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CANADIAN REAL GDP ACCELERATES INTO 2010

• Canadian monthly real GDP advances by a better-than-expected 0.6% in January, suggesting a repeat blockbuster 5.0% annualized performance in the first quarter of 2010.

• The strongest gains were in the goods producing sector, while the service sector advanced at a more moderate pace.

Canadian economic data just keeps on getting better and better and better. A stronger-than-expected 0.6% advance in monthly GDP in January suggests a repeat blockbuster 5.0% annualized performance in the first quarter of 2010. With the Canadian economic recession now a thing of the past, the Canadian economy is making significant headwinds in digging its way out of the production hole left behind. After a 4.7% peak-to-trough decline, Canadian monthly GDP is just 1.8% below its pre-recession peak.

While January’s gains were broad based, the details of the report solidify the belief that the industries hardest hit by the recession are likely to see more upside during the recovery. Goods production – the hardest hit by the reces­sion – increased 1.3%, the largest increase since September of 2003, led by residential construction and manufacturing. Despite these strong gains, goods production remains 9% be­low its 2008 peak. Meanwhile, the service sector increased by a more modest 0.4%, but has fully recovered from the economic downturn. Services have now risen 1.3% above their pre-recession peak.

Residential construction advanced a whopping 4.2%, the sharpest increase since early 2002. Residential construction was likely bolstered by the federal renovation tax credit, as households rushed to take advantage of the credit in the last month before it expired. The gains in manufacturing were quite broad based, however commodity-based industries such as petroleum and coal, primary and fabricated metal, non metallic mineral production advanced the most. Motor vehicle production declined in the month, however, it came on the heels of a strong monthly gain in the previous month. Services related to trade such as wholesale, and transport and warehousing were also strong in the month. Moreover, a robust gain in retail spending continues to point to an ac­celeration in consumer spending through the first quarter of 2010. At the same time, a moderate pull-back in demand in the Canadian resale housing market has started to feed through to cooler economic activity in finance, real estate, and insurance services.

January’s monthly GDP report indicates that the eco­nomic engines are firing on all wheels, with the exception of continued weakness in business investment. February is anticipated to be another strong month for GDP as the Winter Olympic Games likely provided a boost to monthly GDP through increased spending in accommodation and food ser­vices. Beyond February, we continue to anticipate a slight moderation in GDP growth to more sustainable levels. First, the U.S. is already showing signs of moderating from the striking performance in the fourth quarter of 2009. Second, the contribution from fiscal and monetary stimulus is starting to diminish. In particular, the renovation tax credit expired at the end of January, and the strength in residential activity will likely unwind some of its recent strength in the com­ing months. Third, despite some expected volatility in the months ahead driven by regulatory changes, the Canadian resale housing market has begun to cool over the first three months of 2010, which will result in slower pace of growth in housing related investment and purchases. As such, fol­lowing two quarters of stunning economic performance, the pace of Canadian real GDP growth will moderate to a more healthy 3-3.5% over most of 2010.

Diana Petramala, Economist
416-982-6420

R.Paul Chadwick
TDCanada Trust
Manager Residential Mortgages
Tel: 905 334 4066
Fax: 905 332 1619
paul.chadwick@td.com
pchadwick.ca

Read more on what's happening in the Mississauga real estate market and mortgages in Canada.

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Mississauga MLS Listings

The problem with MLS real estate listings is that homes that are still available are the ones everyone is passing on. If a home has been on the market for a long time and is just not selling, there must be a reason. So just having your home appear on the multiple listing service may diminish its appeal for many discriminating buyers. Smart home buyers get in on great new homes for sale right away. Some are bought up before the advertised listing is seen by buyers. A good Mississauga real estate agent can help you learn of newly available properties and of properties that may be becoming available.

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