National Economy

[hipster duck]

Originally Posted by GreaterMontréal

Northvolt is likely to build a C$7B battery plant in a Montreal suburb (Saint-Basile-le-Grand).

Nice. They're a Swedish company but I know that OMERS, the Canadian pension fund, is a significant investor. It's good to see some of that investment "brought home".

[kwoldtimer]

Is that now five battery plants in Canada, including Stellantis, if all go ahead?

[ericmacm]

Originally Posted by kwoldtimer

Is that now five battery plants in Canada, including Stellantis, if all go ahead?

Yes, there are a total of five planned now:

• VW-PowerCo in St. Thomas
• Stellantis-LG in Windsor
• Umicore in Kingston
• GM-POSCO in Becancour
• Northvolt in Montreal

[whatnext]

Nobody's mentioned this yet, but it could be very damaging to the economy:

Canada Dock Strike Enters Second Day as Mediation Resumes
Quarter of nation’s total traded goods flow through the ports
Disruption will have a knock-on effect to rest of the economy
By Randy Thanthong-Knight and Robert Tuttle
July 1, 2023

A strike at Canada’s Pacific coast ports continued for a second day on Sunday as mediation efforts between the dockworkers and their employers resumed after a pause last night.

Negotiations were halted Saturday evening and resumed this morning, Jenny Oan, a spokeswoman for the British Columbia Maritime Employers Association, said by email. The meeting paused after 33 hours of negotiations, the organization representing dockworker employers said in an update on its website.

The International Longshore and Warehouse Union representing more than 7,000 dockworkers went on strike Saturday morning after federal-mediated negotiations failed. The strike threatens to disrupt millions of dollars of trade and add inflationary pressures to the Canadian economy.....

.....The strike affects activities at maritime hubs in British Columbia, including the Port of Vancouver and Port of Prince Rupert, the country’s No. 1 and No. 3 busiest. These ports are vital to exports of natural resources and imports of raw materials and food products.....

https://www.bloomberg.com/news/artic...&sref=x4rjnz06

[Hecate]

Originally Posted by whatnext

Nobody's mentioned this yet, but it could be very damaging to the economy:

Canada Dock Strike Enters Second Day as Mediation Resumes
Quarter of nation’s total traded goods flow through the ports
Disruption will have a knock-on effect to rest of the economy
By Randy Thanthong-Knight and Robert Tuttle
July 1, 2023

A strike at Canada’s Pacific coast ports continued for a second day on Sunday as mediation efforts between the dockworkers and their employers resumed after a pause last night.

Negotiations were halted Saturday evening and resumed this morning, Jenny Oan, a spokeswoman for the British Columbia Maritime Employers Association, said by email. The meeting paused after 33 hours of negotiations, the organization representing dockworker employers said in an update on its website.

The International Longshore and Warehouse Union representing more than 7,000 dockworkers went on strike Saturday morning after federal-mediated negotiations failed. The strike threatens to disrupt millions of dollars of trade and add inflationary pressures to the Canadian economy.....

.....The strike affects activities at maritime hubs in British Columbia, including the Port of Vancouver and Port of Prince Rupert, the country’s No. 1 and No. 3 busiest. These ports are vital to exports of natural resources and imports of raw materials and food products.....

https://www.bloomberg.com/news/artic...&sref=x4rjnz06

The liberals should freeze their bank accounts.

[LightingGuy]

Next jobs report due in a few days will confirm, but it looks like we've reached an inflection point with employment.

Canada has shed 400,000 jobs since December. We know that there is more to come, at least in manufacturing and construction since building permits are down substantially since last year.

Interestingly at least 100K of those job losses are in the public sector.

Avg number of hours worked has also decreased the last few quarters, which usually precedes layoffs.

