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  TRI-Canada says Soft Spring related to Burst Canadian Housing Bubble

May 1st delayed FreeVenue public release of Jan 31st MemberVenue guidance ~ With home prices plunging $400/week, Canada's Economic Action Plan appears at odds in embattling broken confidence.  That said, the Trendlines Recession Indicator gauges the expansion phase of the new business cycle is finally reaching critical mass and should sustain balanced growth onwards w/o the aid of fiscal policy stimulus or easing of monetary policy measures.  Real GDP growth is weighed by TRI to have been 2.6% in January, down from a 5.6% pace in December (Q4).  Today StatCan released data inferring November RGDP was 2.7%  (TRI = 4.9%).

The TRI uses proprietary heuristic algorithms to transform 6 leading data sets into an insightful GDP baseline thru to 2017.  The uniqueness of its methodology minimizes false-positives & false-negatives.  Albeit the past would suggest the demise of the typical 8.5-year business cycle in 2017, the unveiling of today's forecast projects the diminished o.2% RGDP pace for March (Q1) will be followed by a surge to o.9% in Q2 ... en route to a 2.8% growth momentum crest in 2015Q4.  At that juncture, GDP commences a secular decline towards a 2.4% soft-landing at the end of the 2017 fuzzy horizon.  The trajectory will change, no doubt, as inflation and inventory factors come into play.  Factors contributing to short/medium/long term weakness in the TRI outlook continue to be:  (a) waning Fed/Prov fiscal stimulus cheques;  (b) high petroleum prices;  (c) an Export killing "par-plus" Loonie & (d) the weight of the record Canadian housing bubble.

click chart for graphic view back to 1952, outlook table & full discussion...

April 30th delayed FreeVenue public release of Jan 30th MemberVenue guidance ~ Over the past 90 days, the avg/median home price fell $400/week in Canada, £200/week in the UK, $200/week in Australia and $100/week in the USA.  The USA realty bubble been in "over-correction mode" since Sept/2010.  Thus, its annual median home price ended 2011 actually 5% ($8,000) below the long-term Price/Family-Income ratio trend.  In turn, Australia, Canada & the UK face a prolonged stifling of economic activity due to the assault on disposable incomes by the weight of home mortgages and rent.  When one adds in the burden of cumulative high petroleum costs, the fundamentals are in place for Technical Recessions in all three jurisdictions.

Families most at risk are in the UK where the avg home is overpriced by 120%.  The Australian median home is currently 81% overpriced.  Canada's housing bubble finally burst in June 2011.  The avg Canadian home is 32% overpriced and valued at 2.2 x's its American counterpart.  As such, the Canadian economy saw monthly contractions in February, April, May & November and the TRENDLines Recession Indicator currently projects sub 3% GDP thru to its 2017Q4 horizon.

The Conservative Federal Gov't & Bank of Canada talking points have been blaming the Japanese earthquake, EURO troubles & Justin Bieber for the ailing domestic economy, but CMHC is clearly at fault for this situation.  Canada was the last G-20 nation to fall into Recession in 2008 and the first one out ... not by clever fiscal/monetary policy but because CMHC was enabling the domestic realty bubble by condoning 5% minimum downpayments for its high-ratio mortgage insurance coverage.  As such, the housing bubble financed Canada's false good fortune.  The present economic downturn is solely a "made-in-Canada" malaise and was foretold in this venue as far back as March 24 2010.

It is scandalous the measure continues in place and Canadian taxpayers are clearly at risk.  CMHC expects the Canadian taxpayer will bailout any major insurance losses it incurs as was done in the USA with FannieMae & FreddieMac.  If there is any sense of accountability in Ottawa, look for heads to roll at CMHC.  Why?  The following was CMHC's response to my on-going analysis in their Q3 Financial Statement release (2011/11/29):  "At the moment, there is little evidence of a significant over-valuation in the Canadian housing market overall, although some centres warrant close monitoring. CMHC expects housing markets to stabilize next year, and house prices to grow modestly going forward." 

click a chart for 4-nation Bubble guidance & research notes ...

  TRI-USA GDP will rise to 2.7% by Election

Apr 27th delayed FreeVenue public release of Jan 27th MemberVenue guidance ~ The American economic recovery finally surpassed the Dec/2007 Real GDP high water mark in October.  Acknowledging the present stubborn weakness won't trough 'til mid-Spring, today's general upgrade of 2012 by the TRENDLines Recession Indicator reveals the expansion of the new business cycle is exhibiting critical mass despite a virtual absence of both fiscal policy stimulus and monetary policy quantitative easing.  The January RGDP growth rate is gauged at 2.5%, down from 4.1% in December (Q4).  Today, BEA released its first estimate of 2.8% for Q4.

TRI's uniqueness is its use of proprietary heuristic algorithms to transform 14 leading data sets into an insightful GDP baseline thru to 2035.  The uniqueness of its methodology minimizes false-positives & false-negatives.  Albeit the past would suggest the demise of the typical 8.5-year business cycle in 2017, the unveiling of today's forecast projects current headwinds will result in a diminished 1.0% RGDP pace for March (Q1), a o.8% trough in April, followed by a surge to 2.7% in Q3 (to be announced mere days prior to the Nov 6th Election) ... en route to a 2.9% growth momentum crest in October.  At that juncture, the TRI long-term chart illustrates GDP commences a secular decline ending with an ultimate hard-landing in 2031, but no sign of resurrection within the 2035 fuzzy horizon.  The trajectory will change, no doubt, as inflation and inventory factors come into play.

