The record rise of the loonie, which went up from 63 US cents to 90 US cents in the last four years, has stopped in recent months. The exchange rate has been little changed for five straight months.

The levelling off of the Canadian dollar was accompanied by stable interest rates and, more recently, by a drop in commodity prices. Energy and metals drove the decline in commodities, which led the stock market lower in September after a rally over the summer.

So far this year, demand and output has been little affected by these changes. Domestic spending continued to be the main source of growth, notably business investment and auto sales, as housing slowed.

Economic conditions in most of the regions followed the national trend over the summer. Retail sales in July rebounded across the country, while housing starts in August fell everywhere except in Quebec.

Newfoundland and Labrador's unemployment rate in September nearly matched its 18-year low of 14% set last summer, the result of modest job gains and a shrinking labour force. In the past year, Newfoundland and Labrador was the first province in the history of the country to record more deaths than births.

Newfoundland and Labrador's population also declined because of interprovincial out-migration. In the last four quarters, 14,912 people have left the province. Nearly half of these migrants went to Alberta, which surpassed Ontario as the preferred destination of interprovincial migrants early in 2005. In the last year, 7,000 people left Newfoundland and Labrador for Alberta, equal to 1.4% of Newfoundland and Labrador's population.

Alberta remained a magnet for migrants from every province. Nearly 27,000 people moved there in the second quarter, matching its average for the past year, up from an average of 20,000 the year before and nearly double the number in 2003.

The boom in Alberta lifted nominal gross domestic product (GDP) on the Prairies to $300 billion last year, surpassing Quebec for the first time since 1981. As recently as 1999, GDP in Quebec was $30 billion larger than the Prairies. Alberta accounts for 72% of GDP on the Prairies.

Wholesale sales rose 0.5% to $42.6 billion in August, following a 2.2% rise in July. The increase came despite a large drop (-7.4%) in automotive product sales, which returned to more normal levels after posting very strong growth in July. This sector accounts for approximately one-fifth of all wholesale sales, so any significant drop will normally be reflected in the overall wholesale number.

Outside of the automotive sector, sales advanced at a robust 2.6% clip in August, with all six of the remaining wholesale sectors registering gains. Wholesalers of "other products" (mainly agricultural products, chemicals and recycled metals), personal and household goods, and food, beverages and tobacco products were among the most notable gainers.

The sales trend for wholesale has generally been rising since September 2003, in line with the growth in the Canadian economy. As key intermediaries in the economy, wholesalers have been able to benefit from both the surge in business investment as well as strong consumer demand during this period.

Sales in constant dollars, which exclude the effects of price fluctuations, increased by 2.0% in August.

Automotive sales fall after a strong July

The decline in the automotive sector was the result of a large drop in the sale of motor vehicles (-9.3%). This drop in sales came after a large increase in July (+10.9%) and was therefore not entirely unexpected. Many of the motor vehicle sales made to dealers in July ended up being sold to consumers in August. According to the latest New Motor Vehicle Sales Survey, motor vehicle sales in August were the second highest on record, as consumers took advantage of dealer incentives.

Nevertheless, wholesalers of motor vehicles could be facing a difficult period over the coming months, as weakening US housing sales erode consumer confidence south of the border. The US is a key market for Canadian auto wholesalers.

Higher sales of agricultural inputs boost "other products" sector

A substantial increase in the sale of agricultural inputs propelled the "other products" sector to its strongest monthly increase since April 2005. Sales advanced 5.5% to $5.1 billion in August after rising 2.2% in July.

The rise in agricultural input sales was mostly related to the fertilizer industry, where the implementation of a new pricing agreement encouraged buyers to return to the market after several months on the sidelines. Delays in reaching a new agreement have had a significant impact on sales in recent months, as well as forcing some Canadian fertilizer manufacturers to shut down their plants for longer periods than usual during the second quarter of the year. Much of the fertilizer produced in Canada is exported to China and Brazil, and with the new agreement in place, exports of fertilizer surged 39.7% in August.

