Retail sales rise more than expected in May

Financial Post

OTTAWA -- Canadian retail sales rose much more than expected in May after a surprise drop the previous month, Statistics Canada said Wednesday.

Sales increased 1.2% during the month to $34-billion, with gains in seven of eight sectors, led by a 2.4% increase in automotive products, the federal agency said.

"Retail sales have been generally rising since the beginning of 2009," it said.

Most economists has expected sales to rise by just 0.5% cent in May after a 0.6% decline in April.

"This sturdy report marks a nice reversal from April's sour note. It also drums home the point that Canadian consumers are not nearly as stressed as their U.S. counterparts, a point made amply clear by recent home sales data," said Douglas Porter, deputy chief economist at BMO Capital Markets.

Statistics Canada said the jump in auto sector sales was driven by a 3.4% increase in purchases at new car dealers. Sales of used and recreational motor vehicle, as well as auto parts, were up 1.8%, following declines in the previous six months, the agency said.

Sales at gasoline stations rose 0.9% in May after dropping 4.7\% over the previous two months, it said. Building and outdoor home supply stores saw sales rise 1%, double April's rate.

Retail sales were higher in nine provinces in May, with the biggest jump coming in New Brunswick, up 2.5%. Prince Edward Island was the only province to post a decline, down 0.7%.

Charmaine Buskas, senior economics strategist at TD Securities, said Wednesday's report "does not necessarily suggest a turnaround in retail sales."

"The backdrop for the Canadian economy remains soft, and consumers are sure to adjust their spending behaviour accordingly in the coming months," she said.

Canada's economy shrank 5.4% in the first quarter of this year, its fastest pace of contraction since 1991. That followed a 3.7% decline in the fourth quarter of 2008.

On Tuesday, the Bank of Canada revised its outlook for the economy, saying it will contract 2.3% this year, which is less than the 3% drop it forecast in April. The economy is then expected to grow 3% in 2010, up from its previous 2.5% projection. In 2011, the bank forecast growth of 3.5%, which is down from its earlier call for an increase of 4.7%.

Last week, marketing and research group TNS Canadian Facts said Thursday its consumer confidence index edge up to 93.4 in July after slipping to 92 in June. However, its buy index, which monitors views on whether now is a good time to make major purchases, eased this month to 103.2 from 104.5.

"While spending here is no ball of fire, it is gradually climbing back from the lows at the start of the year, with consumers poised to moderately contribute to the recovery," Mr. Porter said. "As the bank noted yesterday, domestic spending is on the road to recovery -- the issue is exports, both because of the strong loonie and still-soft U.S. demand."

CanwestNews Service

Retail sales by sector (% change May from April):

Automotive +2.4

Furniture, home furnishings and electronics stores +0.5

Building and outdoor home supplies stores +1.0

Food and beverage stores +0.7

Pharmacies and personal care stores +1.5

Clothing and accessories stores 0.0

General merchandise stores +0.4

Miscellaneous retailers +0.8

Retail sales by province (% change May from April):

Newfoundland and Labrador +1.0

Prince Edward Island -0.7

Nova Scotia +0.5

New Brunswick +2.5

Quebec +1.2

Ontario +1.5

Manitoba +1.1

Saskatchewan +1.7

Alberta +0.5

British Columbia +0.8

Source: Statistics Canada

Canada's economy set to shine on world stage: IMF

Paul Vieira, Financial Post

OTTAWA -- Canada's economy is set to outperform nearly all industrialized countries this year and next, the International Monetary Fund said Wednesday, leading analysts to declare the country does not need additional stimuli as advocated by certain world leaders at this week's Group of Eight summit.

The latest IMF outlook suggested the world economy is "beginning to pull out" of the deepest recession since the Second World War. The global economy will shrink 1.4% this year, it said, but growth of 2.5% is now expected in 2010, an improvement of just over a half-percentage point from its previous forecast in April.

As for Canada, the IMF said the economy would contract the least among industrialized nations this year, with a drop of 2.3%, compared with the 3.8% shortfall expected among all advanced economies. In 2010, the Canadian economy is set to post growth of 1.6%, or second-best among advanced nations after Japan's expected 1.7% gain. In contrast, the U.S. economy is seen recording meagre growth of 0.8%, or half the Canadian output.