Today's 2012H2 upgrade reflects a forecast easing of high petroleum prices upon resolution Iran-related geopolitical issues.  In the short-term however, the same demand destruction that befell the USA auto sector in Spring 2011 is likely to re-emerge in the coming weeks.  The negative effects of cumulative fossil fuel price increases are still permeating throughout the economy.  The diminished crest compared to previous cycles reflects both the ongoing winding down of the balance sheet recession and a toxic political environment at the federal and state levels.  The model warns the housing sector will face a 2% rise in 5-yr mortgage rates in late 2014.  Monetary Policy actions by the Federal Reserve & the Treasury Secretary's guidance to Congress with respect to Fiscal Policy will ultimately determine the timing and harshness of the cycle bottom.

Headwinds - Factors contributing to short/medium term weakness of the TRI outlook continue to be:  (a) stubbornly high unemployment;  (b) political dysfunction;  & (c) cumulative high petroleum costs

click chart for graphic view 1970-2035, outlook table & full discussion...

 USA "Real" Unemployment Rate drops to 15.2% in December

April 6th delayed FreeVenue public release of Jan 6th MemberVenue guidance ~ Today's headline USA Unemployment Rate for December may be 8.5% (U-3), but the dire state of the jobless is better reflected by the REAL Unemployment Rate of 15.2%.  The latter includes discouraged/marginally attached workers and economically necessitated part-timers.  The rate is down from 15.6% in November, but is not significantly below the Great Recession induced high of 17.2% set Oct/2009.

How is it that GDP has again surpassed the pre-Great Recession levels while 6 million souls are still not working?  A low USDollar has spurred Exports to record levels and manufacturing is much less labour intensive than the decimated construction sector.

click chart for full discussion at UR site...

G-20 Recession Monitor:  only Japan contracting

Jan 10th delayed FreeVenue public release of Oct 10th MemberVenue guidance ~ Global GDP in 2011Q3 is running at a 3.6% pace and transitioned from "recovery" to cycle "expansion" mode in Feb/2010.  Real GDP was -6.3% at the depth of the Recession in 2008Q4.  Japan and Canada are the only G-20 nations contracting today.  Japan's earthquake/tsunami induced downturn is a Technical Recession.

Barrel Meter analysis reveals a new round of fossil-fuel induced G-20 Recessions was narrowly averted.  Crude price reached $113 (avg) in April, a tad shy of the $116/barrel threshold which signals breach of a definitive Crude-Cost/GDP ratio to which several nations would be vulnerable.  Contract oil has since drifted to $96 and is presently forecast to briefly flirt with $62 in July 2013 in the absence of OPEC intervention.

The duration of the global Recession was 2008Q3 to 2009Q1.  Despite the mainstream media hysteria, at its worse only 12 G-20 nations (representing 53% of global GDP) were in Recession.  2008's -0.4% GDP decline was the first annual global contraction in the last four decades.

The repercussions of the 2011 oil price spike did impact the USA auto sector.  Since Nov-2009, the TRENDLines Barrel Meter & Gas Pump models had been forecasting unit sales of New Cars & Light Trucks would suffer the same fate of 1980, 1990 & 2007 if a definitive Gasoline/GDP ratio was again surpassed.

click here for more G-20 graphs & full discussion...

  USA Debt Wall - Structural Deficits Leading to Treasuries Crisis in 2022

Jan 9th delayed FreeVenue public release of Oct 9th MemberVenue guidance ~ After a decade monitoring the issue, Trendlines Research began publishing alerts in early 2009 warning the USA Federal Gov't is headed for an inevitable financial crisis related to its weekly Treasury auctions.  With concern over the integrity of sovereign debt, bond vigilantes are increasingly monitoring Deficit/GDP & Nat'l-Debt/GDP ratios.  It appears the current Wall Street spotlight on European nations will be donned on American Treasury activities within eleven short years.

Building on certain measures within the January Obama Budget, the Tea-Party was instrumental in using the Debt Limit vote to negotiate further present-decade expenditure cuts.  This served to postpone the Deficit/GDP ratio exceeding 3% 'til 2022.  However, all the good seemingly good intentions only means the Debt by 2021 will $23 billion instead of $22 billion.  And that sets the date for my forecasted first sovereign debt downgrade ... to "B" from "A".  3% has long been the accepted threshold past which it is difficult for a jurisdiction to maintain sustainable budgets.  Indeed the USA is three times that today, but sunsetting of Recession fiscal policy measures and this Summer's scheduled cuts should see the ratio dip to 1.0% in 2018.  After that date and barring further intervention, structural deficits take command of the USA's demise taking the Deficit/GDP ratio to 24% over the next three decades.

The Federal Gov't is on a path to double today's $15-trillion National Debt by 2026 and triple it by 2032.  When we commenced this graphic, most buyers of US Treasuries were unaware of these precise numbers, but they have had a sense for a while that America's fiscal well being was suffering from substantial mismanagement and a potentially unsustainable future.

click chart for Debt Wall's full discussion...

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blast from the past with chart update

July 21 2010 ~ Due to exorbitant gasoline and diesel prices at the pump, USA Car & Light Truck sales collapsed in 1980,  1990 & 2007.  On its present trajectory, the same fuel cost/GDP ratio that initiated these episodes of dramatic demand destruction will be revisited upon $3.42/gallon gas ($92/barrel crude) ... probably in 2011Q1. 

Ignoring the Cash-for-Clunkers anomaly, annualized sales have climbed back to as high as 11.8 million from 9.1 in Feb/2009.  See our Gas Pump & Barrel Meter charts for lots more discussion on the real factor thrusting the USA economy into double-dip.

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   Real farmers don't live on subsidies... they live in Brazil !

                                                                                                                                                              Freddy Hutter, TrendLines Research,  Aug 4  2004

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