Sales of personal and household goods back on track

The personal and household goods sector regained some momentum in August, as sales in this sector rose 3.5% after falling 2.7% in July. While higher sales of household goods (+7.1%) accounted for most of the increase, wholesalers of pharmaceuticals also had a good month (+2.5%).

Sales of household goods have generally been rising since September 2003, as an increasingly favorable job market and strong housing sales continue to spur demand for consumer related items. Despite a recent slowdown, housing starts for the first eight months of the year remain ahead of last year's level and housing prices, particularly in Western Canada, remain robust.

The only decline in the personal and household goods sector came in the apparel trade group, where sales fell 4.8% after rising 1.6% in July. While August is normally a very strong month for clothing and footwear wholesalers (this is the time when retailers are gearing up for the traditional "back to school" shopping period), some wholesalers have indicated that retailers may have been ordering their products earlier than usual this year as consumers spread their purchases over a longer period.

Rise in alcohol and tobacco sales helps to boost food sector

A large increase in alcohol and tobacco sales helped to lift overall sales in the food, beverages and tobacco sector by 2.5% in August.

Wholesalers of alcohol and tobacco products boosted their sales by 9.4% in August. Much of this increase was attributable to higher demand by liquor retailers in Alberta, where sales are being driven by a combination of healthy wage growth and an influx of workers from other parts of the country. With liquor sales in the province rising faster than anticipated, some liquor retailers have reported shipment delays as wholesalers struggle to keep up with demand.

Sales of food products rose 1.9% in August, after a 0.8% rise in July. After slowing in the second half of 2004, sales in this sector have generally been rising.

Saskatchewan and British Columbia lead the way

August was another good month for wholesalers in Saskatchewan, as sales increased by 11.7% following a 6.2% gain in July. Higher sales of agricultural inputs were behind most of the August increase, which was the largest since February 2005. Products related to the agricultural industry account for roughly half of all wholesale sales in Saskatchewan.

In British Columbia, wholesale sales increased by 5.9% in August. Higher sales of "other products," as well as machinery and equipment were behind most of the rise. After posting strong gains throughout most of 2005, sales in this province have experienced a bit of a lull since the start of the year, owing in large part to the ongoing slump in the lumber industry.

Only two provinces recorded drops in August: Ontario (-1.7%), which was hit by the decline in motor vehicle sales, and Nova Scotia (-0.3%).

Inventories up for third month running

Wholesalers added to their inventories for the third consecutive month in August, as levels increased by 1.2% to $52.9 billion. The rise was widespread, with 13 out of 15 trade groups reporting higher inventories.

One of the largest increases came in the metals trade group (+4.2%), where inventory levels rose for the seventh consecutive month. Inventory levels in this trade group have risen around 30% since the start of the year and are indicative of a broader phenomenon taking place throughout North America. According to the Chicago-based Metal Service Center Institute, US metal service centre inventories hit their highest level in August since January 2005. Higher than anticipated import levels, as well as generalized weakness in the manufacturing sector, explain in part the high inventory levels in this industry.

With sales growth failing to keep pace with the rise in inventories, the overall wholesale inventory-to-sales ratio edged up from 1.23 in July to 1.24 in August. The ratio is a measure of the amount of time (in months) that it would take to exhaust inventories at the current rate of sales. The ratio has remained relatively stable since October 2003.

Consumer demand continued to strengthen, led by sales of durable goods. Auto purchases increased sharply over the summer, spurred by lower prices. Spending and other durable goods also rose steadily, despite a softening of housing demand. Growth in services employment was led by the personal sector, replacing business services which had driven growth earlier this year.

For the first time in 2006, none of the manufacturing components fell. New orders turned up, led by demand for capital goods. The average workweek eked out an increase, and manufacturers led the recovery of jobs in September. The ratio of shipments to stocks was unchanged, as steeper cuts to inventories accompanied a slower rate of decline for shipments.

The stock market turned down in September after a brief rally over the summer. Energy and metals, the prime beneficiaries of the run-up early this year, led the retreat. Along with housing, the US leading indicator was the only other component to decline.

