Rising interest rates no problem

Despite the Bank of Canada’s rising interest rates, experts say the impact on Canadian stocks will be minimal. The details of the change will be officially announced Tuesday, but until then, predictions are that the increase will be 25 basis points, which will bring the central bank’s key interest rate to 0.75%.

Rising interest rates traditionally means bad news for stock markets, but “What they really point to is some return to normalcy,” says TD Waterhouse chief portfolio strategist Bob Gorman. Canada is the first Group of Seven industrialized nations to raise interest rates since the stock market crash in September 2009.

In absolute terms, interest rates are low, reports the Financial Post. “The central bank cut its key rate to a record low 0.25% in April 2009 in an aggressive response to the financial crisis and resulting recession,” writer Jennifer Kwan says. Analysts expect the overnight rate to rise to 1.25% by year end, and to 2.5% by the end of 2011. “Even then, rates will be lower than they were in early 2008,” Kwan says. In comparison, the central bank raised interest rates 2.5% between late 2004 and mid-2007 to a key rate of 4.5%.

Parking fees climbing

Oil and insurance aren’t the only automobile-related fees that are increasing. A survey of 12 major Canadian cities showed that the median monthly parking rate has raised 2% in the last 12 months to $224.10. The median daily parking rate also raised 2% to $14.83, according to Colliers International’s 10th annual parking rate survey, which was released earlier today. This represents a modest increase in comparison to the 2008/2009 survey, which found the average national increase to be 9.9%.

“Parking garages are one of the only commercial real estate sub-sectors that seemed to remain stable even during an economic turmoil,” says Wayne Duong, director of research with Colliers International in Canada. Only 10 new parking garages are expected to be built in major Canadian cities over the next two years. This will create 1,800 spots. As the economic climate improves, Colliers anticipates parking rates to increase because more people will be on the road and the limited supply will make the spots more desirable.

Of the 12 major Canadian cities surveyed this year, Calgary’s parking was ranked most expensive, with a median unreserved monthly parking cost of $453.38. Toronto ($336.25) was ranked the second most expensive, Montreal ($280.62) was third, Edmonton ($275.00) was fourth, and Vancouver ($266.81) ranked fifth. Calgary is the only city that made it onto Colliers list for the most expensive places to park in the world, ranking 14^th.

Double dip? More like a blip.

Heard enough about the looming threat of a double dip recession? So has Elliot H. Gue over at Investingdaily.com. In fact, he thinks it’s downright unlikely that the recession will rear its head again, poor economic indicators aside.

In a nutshell, he argues that:

A) The precipitous drop in U.S. consumer confidence from May to June isn’t as bad as it looks, since consumer confidence is “a volatile data series” at the best of times.

B) The PMI index for manufacturing has dropped but isn’t tanking, and still indicates an expansion in the manufacturing sector. (Historically, the PMI and GDP have been closely related.)

C) Fears about the European debt crisis have been easing, and the latest numbers are surprisingly good.

Having said all that, Gue isn’t exactly a harbinger of good cheer — he figures we’re in for a “slow, grinding recovery.”

Decline in home sales

National home sales activity declined 8.2% in June from the previous month, according to statistics released earlier this morning by the Canadian Real Estate Association. This figure takes into account seasonal differences in the real estate industry, the CREA says. Nearly 70% of local markets experienced a decline in sales. Toronto and Calgary were most affected.

“National home sales activity is easing due to fewer and more cautious first-time home buyers,” says CREA economist Gregory Klump. “With interest rates on the rise, housing affordability and home sales activity are expected to continue to erode over the second half of 2010,” he says. Still, Klump says the recovering economy and job market will provide support for housing activity and prices.

The number of newly listed homes in June 2010 declined by 6.8% from the previous month, following a monthly decline of 4.8% in May. The CREA says the declining trend in new listings will help maintain the balance between supply and demand, and temper home price volatility. The average price of a Canadian home sold rose 4.9% on a year-over-year basis in June to $342,662, reports the CREA.

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