Download 2009DCM050 - City of Edmonton

Monthly Updates on
Current Financial
Issues and Economic
Trends
Recommendation:
That the July 9, 2009, Deputy City
Manager’s Office report 2009DCM050 be
received for information.



More houses were sold in June
than in May 2009 for marginally
higher prices.
The timing of the recovery of the real
economy remains uncertain.
Economic Indicators
Population

Canada's population increased
by 0.26% (88,006) in the first quarter
of 2009, the fastest first-quarter
growth rate since 2001. The
increased pace in population growth
was due mainly to a rise in the
number of non-permanent residents
in most of the provinces and
territories.

Alberta again recorded the fastest
growth among the provinces.
Alberta's population increased by
0.59% (21,357), more than double
the national average during the first
quarter. The province's growth
rested notably on the highest rate of
net interprovincial migration in the
country.
Report Summary
This report provides an analysis of
key economic and financial
indicators for the month of June.
These indicators are being monitored
on a monthly basis to determine any
significant impacts on Edmonton’s
2009 budget.
Previous Council/Committee Action
At the January 28, 2009, Executive
Committee meeting, the following
motion was passed:
That monthly updates be provided to
Executive Committee with regard to
the current financial issues with
respect to the 2009 Budget.
There remain some signals of an
upturn in economic activities.
Report
Oil and Gas
Attachment 2 provides the most up to
date economic and financial indicators
and their implications for the City of
Edmonton.

The natural gas price dropped for the
fourth consecutive month to
$3.41/GJ.
General Comments

The monthly average oil price
increased by $2.53/Barrel in May,
but was still 58% lower than the price
of May, 2008.

Most of the indicators of the real
economy remain weak:

The Canadian GDP continues to
shrink

Alberta’s consumer prices fell
relative to a year ago.
ROUTING – Executive Committee | DELEGATION – J. Tustian/C. Warnock
WRITTEN BY – D. Faber | July 9, 2009– Deputy City Manager’s Office 2009DCM050
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E
9
Monthly Updates on Current Financial Issues and Economic Trends
Real Estate Market

Residential sales in June reached
2,552 units which surpassed the
2007 record of 2,203 units sold and
was the third best month for unit
sales in MLS® System history.

Listing activity slowed slightly from
last month (down 0.03%) with 3,179
residential listings. The strong sales
drove the sales to listing ratio to 80%
from 68% last month.

As a result of new construction being
added to the Edmonton office market
and more sublease space becoming
available, the overall vacancy rate
increased from 4.10% in the last
quarter of 2008 to 7.14% in the first
quarter of 2009.
Prices

At the national level, consumer
prices rose 0.1% in the 12 months to
May 2009, down from the 0.4%
increase in April. The slowdown in
the 12-month Consumer Price Index
(CPI) was primarily the result of
an 18.3% year-over-year price drop
for energy products.

Consumer prices in Alberta and
Edmonton declined 0.7% and 0.2%
respectively on year-over-year basis.
Financial Indicators

Interest rates appear to be stabilizing
as represented by the fixed income
financial indicators. Given these low
levels, investment earnings from the
City’s working capital are also
expected to remain low in the near
term.
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
The Canadian dollar weakened
somewhat in June, following the
extremely strong month posted in
May. The Canadian dollar fell six
cents versus the U.S. dollar during
the month to close at 86.0 cents.

With respect to the equity markets,
the Canadian TSX and U.S. S&P
500 indices remained basically flat
for the month of June. Both markets
remain in positive territory for the
year at +15.4% for Canada and
+1.8% for the United States.