Leading indicators
	April 2006	May 2006	June 2006	July 2006	August 2006	September 2006	Last month of data available
							% change
Composite leading indicator (1992=100)	214.2	215.4	216.1	217.0	217.7	218.5	0.4
Housing index (1992=100)1	149.2	149.0	147.3	145.9	142.3	140.9	-1.0
Business and personal services employment ('000)	2,691	2,703	2,707	2,719	2,732	2,745	0.5
S&P/TSX stock price index (1975=1,000)	11,844	11,939	11,872	11,901	11,893	11,805	-0.7
Money supply, M1 ($ millions, 1992)2	146,178	147,374	149,075	150,264	150,857	151,766	0.6
U.S. Conference Board leading indicator (1992=100)3	127.4	127.5	127.4	127.2	127.1	126.9	-0.2
Manufacturing
Average workweek (hours)	37.9	38.0	38.0	38.1	38.3	38.4	0.3
New orders, durables ($ millions, 1992)4	26,920	27,005	26,678	26,435	26,374	26,445	0.3
Shipments/inventories of finished goods4	1.87	1.86	1.87	1.86	1.86	1.86	0.005
Retail trade
Furniture and appliance sales ($ millions, 1992)4	2,428	2,460	2,495	2,522	2,535	2,551	0.6
Other durable goods sales ($ millions, 1992)4	8,181	8,280	8,361	8,443	8,469	8,570	1.2
Unsmoothed composite leading indicator	215.0	218.0	217.0	219.1	219.3	219.2	0.0
1. Composite index of housing starts (units) and house sales (multiple listing service). 2. Deflated by the Consumer Price Index for all items. 3. The figures in this row reflect data published in the month indicated, but the figures themselves refer to data for the month immediately preceding. 4. The figures in this row reflect data published in the month indicated, but the figures themselves refer to data for the second preceding month. 5. Difference from previous month.

VANCOUVER - As the United Nations prepares to mark the International day for the Eradication of Poverty on October 17th, research released October 16, 2006 by The Fraser Institute shows that world poverty rates in 2000 were one-third to one-half the rates experienced in 1970.

"The world has already achieved more than 60 per cent of the United Nations' Millennium Development Goal of cutting the world poverty rate to half of 1990 levels by the year 2015," said the study's author Dr. Xavier Sala-i-Martin, a world-renowned economist, professor at Columbia University and author of The Fraser Institute report Falling Poverty and Income Inequality: A Global Phenomenon.

Since there is no agreement on the level of income below which people are poor, Sala-i-Martin used four different measures of poverty for his analysis: <<

(1) the World Bank (WB) Poverty Line of $1 per day;
(2) an adjusted World Bank Poverty Line of $1.5 per day;
(3) $2 per day; and
(4) $3 per day.
>>

UN poverty reduction targets are based on the proportion of people with incomes below one dollar per day.

Sala-i-Martin's study shows that poverty rates unambiguously fell for all four poverty lines, indicating that 212 to 428 million people escaped poverty over the past three decades.

"This is especially impressive given that world population increased almost 50 per cent over this time period," said Sala-i-Martin.

Sala-i-Martin attributes these changes to the dramatic rise in economic growth of Asia, especially in China and India. In East Asia, for example, poverty rates fell to 2.4 per cent in 2000 from 32.7 per cent in 1970. Poverty fell to 2.5 per cent from 30.3 per cent in South Asia.

But Sala-i-Martin cautions that the picture is not uniformly bright. He points to Africa where the proportion of the population living in poverty increased to 48.8 per cent in 2000 from 35.1 per cent in 1970.

As a result, world poverty is now concentrated in Africa. While more than 80 per cent of the world's poor lived in East and South Asia in 1970, three decades later Africa is home to 70 per cent of the world's poor. Thus, while close to half a billion (487 million) people were lifted out of poverty in East and South Asia, an additional 200 million Africans have fallen into poverty over the past three decades.