China and India, which crave Canadian-produced raw goods, are expected to be global growth leaders in 2010, with gains of 8.5% and 6.5%, respectively.

"Financial conditions have improved more than expected, owing mainly to public intervention, and recent data suggest that the rate of decline in economic activity is moderating," the IMF said, adding, however, that the recovery would likely be sluggish.

The release of the IMF report coincided with the beginning of a meeting of G8 leaders in central Italy, with much of the focus expected to be on measures to put the global economy back on track. U.S. President Barack Obama and Britain's Prime Minister, Gordon Brown, were among those advocating more fiscal stimuli be injected in the global economy, on the concern that the US$2-trillion spent worldwide may not be enough to ignite domestic demand.

On the other side is Stephen Harper, the Prime Minister, who is arguing his G8 peers should follow Canada's lead and make sure that already-announced spending initiatives are fully executed.

"Before there's talk of additional stimulus, I would urge all leaders to focus first on making sure the stimulus that's been announced actually gets delivered," he told reporters. "That's been our focus in Canada and I would encourage the same priority elsewhere."

The federal government has in place a two-year, $46-billion plan aimed at creating jobs and reviving tepid demand in an effort to mitigate the fallout from the global financial crisis. (The stimulus could reach nearly $80-billion when provincial and territorial contributions are taken into account.) Mr. Harper has said 80% of the federal stimulus funds have been committed.

The fiscal stimuli is on top of the Bank of Canada's move to chop 425 basis points from its key lending rate since December 2007, from 4.5% to its current 0.25% level.

Economists say the coming stimulus from Ottawa and the provinces should show up more forcefully in the economic data in the months ahead. Given the IMF's expectations, they believe there's no need to add to the stimulus pipeline.

"Staying the course is probably the prudent path right now," said Craig Wright, chief economist at Royal Bank of Canada. "From the time you announce fiscal stimulus to the time you actually see it bearing fruit, there is a great lag involved. It is coming and it will be coming alongside of the lagged impact from the low interest-rate environment."

Stéfane Marion, chief economist at National Bank Financial, said there are distinct differences between Canada and other G8 countries – most notably, Canada did not suffer the same type of collapse in real estate holdings, and its financial system is far better shape than in the United States and Europe.

"I am not sure there is much more than we can do," he said, adding people are "underestimating" how long it takes for the impact of interest-rate cuts and government spending to wind its way into the real economy.

Mr. Marion added that several key indicators, such as surveys of purchasing managers, point to increased levels of production in the economy for the coming months.

The IMF said countries should maintain "supportive" monetary fiscal policy through 2010 until the recovery is in full swing. However, it indicated plans "should be made" to reduce the budget deficits incurred by combating the recession.

Meanwhile, the IMF and Ottawa formally signed a deal Wednesday in which Canada would make US$10-billion available to the global body for emergency purposes. If needed, the IMF could draw up to US$770-million a week to ensure emerging economies and developing countries have the access to capital during the economic crisis. The deal was first announced at last April's meeting of the Group of 20 nations.

Pre-Approvals: A Dying Breed?

Pre-approvals are something many lenders could do without. The problem (from a lender’s perspective) is that people get pre-approved and then frequently don’t close.

One bank that recently did away with pre-approvals in the broker channel was rumoured to be losing $20 million a year on them.

Pre-approvals are pretty expensive, and the return for lenders is debateable. In most cases, less than one-third of pre-approvals actually close. Meanwhile, the lender is tying up human resources to process the applications, as well as capital to hedge the rates (if rates move adversely, the lender is on the hook, so lenders pay to lock-in the interest rates using derivatives).

In recent weeks, some very big-name lenders have halted pre-approvals--either altogether, or in the broker channel. Two of the most prominent have been FirstLine (a division of CIBC) and TD.

There are still some good lenders doing pre-approvals but their numbers are dwindling. Among the best is ING. ING has solid rates, great perks, and they do a full rate look-back (meaning: if rates fall and then rise again, you automatically get the lowest rate during the pre-approval period).

