What the analysts are saying


Calgary, Edmonton will be Canada's hottest housing markets in 2012:

Vancouver and Toronto have ranked as the hottest major housing markets in Canada for several years running.

But with average prices in Vancouver at a sky-high $728,000 (Cdn), and average Toronto house prices north of $480,000, that's set to change.

Alberta's two major cities will lead the pack in 2012, predicts Doug Porter, deputy chief economist at BMO Capital Markets.

"Calgary (average price: $399,000) and Edmonton ($320,000) have seen stable prices in recent years even as Alberta easily recorded the strongest employment growth in the country in 2011," he says.

If oil prices hold around $90 US a barrel or more in the coming year, "look for those two cities to lead the way for hottest housing markets in 2012," says Porter.

Canada's national average house price is currently about $360,000 (Cdn), according to the Canadian Real Estate Association.

It's crunch time for the European Union in 2012:

After a year of scary headlines and innumerable crisis summits, the financial mess in Europe will only worsen in 2012, TD Economics predicts.

"Greece will very likely default in the first half of (2012); it seems probable that this will trigger credit default swaps, weakening the global financial system," the bank's economists predict.

"Faced with the risk of a financial crisis that could very well rival the 2008-09 crisis, political leaders are expected to be pushed into taking bold actions."

Translation: the European Central Bank will be forced to purchase sovereign bonds "on a major scale" - something the ECB has resisted to date - while continuing to prop up Europe's shaky banks.

"These pressures will help ease financial pressures in late 2012," TD forecasts, and help to accelerate the EU's moves toward an eventual fiscal union.

Crude oil prices will top $100 US per barrel in 2012:

"We have increased our price expectations for WTI (West Texas Intermediate) over the 2012 to 2014 time frame by $5 to $15 per barrel," says Martin King, commodity analyst at FirstEnergy Capital.

King now expects WTI prices to average $105 a barrel in 2012 and $120 by 2014, as WTI's former $20-plus discount to Brent crude continues to narrow. He sees Brent prices averaging between $110 and $115 a barrel through 2013.

"Despite immense volatility in equity markets and (negative) investor sentiment, global crude oil market developments have been remarkably resilient," says King.

"Demand growth is expected to remain intact in the developing economies, leading to a moderate pace of global oil demand expansion in the next few years."

While non-OPEC oil supplies are expected to show a one-time rebound in 2012, growth beyond that remains in doubt, he says. Meanwhile, much of OPEC's production growth is expected to come from Iraq, which remains politically unstable.

"Global inventories have appreciably tightened in the wake of various supply problems in 2011, and (will) ease only slowly, providing price support."

Copper will rebound:

Scotiabank's commodities specialist Patricia Mohr is much much more bullish on copper, a key industrial metal whose price is closely tied to Asian demand.

Copper traded at about $3.43 US per pound Friday on the COMEX (Commodity Exchange) in New York, down from a February record high of nearly $4.66.

"Copper is in a supply deficit in late 2011 with global consumption exceeding refined metal production, and will remain in deficit in 2012," she says.

"World mine output has increased by only 1.1 per cent per annum from 2007 to 2011 in the face of rapid demand growth in China and emerging Asia, lifting prices onto a higher plane," she adds.

"China's fabrication demand should strengthen again next spring, with prices surging back to $4 (per pound)," says Mohr. "Copper prices could remain just under the $4 mark through much of 2013."

Alberta's economy will roar again in 2012, as Canada's economy slows:

Alberta will again rank among Canada's fastest-growing provinces in 2012, RBC Economics predicts, with growth of 3.9 per cent.

Only Saskatchewan will top Alberta's performance, with growth of about 4.2 per cent.

The Maritimes, Ontario, Quebec and B.C. are all expected to lag Canada's expected national growth rate of just 2.5 per cent.

Alberta's crude output is poised to set new records in the year ahead, as oilsands production continues to ramp up, says Craig Wright, RBC's chief economist.

"There is an inventory of $120 billion (Cdn) worth of oilsands projects at various stages of development.

Needless to say, oilsands megaprojects will continue to generate tremendous economic activity and will be a boon to Alberta's economy for years to come."

Employment growth is also expected to remain robust at 3.1 per cent in 2012, after 98,000 net new jobs were created in the first 11 months of 2011.

"The boom entirely emanates from the private sector - the source of an astounding 116,000 new jobs this year," says Wright.

The BRIC economies will slow in 2012:

It's been a decade since the term BRIC was coined to describe the world's four most important emerging markets: Brazil, Russia, India and China. But their cachet with investors is clearly waning as growth rates slow.

"We expect weaker export demand owing to the global economy's softer performance to help hold BRIC growth to a sub-seven per cent pace in 2012, after an average increase of well over eight per cent in the preceding two years," says CIBC World Markets senior economist Peter Buchanan.

With GDP (gross domestic product) in the BRIC countries growing at the slowest quarterly pace in almost two years, other observers are also casting doubt on future growth prospects.

Average economic growth rates in the BRICs will drop to a stillrespectable 6.1 per cent next year from a peak of 9.7 per cent in 2007, according to recent estimates by the International Monetary Fund (IMF).

"Slowing exports to Europe and government restrictions on realestate investment are curbing the expansion in China, the biggest emerging economy," Bloomberg reports.

"India's growth has been hampered by the fastest interest rate increases since 1935 and the rupee's decline to a record low and ... Brazil and Russia, whose growth during the past decade was spurred by surging commodity demand, have been hurt by falling metals prices and the slowdown in China."


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