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Moderate gains starting in the medium term

Apr 30, 2013|Source: TD.com

Canadian housing market sees a modest pace

The economy is growing reasonably, consumer demand has decreased, and Canadians are paying back their debt. Consequently, both price and sales levels are predicted to even out in the coming months. The moderate pace in building new homes has been expected given the strong rate of construction that took place last year. The average home price in Canada is now approximately $378,500[1] on a non-seasonally adjusted basis (an increase of 2.5%[2] compared to last year).

...the Obama administration 2014 budget announced a proposal for $580B of additional revenues...

Among slowing domestic demand, the manufacturing sector still awaits an increase in exports. Manufacturing overall expects a full recovery in the second half of this year. An increase in manufacturing would be supported by U.S. private demand, mainly for autos and houses. The recent depreciation in the Canadian dollar will also help manufacturers reclaim some international competitiveness in 2013.

Annual U.S. Inflation Declines

On a year-over-year basis, core inflation declined slightly to 1.9% from 2.0%. Additional declines of gasoline prices will allow for another inflation decline in the short-term. Annual inflation is expected to rise gradually throughout the year, with core CPI rising to around 2.5% by year's end. With that said, inflationary pressures are still expected to be restrained while the U.S. government focuses on employment. Furthermore, the main points of the Obama administration 2014 budget announced a proposal for $580B of additional revenues, $610B in spending cuts, and $620B in entitlement reform over the next ten years.

Economic growth expected for second half of 2013

In recent months, the Canadian economy has slowed down which translates into a sub-par performance for the S&P/TSX. This should improve as the economic setting is expected to accelerate in the second half of 2013 and onto 2014. US economic fundamentals ultimately show signs of moderate annual-ized gains in US equities over the medium term. The US economy is set for a slowdown in the second quarter of this year, but growth is expected to gain momentum by the summer and into 2014. There will be a continued strain on bond yields as the U.S. Federal Reserve's bond buying will most likely continue through the rest of this year.

This article is for information purposes only. It is recommended that individuals consult with their Wealth Advisor before acting on any information contained in this article. We accept no liability whatsoever of any kind for any damages or losses incurred by you as a result of reliance upon or use of this publication in contravention of this notice.





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