Alex Carrick, Chief Economist of Reed Construction Data Canada
Retail sales in the U.S. are increasing nearly twice as fast as in Canada. That’s because Americans are feeling more prosperous than we are. There are two primary reasons.
First, according to the calculations of four major authorities south of the border, new and existing home prices in the U.S. are rising by between 7.0% and 15.0% annually. In Canada, we’ll consider ourselves lucky if home prices stay flat this year. We’re worrying about a possible home price bubble, although the 40% drop in new multiple-unit starts in Toronto so far is deflating some of the problem.
Second, stock market indices in the U.S. have been vastly outperforming the Toronto Stock Exchange. This translates to higher valuations for pension and mutual funds. Since the trough for equities in February 2009, the TSX has risen by about 50%, while the DJI and S&P 500 have doubled. NASDAQ has done even better. The factor that’s been holding back the TSX has been weak world trade, causing commodity prices to retreat from their peaks. At the same time, the lower commodity prices have helped American firms realize higher profits. As a result, it might be said that Canadian investors have “taken a bullet” for their U.S. cousins.
Join Alex Carrick and other industry professionals on Thursday, September 26, 2013 in Toronto for the 28th Annual CanaData Conference.
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