stagnation

Here we are at the shortest, darkest day of the year. It's a sleepy time, and it seems as if the housing market, and the economy at-large, is sleeping. Is this the end of the bull cycle? The markets are giving up some of their gains, and we are seeing price reductions in the Vancouver RE market (although that is somewhat difficult to quantify at this point).

The Central Canadian economy is in a slump, while the western economy (particularly Alberta) remains fairly strong, though oil and gas exploration is going down, and oil production is down. There is talk of the BoC cutting interest rates (presumably to stimulate Central Canada), and that is something that I have been pondering, and will address in another post.

Economy stagnated in October; sluggish manufacturing offset energy growth

OTTAWA (CP) - Statistics Canada says economic growth was basically stagnant in October...
The agency says manufacturing and the service sector stood still, although energy and utilities showed good growth.

The energy sector grew by 0.9 per cent in October, led by production and distribution of natural gas, a rebound in electricity and a jump in refinery output.

Oil production and oil and gas exploration declined.

Manufacturing was down for the ninth time this year, ... as auto and steel makers cut production.

Of the 21 major manufacturing groups, 12 showed decreases. link

The thing is, auto manufacturing and steel production are the biggest drivers of the Ontario economy, and oil is really only an issue in Alberta and NE British Columbia. As other economies head into possible recession, we will likely see less demand for oil, which will stifle the oil driven economies of Western Canada. Like any well-built house of cards, once it starts falling, it won't stop until it is completely collapsed.

And in the US;

Housing slump weighs on U.S. economic activity, no change expected.

The U.S. economy felt the strain of the housing bust and lost momentum in the late summer, with more sluggish performances expected in the months ahead.

...most analysts do not expect the troubled housing market will undermine the economy to the point it slides into a recession.

Would that be the housing bust that was not going to happen? Does the prognostication that the economy will not slide into recession carry the same weight of the one that the housing market would not crash? That the slumping US economy would not have any effect on the Canadian economy - because we are so well insulated?

The housing slump will bite into overall growth, but not too badly, some economists hope. Housing will continue to "contract during 2007 but at nowhere near the hemorrhage of the third quarter,"

Interesting choice of words - hemorrhage - where there was so much talk of there being no chance of any reversal of fortune. And hope springs eternal - for some...

The Fed predicts core inflation - while still too high for its tastes - will fall in the months ahead as economic growth remains subdued.

Against that backdrop,the central bank has felt comfortable holding interest rates
steady, which it has done since August.The Fed's goal is to slow the economy
enough to thwart inflation, but not so much as to cripple economic
activity.link

But with manufacturing declining, the trade deficit with China, et al, it seems that the US economy has been just as much propped up by housing as the Vancouver economy. Retail sales are reportedly lack-lustre, which indicates less discretionary spending as people struggle to make their mortgage payments.

I think that we are really going to have to wait for spring/summer to see how this shakes itself out, but I strongly feel that the party is over, and all that we have to look forward to is the hang-over (for the exuberant), and some much more affordable RE for the patient.