"While poverty was once mostly an Asian problem, the dismal lack of economic growth in Africa means poverty is now largely an African tragedy," Sala-i-Martin said.

TORONTO - Canada's economy is expected to grow by 2.8 per cent in 2006 and 2.7 per cent in 2007, according to the latest economic forecast from RBC.

Thanks to a strong domestic economy, Canada performed well in 2004 and 2005, despite an appreciating Canadian dollar and rising energy prices. Growth in 2006 is expected to be only slightly slower, as consumer and business spending mitigates the drag coming from the trade sector.

"Despite slower growth for the second quarter of 2006, Canada's domestic economy actually grew at a robust four per cent annual rate," said Craig Wright, vice-president and chief economist, RBC. "The trade sector subtracted more than four percentage points from the quarterly growth rate."

According to the report, Canada's trade sector has pulled down GDP growth over the past two years, with import growth outpacing exports. RBC expects this to persist in 2006, as waning U.S. demand for products like motor vehicles and lumber, weigh on exports. The weaker, but still strong, Canadian dollar will continue to fuel import demand for machinery and equipment as Canadian businesses bolster investment.

The U.S. economy is expected to grow at about 2.5 per cent in the second half of 2006 and in 2007. The report cites slower consumer spending and a cooling in the housing market as the main factors moderating U.S. economic growth.

Although RBC forecasts that short-term Canadian interest rates have peaked, market rates will edge a bit higher in late 2006. The Canadian dollar is expected to weaken to 85.5 U.S. cents at year-end 2006 and 80.6 U.S. cents at year-end 2007.

"With a Canadian economic outlook of near-potential growth and only a modest increase in core inflation, we expect the Bank of Canada to hold the policy rate at 4.25 per cent to ensure that the domestic economy is strong enough to withstand a period of slower U.S. demand for Canadian exports," said Wright. "The Bank of Canada's next move is likely to be an ease, but not until the fourth quarter of next year as Canada's domestic economy will remain buoyant."

In the U.S., slowing growth and rising inflation pressures will keep the U.S. Federal Reserve on the sidelines. A sustained period of below potential growth and moderating inflation are likely to spur the U.S. Federal Reserve to cut rates in the third quarter of 2007.

Further downside risks exist

TORONTO - Ontario's economic outlook has weakened with expected growth of 1.5 per cent in 2006 and two per cent in 2007, according to a new provincial forecast released today by RBC.

"Ontario's economic growth forecast has weakened and is facing further downside risks," said Craig Wright, vice-president and chief economist, RBC. "The economy isn't far from being at a standstill despite the drop in natural gas and oil prices, which should both serve to stimulate growth."

RBC notes that much of the weakness was already evident in the first half of 2006, and more numbers on growth in retail sales, housing starts, building permits, housing resale activity, job growth, manufacturing shipments and exports, continue to underperform.

According to the report, since last quarter, the U.S. housing market has soured further, and Central Canada's has joined this correction although not to the same magnitude. Ontario's housing markets will be a drag on growth this year and next, with resale prices expected to modestly soften.

Furthermore, while RBC forecasts that manufacturing will emerge much stronger towards the end of this decade, it will remain weak this year and next. In addition, Ontario's auto sector awaits new production runs thanks to recent investment announcements with production expected to stabilize in 2008. However, the sector faces a flat outlook for the remainder of the decade.

For the overall Canadian economy, RBC has revised its 2006 growth forecasts downward with Ontario being sharply downgraded to last place among the provinces. Alberta and British Columbia are now in first and second place respectively, bumping Newfoundland and Labrador to third place for growth in 2006.

The RBC Economics Provincial Outlook assesses the provinces according to economic growth, employment growth, unemployment rates, personal income growth, retail sales, housing starts, and the Consumer Price Index.

