"Canadians have been spending at above-normal levels, while the personal savings rate has fallen below zero," said Terence Yuen, research economist for Watson Wyatt.
Lets repeat that shall we, savings have fallen below zero. Probably for the first time in the history of Canada, which was a savings based nation.
And while the dollar has risen impacting on sales and exports, the economy has been boosted by Petro dollars from the West and personal debt by Canadians.
Like our American counterparts, housing and consumer goods are driving the economy, not production. Not jobs. Rather we have a debt economy.
Meanwhile the Bank of Canada with its fetish for inflation, looking for it anywhere it can't find it. Because wages have been low, despite the boom economy.
The Bank of Canada has been raising its key interest rate slowly since September, citing the need to bring monetary stimulus to a more neutral level, given the strength of the Canadian economy. However, new wage data released yesterday showed salaries for unionized workers increased 2.3 per cent in November. While this number is much stronger than the 1.3-per-cent increase recorded for October, it's hardly strong enough to set off alarm bells.
Like I said that won't stop David Dodge and the Bank of Canada from plowing ahead with rate increases. Dumb, Dumb, Dumb.
Most economists say the bank will raise rates again in January and probably in March, but any rate increases after that will depend on what the U.S. Federal Reserve does and the strength of the Canadian dollar.
Meanwhile, TD Waterhouse released a poll that appeared to show diametrically different results.
The Toronto-based bank said a growing number of Canadian investors have lowered their expectations for 2006, continuing a trend that began in 2002.
The poll suggested only 36 per cent of those surveyed expected higher returns this year than last.
The bank also expects a U.S. economic slowdown in the third and fourth quarters that will negatively impact Canada's economy, directly through weaker exports and indirectly though softer demand for commodities.
Which would make raising interest rates a really DUMB idea. Especially in a non productive market. One that is relying on consumer spending rather than jobs and production to create national wealth.Labour is in increasingly short supply and production in industries across the country has been pushed to its limits, but only a few business leaders expect inflation to pick up pace, the Bank of Canada's latest business outlook survey shows.c
More than a third of respondents said they would have some difficulty meeting an unexpected increase in demand, while 15 per cent said they would have significant difficulty. That's the highest level since the third quarter of 2000 at the height of the tech boom.
"Pressures on production capacity continue to intensify. They are at particularly high levels in Western Canada, limiting the scope for further increases in production and sales," says the November and December survey of about 100 firms. "A number of firms in the rest of the country report that they are more fully utilizing their existing capacity, after having recently rationalized their operations."
Now last time I checked labour shortages were supposed to mean wage increases, but that has not been happening. Instead the wage increases listed above are exactly what they have been for a decade. No different than the ninties during the Debt and Deficit hysteria in the Provinces and Ottawa.
Wages have always been the driver of the inflationary paranoia of the banks and the movers and shakers in the market place. Not prices. And despite a boom economy based on relatively low wage increases, the Bank of Canada will continue to raise interest rates.
Remember during the Mulroney Regime, the Banks high interest rate policy was an economic disaster for the country. Imagine a crash when Canadians have a personal deficit. The impact would be horendous on individuals and the economy.
Its time to regulate the Bank of Canada. It's power is to great to continue to allow it to be a rogue element of the State.
Tags
Canada
Bank of Canada
economy
wages
labour
inflation
personal debt
2 comments:
You are correct that in a hot economy like Alberta wages are an anomaly. In fact in a hot economy short on labour wages do increase...though this is no reason to eliminate the minimum wage, which is the usual excuse of the Fraser Institute, nor do lessen the demand for a Living Wage of $10 per hour and a full benefits plan paid for by the employer.
You can search in Technocrati for my articles on this.
The Alberta economy heats up the national economy, however job layoffs in Ontario, and the declining economies elsewhere leave the national wage average at 3.2% which it has been for over twenty years. While managers and Bay Street boys earn a lot more.
Soory that was 2.3% not 3.2 and Bloomberg reported this earlier in the month;
Bank of Canada Governor David Dodge has said the economy, which grew at a 3.6 percent annual rate in the third quarter, is at full capacity and interest rates need to continue rising to keep inflation at bay.
Average hourly wages advanced by 3.8 percent from a year earlier. Wages in Alberta, where the unemployment rate is 4.1 percent, have increased 7.5 percent in the year through December. Annual inflation stood at 2 percent in November
And here is an interesting tidbit on Minimum Wages...
Welfare drops minimum wage to $2 an hour
By JAMES KELLER The Canadian Press
Welfare recipients who hold minimum wage jobs on the side effectively earn only about $2 an hour under Nova Scotia rules, anti-poverty advocates said Thursday.
The minimum wage in the province is $6.80 per hour, jumping 35 cents next month. But 70 per cent of all wages earned are taken off social assistance cheques.
That means if an unemployed person on social assistance finds a job, they only increase their income by less than a third of their new wage.
An anti-poverty group, Face of Poverty Consultation, told a legislature committee that the rules mean there is often little benefit for unemployed people to find a job.
"This keeps the individual from being able to work his or her way out of poverty," group spokesman Alasdair Sinclair told the hearing.
"Surely if a person in the system gains employment, the person should be able to make a very real contribution to their living standards."
Sinclair said the current rules punish impoverished people who want to find work.
He called on the province to change the rules and let low-income earners keep more of the money they make.
The group also wants the province should increase the minimum wage to at least $9 per hour. That would enable a full-time, minimum wage worker to earn about $18,700 a year before taxes.
In 2003, Statistics Canada’s low-income cut-off for most large cities was $19,261 for a single person.
"The minimum wage must be a living wage," said Sinclair, who rejects the argument that an increase would hurt businesses.
Post a Comment