This is all despite Canada having 1M more people than last year this time.




https://www150.statcan.gc.ca/t1/tbl1...pid=1410020101


https://www150.statcan.gc.ca/n1/pub/...019001-eng.htm


https://www150.statcan.gc.ca/t1/tbl1...pid=1410021801

[LightingGuy]

Meanwhile, the people who influence the BoC's decisions still seems to think that economy is doing great and firing on all cylinders.

I really can't explain this. They're either blind, or stupid, or just flat out lying. Every business owner and sales person knows that we're in a recession, whether the "official" numbers reflect it or not.

Normally I'd say that they're going to drop rates once CPI reaches 2%, but there is obviously something strange going on. Just like they kept rates too low for too long, they are going to keep them too high for too long this time.

Canada’s Economy Is Supporting Higher Rates, No Cuts In 2023: BMO

https://betterdwelling.com/canadas-e...s-in-2023-bmo/

[Truenorth00]

Inflation needs to be crushed. And that probably means eating a recession. The BoC won't be cutting rates until they know for sure that inflation is dead. Just look at how housing and other speculation took off at the mere mention of a pause, few months ago. They won't make that mistake again.

A lot of this is housing. We need to see speculators losing their shirts before we can be sure. We're years from bottom.

People have no idea.

Yellow - new 5-year fixed interest rates, Chartered banks.

Purple - Average outstanding mortgage rates, 5-year fixed, chartered banks.

It HASNT EVEN BEGUN.

The averaged fixed mortgage holder in Canada is still paying less interest than in 2019.

https://twitter.com/Tablesalt13/stat...285551620?s=20

It's really only the variable borrowers that are feeling the pain right now.

Variable rate holders got fuckin launched into orbit.

https://twitter.com/Tablesalt13/stat...hZsjVmMDg&s=19

[someone123]

There was also a bit of a mortgage boom during the covid era when the BoC said rates would stay low for a long time. The renewals won't peak until around 2024-2025.

[LightingGuy]

Selfishly I'm all for a recession and a housing crash - I'm trying to put myself in a position to swoop in and get a few good deals when prices crash. I'm just surprised to see the BoC actually allowing it to happen. The irony is the Feds keep doing everything they can to prevent housing from crashing, which based on recent BoC behavior tells me that they will just keep rates high for longer.

[LightingGuy]

Originally Posted by someone123

There was also a bit of a mortgage boom during the covid era when the BoC said rates would stay low for a long time. The renewals won't peak until around 2024-2025.

It was more than "a bit". A lot of people refinanced. We now have a "stuck supply" problem, where people don't want to move since they would forfeiting their current low rate by moving.

As for the 2025/26 renewals...

It really depends on how the banks handle, and how rates go - you have to figure that they would want to avoid foreclosures at all costs. They are more likely to start offering 100 year amortizations to people to help them avoid defaulting on their mortgages.

Some quick back-of-napkin math:

$500K principal
20 year amortization
2% rate
= $2,529.42 monthly payment

$500K principal
100 year amortization
6% rate
= $2,506.31 monthly

However if mortgage rates go up to 8% it's a different story:

$500K principal
300 year amortization
8% rate
= $3,333.33 monthly payment

So really, rates don't have to go much higher before even infinite amortization periods won't save people from increased payments.

[Truenorth00]

Both OSFI and the BoC have had some very pointed language about the growing amortization. I don't think Fixed Payment Variable mortgages will be as generous on terms going forward.

[LightingGuy]

Does anyone have any insight on what's going on at the public staffing level, and why Public Administrators decreased by 110K people between March and April? Was this a temporary decrease due to the PSAC strike? Or were there layoffs that went unreported?




https://www150.statcan.gc.ca/t1/tbl1...pid=1410020101

EDIT:

NVM I answered my own question - it was exactly 110K PSAC workers that went on strike, so it somehow made it onto the jobs report, despite their still being employed.
https://ottawa.ctvnews.ca/tentative-...psac-1.6388152

[ericmacm]

Originally Posted by LightingGuy

It was more than "a bit". A lot of people refinanced. We now have a "stuck supply" problem, where people don't want to move since they would forfeiting their current low rate by moving.