According to the report (available online as of 8 a.m. E.D.T., at www.rbc.com/economics/market/pdf/provfcst.pdf), provincial forecast details are as follows: << Real Housing Retail
GDP starts sales

Thousands
05 06 07 05 06 07 05 06 07
-- -- -- -- -- -- -- -- --
NFLD. 0.4 4.7 4.0 2.5 2.1 2.0 2.4 1.6 2.0
P.E.I 2.0 2.1 1.9 0.9 0.9 0.8 3.2 4.0 2.1
N.S. 1.1 2.6 2.4 4.8 5.3 4.6 3.1 5.8 3.5
N.B. 0.5 2.7 2.4 4.0 4.2 3.9 5.6 5.0 3.2
QUE. 2.2 2.0 2.1 50.9 46.5 41.4 6.0 3.7 3.8
ONT. 2.8 1.5 2.0 78.8 76.8 66.8 4.9 4.1 4.2
MAN. 2.7 3.3 2.7 4.7 5.2 4.4 6.6 6.2 4.1
SASK. 3.2 3.8 3.1 3.4 3.4 3.0 7.8 5.5 5.1
ALTA. 4.5 6.3 4.5 40.8 48.2 41.5 12.4 14.8 10.1
B.C. 3.5 4.8 3.7 34.7 36.7 32.7 6.0 6.5 6.4
CANADA 2.9 2.8 2.7 224 228 200 6.3 5.9 5.2



Employment CPI

05 06 07 05 06 07
-- -- -- -- -- --
NFLD. -0.1 -0.3 0.2 2.6 2.4 1.4
P.E.I 1.9 0.8 0.6 3.2 3.3 1.3
N.S. 0.2 -0.7 0.5 2.8 2.4 1.3
N.B. 0.1 1.9 0.8 2.4 2.1 1.4
QUE. 1.0 1.3 0.9 2.3 1.7 1.5
ONT. 1.3 1.5 1.0 2.2 1.7 1.5
MAN. 0.6 1.3 0.7 2.7 2.2 2.2
SASK. 0.8 0.2 0.2 2.2 2.3 2.0
ALTA. 1.5 4.2 2.3 2.1 4.1 3.1
B.C. 3.3 3.2 2.2 2.0 2.0 2.3
CANADA 1.4 1.9 1.2 2.2 2.3 1.8
>>

Measure at Lowest Level in Nearly Five Years

USA - The Chief Executives’ Confidence Measure, which had fallen to 50 in the second quarter of 2006, fell to 44 in the third quarter, The Conference Board reports in its latest survey of CEOs. A reading of more than 50 points reflects more positive than negative responses. The survey includes about 100 business leaders in a wide range of industries.

This is the first time the Measure has dipped below 50 in nearly five years, when it was at 40 in the final quarter of 2001.

Says Lynn Franco, Director of The Conference Board Consumer Research Center: “The lack of confidence expressed by CEOs is a result of the recent slowdown in economic growth, combined with expectations that this lackluster pace of growth will carry over into the beginning months of 2007.”

CEOs’ assessment of current conditions weakened further in the third quarter. Now, only 16 percent of CEOs claim the current economic environment is better, down from about 27 percent in the second quarter. In assessing their own industries, business leaders were less upbeat. Approximately 28 percent say conditions are better, compared to 40 percent in the last quarter.

CEOs are also less optimistic about the short-term outlook. Now, only 16 percent of business leaders expect economic conditions to improve in the coming months, down from 21 percent last quarter. Expectations for their own industries were also less positive, with 20 percent anticipating an improvement, down from 31 percent last quarter.

Moderate Changes in Capital Spending Plans

Some 28 percent of business executives report increases in their companies’ capital spending plans since January of this year, while only 9 percent have scaled plans back, based on a supplementary question asked each year in the third quarter. This is a moderate change from the 2005 survey, when 34 percent of chief executives had increased their capital spending plans and 12 percent had made cuts. Among the reasons given for increasing capital investment plans, the most common was an increase in sales volume. A decline in sales volume was the most cited reason for a decrease in spending plans.

“The challenge for both the Federal Reserve Board and the U.S. economy is that this period of sub-par growth is likely to have little impact on inflation and short-term interest rates,” says Gail D. Fosler, Executive Vice President and Chief Economist of The Conference Board. Her analysis appears in StraightTalk, a newsletter designed exclusively for members of The Conference Board’s global business network. “Rather than coming down, they are likely to remain high for an extended period or even go up.”