It’ll be interesting to see what the future holds for pre-approvals. If we had to guess, more lenders may eventually either:

A) Eliminate them; or,

B) Start charging rate premiums (some lenders, for example, already charge 0.10% more for pre-approvals).

We’d love to hear your thoughts and predictions!

The Six Human Emotional Needs

Have you wondered why it is seems so difficult to change our habitual behaviours? The reason is because our decisions and behaviours are driven by our emotions more than by our logic. Logically, we want to stop smoking or stop overeating, and yet, we still find ourselves repeating the pattern of behaviours. Why do we do this? It is because smoking and over eating meets our emotional needs.
At the same time, we all logically want to have a great relationship with our spouse or friends. And yet, we sometimes find ourselves getting into the same patterns of arguments and conflicts. Again, this is all caused by a mismatch of emotional needs between well-intentioned parties.
To change any kind of behaviour, you must first understand that as human beings, our decisions and actions are almost ALWAYS driven by the need to meet six human (emotional) needs. This is why we sometimes do things that don’t make any sense at all. We do it simply to meet these 6 human needs (by the way, this was developed by Anthony Robbins). So, what are these 6 human needs?
Human Need 1: Certainty
The first human need is the need for CERTAINTY. We all need to feel a sense of security that things will be okay. Certainty gives us peace of mind and assurance.
Although we all have the need for CERTAINTY, we use different behavioural strategies to meet this need. For example, when you feel stressed, worried, unsure and uncertain, how do you meet your need for certainty?
Some people use destructive strategies like over-eating, smoking or drinking alcohol. Don’t some people do these things to relieve the stress of uncertainty and get into certainty? Others get certainty by controlling other people (becoming a control freak) or by losing their temper. In one episode of Oprah, she interviewed a woman who handled her stress of being sexually abused by creating a multiple personality disorder.
At the same time, there are useful strategies to get certainty. Some people pray/use religion to get that sense of certainty. Some people, adopt empowering beliefs like, ‘ I know I will get through this’ or ‘everything happens for a reason’ or they simply have faith in themselves. Others get certainty through exercise, meditation or confiding in a friend.
So, think about this? How DO you meet your need for certainty? Is it constructive or destructive to you?

Human Need 2: Uncertainty
Now, here is the big paradox! As human beings, we have a second emotional need that is in direct conflict with our first need. We all have a need for UNCERTAINTY!
Think about it. If you had absolute 100% certainty in your life where you knew exactly what was going to happen, when it was going to happen, how it happens, before it happens every single day, how will you feel? You will feel BORED TO DEATH. This is why there are multi millionaires who have all the money and all the possessions in the world, but are depressed! Their life is so certain that they have no more challenges or surprises. No more uncertainty!
This is also why a woman/man in a perfect marriage where everything is routine and predictable will eventually get so bored, that they will unconsciously start picking a fight, having an affair or leave the marriage. There is no more excitement and stimulation that we all need emotionally.
So, how do people meet the emotional need of uncertainty (i.e. challenge/surprise/variety) in their lives? Again, some people do destructive things like having an affair, starting arguments, picking up one-night stands, taking drugs, smoking when bored and drinking to get high (yup, smoking and drinking offer both certainty AND uncertainty).
Some of us do neutral stuff like watching a movie, playing sports, changing jobs, making new friends or partying. This gives us the stimulation and variety we all need.
Some constructive strategies would include taking on new challenges (e.g. going mountain climbing, traveling, starting a business, writing a book). So think about it, how do you meet your need for uncertainty?

