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This Recession Will Deepen

CMHC has forecasted that our economy is to rebound by 2010 and the Bank of Canada chief has also been quoted as expecting a rebound in early 2010; these forecasts have also been received with widespread ridicule.   I wouldn't necessarily ridiculue anyone for their forecasts, but I would consider looking at the current facts and trends.   All of the forecasts that have been proclaimed, over time, have been revised downwards as these last few months have passed.  For example, an original housing starts fourth quarter outlook from last year was predicated at 200k, but reduced to 177k, then reduced even further.  The fact is that housing starts are now lower than they have been in seven years!  I believe that housing starts, which have been steadily declining since last October, and are primarily fueled by the global financial crisis will result in further decline of home sales, leading to a further softening of the economic climate.    But Duggan, the CMHC chief has proclaimed the following:
"Housing market activity will begin to strengthen as the Canadian economy rebounds in 2010 and the level of housing starts over the forecast period will be more in line with demographic fundamentals."
Further reports from CMHC show drastic declines in housing starts, especially in the West (most likely because it was booming the most), where upwards of 30% drops are expected by the year's end!   Can you imagine if your home value dropped by 30% in one year?   But most reports and many forecasters are suggesting that perhaps with the exception of BC and Quebec, most provinces should see some relief in 2010.   I guess we'll just have to wait and see.
Home sales in Canada have also been steadily declining (housing starts and home sales are interconnected); current forecasts for average decline rates are in the 15% range for the next year!   Average home prices are expected to decline by a little over 5 %!   Current data shows that Canadian home sales have plunged dramatically by 41% and prices dropped by 11%!  This signifies a huge and abrupt stalling (but a year is still less abrupt than a day, or a few minutes, like in the stock market - and we did have notice) of the market.
Set off by AIG (the world's largest insurance company) which recently received a bailout of over 180 billion dollars!!!!, markets were in a spin this past week.   Last Monday, AIG wrote off over 62 billion dollars and coupled with a sinking US economy and a drop in Gross Domestic Product (Canada's drop was over 3% last quarter)  markets reacted aggressively.   Our stock exchange dropped over 435 points in just one day - the lowest close in OVER a decade!
Since Labour Day, the stock market average has been going south consistently.  Markets ranged in the 14000 point scale and now our just over 7000 - a 50% drop since September/08 and we are only in March/09.  Although things aren't as bad for us in this area as it is in the US (where markets closed last week at their lowest ever in more than a decade!), things are still concerning.   And with the GDP continuing to decline, this is my summation:  this recession will continue to deepen. 


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