Consumer confidence recovers in November...
But interest rates rise in December.
National consumer confidence a significant indicator in projecting Canada's housing market that is measured by the Conference Board of Canada rebounded in November 2005. The increase in confidence was fueled by increased enthusiasm about making major purchases in all regions. Confidence had dropped to a nine-year low in the wake of Hurricane Katrina in September and remained on the ropes in October.
The percentage of households that said now is a good time to make a major purchase stood just below where it was during summer months. Willingness to buy big-ticket items had fallen sharply in each of the previous two months, when fears about the high cost of gasoline and home-heating fuels coincided with interest rate increases. Now that gasoline prices have eased somewhat, initial fears appear to have subsided.
Sentiment about household budgets improved in Ontario and the Atlantic Region, while more households in British Columbia, the Prairie Region, and Quebec expect finances to remain stable over the next six months.
Not surprisingly, sentiment about near-term job growth remained strongest in the West. Expectations for further job growth reached its highest level in over a decade in British Columbia and the Prairie Region, and became slightly more optimistic in the Atlantic region in November. Survey respondents increasingly expect jobs to remain stable over the next six months in Ontario and Quebec.
As widely expected, the Bank of Canada hiked its benchmark overnight lending rate by one-quarter of a percentage point to 3.25 per cent on December 6th. The trend-setting Bank rate, which is set one-quarter of a percentage point above the overnight lending rate, now stands at 3.50 per cent. This is the third increase in four months.
The Bank continues to judge that the risks to the outlook are balanced over the short term, but are tilted to the downside through 2007 and beyond, the Bank of Canada said in a statement. In line with the outlook, some further reduction in monetary stimulus will be required to maintain a balance between aggregate supply and demand over the next four to six quarters and keep inflation on target.
The Bank of Canada's next scheduled date for announcing the overnight rate target is January 24th 2006. (CREA 07/12/2005)
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