Human Need 3: Significance
The third human emotional need is the need to feel significant/special/unique/important/needed. We all hunger for this need and again pursue it in different ways.
Some people feel significant by attaining qualifications (e.g. MBAs, PhDs etc..), achieving success, buying lots of toys (e.g. bigger house, bigger car, country club, Rolex watch etc…) or pursuing status symbols.
Others get significance by putting other people down, dressing in a unique way or tattooing every conceivable part of their body. Again, others feel significance by having children (and making sure they excel and do them proud) or flaunting their wealth. Some people get significance by being proud of certain identities they adopt like being a Christian, a Muslim, an Army Officer, a Vegetarian etc…
Many people have asked me why I continue to work so hard to write so many books, spend hours writing posts on my BLOG and speak at so many seminars when I clearly don’t really need the money anymore. The answer is that I am driven to all these things because it makes me feel significant (useful, special, needed) and provides me the uncertainty (challenge & variety) that I crave. It also, gives me the 4th human need, connection and love and the 6th human need, contribution.
Again, think about how YOU meet the need to feel significance?

Human Need 4: Love and Connection
The 4th human need is in direct conflict with the 3rd human need of SIGNIFICANCE. Think about this. If you felt TOTALLY significant where you were so unique, so special and so different from all the people around you. Would you be happy? No! You would feel disconnected from the people around you.
One of our strongest needs as humans in the need to be accepted, to be loved and connected to the people around us. Once we become so special and unique, we will start to find ourselves losing that connection to our peers. I can tell you that I feel that way sometimes myself. At times I find it difficult to really be myself, connect with people I meet because people keep expecting me to be this perfect guru, with all the answers.
Have you ever wondered why a superstar like Britney Spears with all the fame, money and talent in the world could end up screwing up her life by engaging in destructive behaviours like drink driving, drug taking that would lead to 2 divorces, losing custody of her children and ending up in a mental institution? My guess is that although she felt total significance, she felt unloved and disconnected from everyone around her.
She probably could not be herself, always having to put up a front and feeling that all the people around her were just using her. Her need for connection and love probably drove her to mix around with the wrong company (i.e. Paris Hilton) and engaging in destructive behaviours that would get her the love/connection and sympathy she was lacking.
We all need to feel love and connection and again get it through different means. Some people get connection by getting into a relationship, getting married, making love, joining clubs, playing with their children, having pets, prayer (connection to God) or hanging out with friends.
Sometimes, people even ‘try’ to get love and connection by self-abuse and falling sick (studies show 90% of all illnesses are psychosomatic). This gives them the sudden outpour of sympathy and love that they yearn for. How do you get love and connection in your life?

If Your Relationship is Not Happy, Here’s Why…
I have found after working with many couples that whenever a marriage breaks down, it is always because partners are not meeting each others emotional needs.
A man (or woman) often wants to leave the marriage either because he/she no longer feels significant, loved, certainty or uncertainty by his/her partner. What is a very very common scenario is that after a couple has a child, the man no longer feels the same level of significance anymore. It seems that his wife spends all the time with the kids, that he is no longer important. So what happens? He rather spend his time in the office where he feels more significant or find a girlfriend who makes him feel special again!
So, here is a point of reflection. How well are you meeting your partner’s emotional needs?

If Your Staff Are Leaving Your Company, Here’s Why…
As a boss of my own company and a person who trains other companies in bringing put the best in their employees, I have found that your staff will only be happy and motivated to give their best when they feel significant (they are praised often and recognized), certainty (sense of security of their future in the company), uncertainty (their jobs gives them variety and challenge) as well as connection (they love the people they work with and have a sense of belonging).
Similarly, people leave a company not only for monetary reasons. They leave when they feel a lack of security (certainty), lack of challenge (uncertainty), lack of connection (they hate the people) or a lack of significance (unappreciated).
Reflection: if you are a boss/team leader, are you meeting your staff’s/colleagues emotional needs to bring out the best in them?

If You Have An Addiction that You Cannot Change, Here’s Why…
Finally, I have found that if you have a negative behaviour that you find hard to change, it is only because it is being used to meet two or more of your emotional needs. For example, if you find yourself constantly losing your temper, it is because it gives you a sense of significance and certainty.
If you find it difficult to stop smoking, it is probably it meets your needs for certainty (relaxes and de-stresses you), uncertainty (smoke when you feel bored), connection (especially if you smoke with friends to ‘fit in’) and significance (makes you look ‘cool’). Often, when a behaviour meets more than 2 needs, it becomes an ADDICTION.
In my patterns of excellence programs, I show people how to break limiting patterns of behaviours by first finding an alternative way to meet their needs. If you do not find a new useful alternative behaviour to replace it, you will find yourself going back to the old habit/addiction.