As for the 2025/26 renewals...

It really depends on how the banks handle, and how rates go - you have to figure that they would want to avoid foreclosures at all costs. They are more likely to start offering 100 year amortizations to people to help them avoid defaulting on their mortgages.

Some quick back-of-napkin math:

$500K principal
20 year amortization
2% rate
= $2,529.42 monthly payment

$500K principal
100 year amortization
6% rate
= $2,506.31 monthly

However if mortgage rates go up to 8% it's a different story:

$500K principal
300 year amortization
8% rate
= $3,333.33 monthly payment

So really, rates don't have to go much higher before even infinite amortization periods won't save people from increased payments.

Extending the maximum allowable amortization period by that much is pure crazy talk, let alone extending it in general. The only reason we are seeing amortization periods on mortgages extending to crazy lengths right now is because of a temporary measure to keep people’s payments the same, at the cost of their equity. The amortization period will still be forced to snap back to its original schedule at the end of the term.

The banks and government aren’t doing this to keep people in their homes, they are doing this to give themselves time to accumulate enough reserve money to soften the blow that the wave of mortgage defaults will inevitably cause them.

The banks don’t care about keeping people in their homes, they care about getting their money. It’s also worth noting that banks in Canada are allowed to take your other assets to make up for mortgage losses, unlike in the US. The BOC doesn’t care about keeping people in their homes, they care about keeping the inflation rate at around 2% so we don’t turn into Argentina. Hate to say it but the time has come for those borrowing beyond their means.

[WarrenC12]

It's in everybody's best interests if people can stay in their homes and keep making a mortgage payment, even if it means extending their amortization.

What will stop this is people losing their jobs, that will cascade into housing pretty quickly IMO.

[casper]

Originally Posted by ericmacm

Extending the maximum allowable amortization period by that much is pure crazy talk, let alone extending it in general. The only reason we are seeing amortization periods on mortgages extending to crazy lengths right now is because of a temporary measure to keep people’s payments the same, at the cost of their equity. The amortization period will still be forced to snap back to its original schedule at the end of the term.

The banks and government aren’t doing this to keep people in their homes, they are doing this to give themselves time to accumulate enough reserve money to soften the blow that the wave of mortgage defaults will inevitably cause them.

The banks don’t care about keeping people in their homes, they care about getting their money. It’s also worth noting that banks in Canada are allowed to take your other assets to make up for mortgage losses, unlike in the US. The BOC doesn’t care about keeping people in their homes, they care about keeping the inflation rate at around 2% so we don’t turn into Argentina. Hate to say it but the time has come for those borrowing beyond their means.

Well LightingGuy is running a variety of "what if" cases. I think we know interest rates are getting close to topping for if they have not yet.

They bank cares about getting its interest and ensuring its principle is not at risk. House values are not in free fall. Their principle is as secure now as it ever way.

[Truenorth00]

Originally Posted by WarrenC12

It's in everybody's best interests if people can stay in their homes and keep making a mortgage payment, even if it means extending their amortization.

Regulators and the bond markets disagree.

https://www.canadianmortgagetrends.c...ong-borrowers/

Loaning money to people who have no intention or ability to pay you back in a lifetime is not a good foundation on which to build capital markets.

[thewave46]

Originally Posted by Truenorth00

Regulators and the bond markets disagree.

https://www.canadianmortgagetrends.c...ong-borrowers/

Loaning money to people who have no intention or ability to pay you back in a lifetime is not a good foundation on which to build capital markets.

We are basically operating in a Japan zombie bank situation, except with home mortgages and the federal government via CHMC is on the hook for losses. ~30% of mortgages are in negative amortization and the period is above 30 years for them. People are sliding backwards nearly a decade of amortization in the span of a year.