Overall, interest rates remain quite
low while equity markets continue
their positive performance year to
date. Based on year to date market
performance our earnings are
tracking to the revised budget
Budget/Financial Implications
The impacts of current economic
conditions have been addressed by the
2009 budget adjustments approved by
Council on April 15, 2009. Adjustments
included reducing the budgets for
investment earnings and planning
revenues as well as fuel and other
expenditures impacted by current
economic conditions. No further budget
adjustments are required at this time.
Attachments
1. Glossary of Terms
2. Monthly Economic and Financial
Indicators – Specific Summary July
2009
Others Reviewing this Report
C. Warnock, Chief Financial Officer and
Treasurer
Attachment 1
Glossary of Terms
Glossary of Terms
ACFA Borrowing Rates: The Alberta Capital Finance Authority ("ACFA") is a provincial
authority that provides local entities with financing for capital projects. ACFA is able to
borrow in capital markets at interest rates which would not be available to local
authorities acting independently. ACFA makes loans to Alberta municipalities, school
boards, and other local entities at interest rates based on the cost of its borrowings.
Indicative borrowing rates are posted on the 1st and 15th of the month. The rates
provided represent the level at which the City of Edmonton could borrow via AFCA.
Apartment Vacancy Rate: In October of each year, the Canada Housing and Mortgage
Corporation (CMHC) conducts a rental market survey across Canada. This information
is released in November of each year. An apartment is considered vacant if it is
physically unoccupied and available for immediate rental. The apartment vacancy rate
is a percentage of all vacant apartments divided by all apartments in a region multiplied
by 100.
Average Weekly Earnings: Based on Statistics Canada’s Survey of Employment,
Payrolls and Hours (SEPH), and Revenue Canada’s Business Payroll Survey, the
average weekly earnings is calculated monthly nationally, provincially and by economic
region. Information on any given month is released two months later.
Bank of Canada Overnight Lending Rate: the rate at which financial institutions lend and
borrow one-day funds among themselves. In conducting monetary policy, the Bank of
Canada sets its target for this rate at regular intervals throughout the year. Changes in
the target influence other interest rates and the exchange rate of the Canadian dollar.
Building Permits: Information on building permits issued by Canadian municipalities is
used as an early indication of building activity. Permits are categorized as follows:
1. Residential: Includes all buildings intended for private occupancy whether on a
permanent basis or not. Dwellings include single-family, mobile, cottage, semidetached, row house and apartment building.
2. Industrial: Includes all buildings used for manufacturing and processing;
transportation, communication and other utilities, and agriculture, forestry and
mining.
3. Commercial: Includes all buildings used to house activities related to the tertiary
sector, such as stores, warehouses, garages, office buildings, theatres, hotels,
funeral parlours and beauty salons.
4. Institutional: Includes the community, public and government for buildings and
structures like schools, universities, hospitals, clinics, churches, homes for the
aged.
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Report: 2009DCM050 Attachment 1
Attachment 1
Permit information is collected by the City of Edmonton Planning and Development
Department and is available two weeks after the end of a given month.
Consumer Price Index (CPI): This measure is often used as a measure of inflation. It is
the rate of price change for goods and services bought by consumers and is the most
widely used indicator of price changes in Canada. The CPI for a given month is usually
published by Statistics Canada in the third week of the following month, and it is not
revised once it has been published.
DEX 60 Day Corporate Paper Index: is maintained by PC-Bond (a business unit of TSX
Inc.) and measures the total return attributable to 60-day corporate paper which is
issued and secured by Canadian corporations. As some of the City’s working capital is
invested in money market securities (including treasury bills, bankers acceptances,
corporate paper, etc.) this index, along with others, serves as an indicator of investment
earnings.
DEX Short Term Bond Index: is maintained by PC-Bond (a business unit of TSX Inc.)
and measures the total return attributable to investment grade Canadian bonds issued
by governments and corporations with a term to maturity of one to five years. As some
of the City’s working capital is invested in short term bonds, this index, along with
others, serves as an indicator of investment earnings.
DEX Universe Bond Index: is maintained by PC-Bond (a business unit of TSX Inc.) and
measures the total return attributable to investment grade Canadian bonds issued by
governments and corporations with a term to maturity of more than one year. As some
of the City’s endowment assets, long-term deposits, and reserves are invested in short-,
medium-, and long-term bonds, this index, along with others, serves as an indicator of
investment earnings.
Diesel Fuel Price: Prices for diesel fuel are released by Statistics Canada by province or
urban area in their publication on the consumer price index on the third week after any
given month.
Exchange Rate: The factor by which the amount of one currency is multiplied to yield
an equivalent amount of another currency. For example, an exchange rate of $0.90
USD/CAD means that one Canadian dollar buys $0.90 U.S. dollars.
Gasoline Prices: Prices for gasoline are released by Statistics Canada by province or
urban area in their publication on the consumer price index on the third week after any
given month.
Gross Domestic Product (GDP): This is a measure of economic activity. It measures
the change in value of all goods and services produced in an economic area, province
or country. Statistics Canada releases national data on
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Report: 2009DCM050 Attachment 1