The Last Two Human Needs: Growth and Contribution
You are probably wondering what the last two human emotional needs are. Understand that the first four needs MUST be met by us constantly. It is what drives our daily behaviours.
However, to be truly fulfilled and happy, we need to meet the last two needs of ‘growth’ and ‘contribution’. We need to constantly grow by learning more and challenging ourselves to become better. The moment we stop growing, we start dying emotionally.
Finally, we all need to contribute beyond ourselves, This is why people like Bill Gates and Warren Buffett make all the money in the world only to give most of it away to charity. contribution is what gives us ultimate purpose and fulfillment in life.

Don't handcuff your mortgage

Gary Marr, Financial Post Published: Saturday, June 13, 2009

Would you like to pay an extra $300 per month on your mortgage? Not likely.

That hasn't stopped a number of Canadians, with the deal of a lifetime on a variable-rate mortgage, from switching over to a more expensive fixed-rate product and paying the extra freight.

A fear of rising rates is driving the rash decision. But if you've finally managed to pin your banker to the ground, why on Earth would you let him off the mat?

More than 28% of Canadians have a variable-rate product tied to prime, according to the Canadian Association of Accredited Mortgage Professionals (CAAMP). If you negotiated a deal before October of last year, chances are you are now borrowing money for as little as 1.35%. That's based on deals that at one point saw the banks giving 90 basis points off prime. Prime is now 2.25%.

The average sale price of a home last month in Canada was $306,366. Based on a 25% downpayment and a 25-year amortization, your monthly payment would be $962.61 at 1.35%. Convert that to a five-year fixed-rate term and you're probably going to have to consider a 4% mortgage rate and a monthly payment of $1,289.04.

Rates are rising fast. Most major banks upped their five-year rate by 40 basis points this week, although discounters were still offering 4% this past week.

"It's not a mass rush yet, but we are starting to see ... people locking in. But variable rates are still so good," says Joan Dal Bianco, vice-president of real estate-secured lending, TD Canada Trust. She stops short of questioning why a consumer would pull out of these "deals" that are no longer available on the market.

Try to get a variable-rate mortgage today and the best you can probably hope to get is 60 basis points above prime, or 2.85%.

The landscape changed dramatically in October during the credit crunch. As the Bank of Canada lowered rates, the major banks reluctantly lowered prime because of the massive amount of customers with variable-rate products negotiated under the old, higher terms.

"Bonds yields are going up rapidly and people are starting to realize the rates are going to go up," Ms. Dal Bianco says. Throw in the fact the Bank of Canada used the weasel word "conditional"(on inflation rates)when it promised not to raise rates until June, and you can understand why some people think today's record-low prime rate might not hold.

But if you're someplace between 60 to 90 basis points below prime, the rate is going to have to go up pretty fast to justify locking in today at 4%, even though that is just slightly above the all-time low hit last month for a five-year term.

"I don't understand why you would lock in," says Jim Murphy, chief executive of CAAMP. "Sure, if they start to rise, but [Bank of Canada governor Mark] Carney says they won't rise, so you've got another year at that prime-minus rate."

Don Lawby, chief executive of Century 21 Canada, says even when rates do start to increase, they are not going to jump significantly right away. You are not going to get 4% on a fixed rate again, but double-digit rates seem unlikely. "The only logic two locking in would be for someone very sensitive to any rate change and they just want to be secure," Mr. Lawby says.

But at what price? If you're using the "feeling secure" logic, why not go for the 10-year fixed-rate product? Rates on that product can be locked at 5.25%, ridiculously low by historical standards. Yet fewer than 10% of Canadians consider a 10-year product.

There are some compromises you can make. For starters, there is nothing to prevent consumers from having a blended mortgage at most Canadian banks. Some banks will let you take half your outstanding debt and lock it in. Diversity is preached for stock portfolios, but few people seem to adhere to the same philosophy when managing their debt.