There is probably intense political pressure to not realize these losses coming from the federal government. If banks don't realize the losses, CHMC doesn't have to pay out. What a poison pill for a government if CHMC has to eat huge losses and divert tax dollars to keep banks upright. It'll be our version of the 2008-09 US meltdown, but saddled with huge COVID debt already. The walk in the snow looks rather more pleasant than the fireworks burning next to the pile of ammonium nitrate.

The last hope is that housing prices continue on upwards unto infinity so that the asset can be unloaded to the next person at the inflated price, covering the principal and accrued interest. Policy from government seems to be oriented to this tactic. The current homeowners aren't going to be homeowners for long - they're losing it all regardless. It'll just be a few years until it happens even if interest rates go to near-zero, because that's where most took on the original mortgage and now they're behind.

Maybe capital-rich people will buy the asset and turn them into rooming houses or rent them back to their former owners.

The fact that we got here says about how dumb the last decade has been. Had the incoming Liberal government of 2015 banned variable mortgages, tightened lending standards, increased the amount of downpayment required and limited CHMC's mandate more, the train wouldn't have picked up the speed it did.

Here we are. The derailment will be fun. At least inflation will get stomped out of the economy when this happens.

[whatnext]

Thanks Justin!

The shocking collapse in Canadian productivity: in spite of the Liberals’ best efforts, or because of them?
ANDREW COYNE
PUBLISHED 10 HOURS AGO
FOR SUBSCRIBERS

For years now, scolds like me have been boring the pants off you with our interminable screeds about the problem of sluggish productivity growth. Oh God, we moaned, productivity in Canada is growing so slowly: slower than it was, and much slower than in other countries. This cannot go on; foundation of living standards; however will we pay for health care, etc., etc.

So it may relieve you to know that this has ceased to be a problem. Canada’s economic problem is no longer slow or slowing productivity growth. It is declining productivity, in absolute terms – and not occasionally, or tentatively, but steadily, and without much prospect for improvement.

The latest figures from Statistics Canada show that labour productivity – measured by real GDP per hour worked – fell again in the first quarter of 2023, for the 10th time in 11 quarters. Much of that decline, of course, is simply a return to trend, after the artificial spike in productivity observed during the lockdown.

But productivity has not just fallen back to prepandemic levels: that adjustment was already complete by 2021. Rather, it has continued to fall since then, to a level that is now lower than at any time since 2017. Had Canada’s productivity instead grown in line with that of the United States over the last five years, the economist Trevor Tombe calculates, it would today be 8 per cent higher than it is.

If you want to know why living standards in Canada have stalled – per capita GDP is also no higher than it was in 2017 – there’s your answer. Mr. Tombe calculates that Canada has fallen so far behind the U.S. in recent years that output per capita in Ontario, Canada’s fifth-richest province, is now comparable with that of Alabama, America’s fourth-poorest state.....

....No one can say they failed to deliver on the policies. A short list would include the Canada Infrastructure Bank; the “superclusters” program, designed to create world-beating hives of activity in selected sectors in cities across Canada; Innovative Solutions Canada, a program to boost startups through government procurement; the Strategic Innovation Fund; the various government-sponsored venture-capital funds administered by the Business Development Bank; all the way to the Canada Growth Fund, the Canada Innovation Corporation (the renamed Canadian Innovation and Investment Agency), and the massive subsidies for battery manufacturers of more recent budgets.

All those agencies, all those acronyms, all those billions, and what is the result? Falling capital stock, falling productivity and falling relative living standards – year after year after year. I can’t imagine a more perfect test of Liberal economic theories, or a more complete failure. (bold mine)

https://www.theglobeandmail.com/opin...-spite-of-the/

[Truenorth00]

Coyne forgets the big ones. Immigration and deficit financing.

Had they done what they originally promised to do with infrastructure, at least we'd have a lot more to show for it. Instead, this government feels like its being run by realtors and landlords singularly focused on keeping real estate prices up at all cost.