Over the past three months, The Conference Board index of leading economic indicators has turned down relative to its level six months ago for the first time in this expansion.

“While this signal is not particularly alarming, since the downturn is still rather modest, it does suggest that the economic cycle is more mature than is generally presumed,” says Fosler. “Although such downturns do occur, they usually happen toward the end of the economic cycle.” The current downturn is still in the range of the 1995 slowdown rather than the sharper declines before the 1990 and 2001 recessions.

The rate of change in the leading index is as important as its level. The LEI may dip into negative territory, but the decline is likely to be modest or brief. The key element is not only the level of the index, but the magnitude and duration of its decline. According to both of these indicators, the LEI is now signaling a downturn – not a recession.

THE FED IS IN A PICKLE

The Federal Reserve Board is currently operating with little leeway. The current topline Consumer Price Index is rising above a 4 percent annual rate, which is the highest inflation rate in over 15 years. Core CPI is running at about 2.5 percent, which is on a par with the rate that preceded the 2001 recession, and appears to be moving up to the 3 percent inflation rates of the mid-1990s.

“Despite the financial market’s enthusiasm for the Fed’s restraint in August, it is hard to believe that the Fed will not have to continue to raise the Fed funds rate in the face of these inflation pressures,” says Fosler. “Before the Fed can actually cut rates, an event or shock of a sufficient magnitude to reverse the currently entrenched optimism in commodity markets will have to occur.”

The next several months bear watching. Earlier, the Fed’s tightening had little or no impact and it appeared that the U.S. economy might be reaccelerating after the shock from Hurricane Katrina in the fourth quarter. The deceleration in the economy is clearer now that consumer and investment spending and the housing and employment sectors are beginning to weaken. Over the past two years, the financial indicators in the LEI have taken the U.S. economy toward lower ground and the nonfinancial indicators are now following suit.

CAPITAL GOODS MARKETS ARE WEAKENING

One of the biggest disconnects in the U.S. economy has been between the rapid growth in the capital goods and manufacturing sectors and the systemic weakness of the consumer sector. The consumer goods sector, which was propped up by low interest rates during 2000-2002, never faced the traditional recession challenge. Outside of housing investment, the consumer sector never recovered either. While consumer spending has remained in the 3-4 percent range, the major benefactor has been consumer-related imports. Domestic consumer goods orders on average have not grown at all over the past four years.

The capital goods sector has been the other overwhelming economic driver during this cycle. The acceleration in nondefense capital goods orders during this cycle dwarfs past investment booms – even those of the tech “bubble” of the late 1990s. The year-to-year growth in capital goods orders peaked at about 30 percent late last year. This growth is the result of what has been, until very recently, rapid growth in domestic infrastructure, housing, technology, and capital goods investment, as well as a boom in investment in other parts of the world – especially emerging markets – which is reflected in the rapid growth in export orders. Exports of capital goods have been rising at a 13 percent annual rate over the past year.

But recently, the capital goods sector appears to be slowing. Besides the slowdown in capital investment in the second quarter Gross Domestic Product, there has been a sharp drop in capital goods orders overall.

Despite a bounce back in August from July’s dip, the slowdown over the last several months in the Institute of Supply Management export orders index, which is generally a good leading indicator of export orders, is a matter of even greater concern. The decline in the short-term trend of this index suggests that external global demand for capital goods may be slowing. Vendor performance, as measured by the percentage of companies reporting slower deliveries, is still relatively high (above 50 percent).

WHERE WILL PROFITS GO?

Corporate profitability, which is an important long-lead indicator of the business cycle, is making stunning gains. When corporate profits are high, investment usually grows rapidly and businesses spend more freely on travel, marketing, and other general administrative expenses. Hiring rises and, equally important, so does liquidity.