Consumers might want to take their cue from business. Few companies would want all of their debt coming due at the same time -- it presents too much risk. The other option is knocking down principal: Make payments based on a 4% rate and have that extra $300 go straight to your principal every month.

The bottom line is if you've got a deal on your mortgage, why would you give it back?

Dusty wallet Double check your credit card statements. DW is in a bit of a skirmish with Visa over a taxi cab bill. Of course, DW is too cheap to use cabs, but does succumb to them to get to and from airports on vacation. Last trip, the family took an airport limousine and paid the $56 charge. Guess what? The same amount was billed a month later. So far, the taxi cab company has yet to produce a second receipt. In the interim, DW had to pay the second $56 charge.

gmarr@national-post. Com

Fed not likely to raise rates

Peter Hodson, Financial Post

Recently, there has been some loud talk about inflation and how the U. S. Federal Reserve is going to have to start raising interest rates soon in order to nip inflation in the bud.

When first confronted with this news, you may have said, "Hogwash! No way in this economic backdrop could the Fed raise rates, slow down growth and risk sending us into a steep 'double-dip' recession."

That certainly would be my view. It's unclear at this point even if we are coming out of recession, so it really would be premature to slow things down at this point before any growth traction has been achieved.

However, let's not just make assumptions. Let's delve into history to see what the Fed has done in prior cycles.

The last U. S. recession was from March, 2001, to November, 2001, a period of eight months. The Fed funds rate was 6.5% from June, 2000, to January, 2001. In January of that year, the Fed lowered the rate to 6%, then went on a 12-month lowering frenzy during the recession and in the aftermath of the 9/11 attacks. By year-end 2001 the Fed funds rate was 1.75%, with the Fed still maintaining an easing bias.

Despite the official ending of the recession in November, 2001, the Fed maintained very low interest rates for almost three more years. In fact, it kept lowering rates, down to 1% from June, 2003 to May, 2004. This strategy of keeping rates low despite no recession is now widely blamed as the reason for the creation of the housing bubble that popped in 2007. The Fed finally raised rates in June, 2004, a full 30 months after the recession had ended.

In the recession of July, 1990 to March, 1991 (eight months) the Fed had been easing or maintained a neutral bias since February, 1989. At the start of that recession, the Fed funds rate was 8.25%. By the end of the recession, it was down to 6%. Again, despite the recession being over, the Fed kept jamming rates lower, all the way down to 3% in December, 1993. The Fed didn't raise rates again until February, 1994. In that recession, again the Fed kept lowering rates for 30 months after the end of the recession.

Going back further into history, in the recession of July, 1981 to November, 1982 (16 months) the Fed acted a little more quickly. In May, 1981 the Fed rate was 20.0%. By December of that year, the Fed had moved rates down to 12%. In the spring of 1982, though, rates were back to 15%. But, showing signs of confusion, by the end of the summer 1982, rates were much lower, at 9.5%. The Fed was tightening rates again by September, 1982, and for a period of time investors had no idea what to expect, as the Fed moved rates up or down seemingly at random for a period of 18 months.

In the energy crisis of the early 1970s, the recession lasted from November, 1973, to March, 1975 (16 months). In November, at the start of the recession the Fed funds rate was 9.00% but by May, 1974, because of inflation fears the Fed had already raised the rate to 13%. Recession fears, however, ultimately ruled the day, and by year-end 1975 the Fed rate had been cut in half, to 4.75%. The tightening began anew, however, in April, 1976, 13 months after the official end of the recession.

What can we conclude? One, it seems sometimes that the Fed is just winging it, moving rates at random in response to short-term events. But it does seem the Fed is unwilling to raise rates too quickly after any recession.

Based on the severity of this economic downturn, you would have to conclude the Fed is unlikely to risk a double-dip recession, and will keep the Fed funds rate very low (now 0% to 0.25%) for a long time.

This may, of course, cause inflation, but for the time being, that is still better than a giant de-leveraging economic death-spiral.

peter@sprott.com--- - Peter Hodson is a senior portfolio manager at Sprott Asset Management.

Have a great day!

