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