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The turnaround in the Canadian housing market is gratifying, but isn't it generally conceded that the recession won't be over until the U.S. housing market improves?

Canadian house sale numbers have certainly prompted some optimism in this country. With home sales numbers up almost 18 per cent in June from the same period last year and prices up 3.6 per cent, Bank of Montreal economists declared the housing rebound "the most astonishing economic development of 2009."

But the picture isn't as rosy in the United States, where the collapse of the housing market is considered one of the key causes of the worldwide recession.

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The most recent Case-Shiller index numbers - a broad and detailed look at house prices in 20 U.S. cities - showed prices down 18.1 per cent in April from a year earlier. That's an improvement from earlier in 2009, but still discouraging.

Some other measures have shown small price gains in May.

BMO Nesbitt Burns senior economist Sal Guatieri said in a recent report that the long slide in U.S. home sales is likely over, mainly because houses are now so affordable. But the demand isn't enough yet to absorb all the vacant and unsold homes.

The bottom line is that house prices are key to an economic recovery, because when prices go up, homeowners tend to spend more of their disposable income, as they feel richer. Higher prices also add strength to credit markets, and there are likely to be fewer market-destabilizing defaults if prices aren't falling.

The Goldman Sachs profit numbers seem to have angered some people, but isn't it good if corporate profits are on the rise?

The main concerns about the Goldman numbers, among some critics, are that the company profited greatly from the bailout of insurer AIG and that the bank will likely pay out huge bonuses as a result of its blooming profit.

Still, improving corporate profits will certainly be a sign of the end of the recession, and there aren't many people who think that is a bad thing.

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Second-quarter profit numbers from computer chip maker Intel Corp. were also better than expected, and that helped buoy those looking for "green shoots" and light a fire under markets yesterday.

Over all, however, profit numbers for the second quarter, which are just now starting to be released, are expected to be dismal. Analysts surveyed by Thomson Reuters said they expect S&P 500 companies to report profits that are down more than 35 per cent from the same period last year.

A lot of attention is focused on the federal budget deficit, but how much are the provinces going into the red collectively?

According to figures compiled by Royal Bank of Canada economists, the provinces are projecting to run deficits totalling $29-billion this fiscal year.

Saskatchewan and Manitoba are the only two provinces that are expected to avoid going into the red. Alberta is now in a deficit position after 15 years in the black.

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About the Author
Reporter, Report on Business

Richard Blackwell has reported on Canadian business for more than three decades. At the Financial Post and the Globe and Mail he has covered technology, transportation, investing, banking, securities and media, among many other subjects. Currently, his focus is on green technology and the economy. More

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