The next decade: Return to growth, high loonie and western economic power

Julian Beltrame, The Canadian Press

OTTAWA - Canadians can look forward to a sustained period of strong growth in the next decade, but one that will be different from the rise that came a cropper in the last, says a new report.

Canadian Imperial Bank of Commerce (TSX: CM.TO) economists say the next decade will bring major fundamental changes to the world economy, and a bit of deja vu for Canada, with the return of Western power, a high-flying loonie and surging stock values.

The major change is that Canada's economy will be less dependent on consumers or the United States, says the report written by economists Avery Shenfeld and Benjamin Tal.

Overall, it's a rosy picture of a decade that begins slowly next year but picks up steam based on global growth and surging consumer demand in newly-rich emerging economies like China and India, as well oil-rich countries from the OPEC nations and Russia.

"I am optimistic, particularly relative to those who say the global economy is in such a deep hole that even when we look over the medium turn we are going to be paying for it," said Shenfeld, the bank's chief economist.

"This is making the point that just because the last decade's growth included a lot of excessive leverage that came to ruin, it doesn't mean we are doomed for a slow decade of global growth ahead."

Excessive leveraging, or irrational consumer spending on borrowed money, will result in a sea-change in attitudes in the U.S., but also Canada and many other industrialized nations. But emerging economies, with their newfound wealth, will likely more than take up the slack.

Canada's economy will get a boost from exports, particularly commodities, whose prices will get back some of their lustre as demand in emerging markets grows.

"We're not going to break our ties to the US economy," said Shenfeld, "but what we sell to the world will be much more driven by demand coming from East Asia and even (the raw materials) we sell to the U.S., the price will be more determined by East Asia."

The diminished importance of the U.S. will impact the currency, the report states, forecasting a 20 per cent tumble during the decade. In part, the devaluation will be based on high inflation caused by the Federal Reserve's current quantitative easing policies that are massively increasing the supply of dollars.

That, in turn, will push the loonie above the U.S. dollar again, damaging central Canada's manufacturing sector and forestry exports, but boosting the West's resource sector.

Rising resource prices will re-ignite capital-intensive development of the oilsands, natural gas projects and metal mines, the report states.

"It'll be a bit of a return to some of the boon days we saw a couple of years ago," Shenfeld said.

One sector that won't bounce back as strongly is housing. The report sees housing starts averaging a tame 170,000 in the next decade, after being above 200,000 for most of the current decade.

Mortgage rates unlikely to fall further: Brookfield

Sean B. Pasternak, Bloomberg Financial Post Mortgage rates in Canada, which have plunged by almost 50% in the last year, aren't likely to fall further, said Phil Soper, chief executive of Brookfield Real Estate Services Fund.

"Certainly with the Bank of Canada's target rate set at virtually zero, there's very little room," Mr. Soper said Tuesday at a conference in Toronto on Canada's real estate market. The rate is "the lowest it's been in anyone in this room's lifetime."

Rates for home loans have been dropping during the biggest financial crisis since the Great Depression, with some lenders offering mortgages approaching 4%, Mr. Soper said. That compares with an average posted five-year rate of 7.5% a year ago, according to the Bank of Canada. He added that home prices in Canada aren't likely to rise "sharply" over the next two years.

Bank of Montreal, which sponsored the conference, lowered its rate for a five-year fixed-rate mortgage this month to 4.15%.

"We are approaching almost zero interest rates," at the Bank of Canada, said John Turner, the Toronto-based bank's director of mortgages. "The question becomes, how much upward pressure will there be as we come out of this recession?"

The Bank of Canada last month cut its benchmark lending rate to 0.5%, its lowest ever, and said it's preparing to use policies beyond interest rate moves to revive an economy hit by a recession and tight credit markets. The next rate announcement is April 21.

Canadian existing home sales rose in February for the first time since September as buyers took advantage of lower mortgage rates and prices, according to the Canadian Real Estate Association's Multiple Listing Service. Sales of existing homes rose 8.6% from January to 28,669 units.

Bank of Montreal senior economist Sal Guatieri predicted that Canada's housing market will decline further this year, without the "crash" experienced in the U.S.