“What is clear is that companies have been spending their cash flow freely through investments and stock buybacks and increased dividends,” adds Fosler. “Companies still appear relatively liquid, but the financing gap is now in territory that bears vigilance.”

Home construction to date this year continues to lag behind last year’s relatively strong numbers. For the first nine months of 2006, housing starts in the Kitchener CMA are down 25 per cent with both single-detached and multiple home starts well below levels recorded last year.

“Despite mortgage rates which remain favourable to the homebuyer, higher new home prices due to increased land, labour and material costs, have pushed principal and interest payments beyond the reach of many buyers,” said Erica McLerie CMHC Market Analyst for the Kitchener CMA. “In addition, a softer resale market with increased listings has enabled some homebuyers to find an existing home to meet their demands.”

OTTAWA - The seasonally adjusted annual rate(1) of housing starts was 211,300 units in September, down slightly from 216,600 units in August, according to Canada Mortgage and Housing Corporation (CMHC). "The decline in housing starts is attributable to a decline in the multiple starts, which reached their lowest level since July 2004. For a second consecutive month, single-detached starts edged higher." said Bob Dugan, Chief Economist at CMHC's Market Analysis Centre. "The lower level of housing starts in recent months is consistent with our forecast for a gradual easing in the pace of new home construction."

The seasonally adjusted annual rate of urban starts decreased 2.9 per cent to 176,900 units in September compared to the previous month. Urban multiples declined 7.0 per cent to 81,200 units in September, while singles inched up 0.8 per cent to 95,700 units.

Urban starts decreased by 10.8 per cent in Quebec and by 4.3 per cent in Ontario in September compared to August. Modest increases were recorded in British Columbia and the Prairie region where urban starts were up 1.4, and 0.5 per cent respectively. Urban starts were up 15.3 per cent in the Atlantic region.

Rural starts in September were estimated at a seasonally adjusted annual rate of 34,400 units.

For the first nine months of 2006, all areas' actual starts increased 1.2 per cent compared to a year ago, which compares to 0.8 per cent growth in actual urban starts over the same period. Year-to-date actual urban single starts rose 2.0 per cent, while actual urban multiple starts were down 0.3 per cent compared to the same period in 2005.

The value of residential permits hit $3.6 billion, up 5.0% from July and the third gain over the last four months. This was the result of strong demand for both new single- and multi-family dwellings. This demand has been on an upward trend over the last few months.

The value of non-residential permits totalled $2.17 billion, a 14.2% increase from July. Double-digit growth in the three non-residential components (industrial, commercial and institutional) fuelled the overall gain. August's level was the second highest during the last 12 months, surpassed only by the $2.23 billion registered in March this year.

The value of non-residential permits has been on an upward trend since the end of 2005.

These results point to a busy end of 2006 for workers in both the residential and non-residential construction sectors, as the value of permits are a leading indicator for building activity.

Every province, except for Manitoba and Saskatchewan, posted gains in the overall value of permits. However, the solid increases in Ontario for both residential and non-residential permits were largely behind the exceptional results in August.

Residential sector: Both single- and multi-family permits remain high

The value of single-family permits advanced 2.9% to $2.3 billion in August, a third consecutive monthly increase. Permits for multi-family dwellings were also up, rising 9.1% to $1.3 billion. This gain followed an 11.0% increase in July.

Provincially, the largest advances in the value of housing permits in August occurred in Ontario (+10.6% to $1.3 billion) and in British Columbia (+11.4% to $649 million). The value of housing permits in Ontario was at its highest since January, the increase coming from both single- and multi-family permits. In British Columbia, the gain was fuelled only by the rise in the multi-family component.

The largest decline (-4.4%) was posted in Alberta, but it followed a record month in July. Despite this drop, the value of housing permits in Alberta remained very high from a historical standpoint.

Municipal authorities approved the construction of 20,180 new dwelling units in August, the highest monthly level since the beginning of 2006.

Since the beginning of the year, a total of 155,230 new dwelling units have been approved, up 1.5% from the first eight months of 2005. Since 1988, this cumulative total has been surpassed only in 2004, when 161,575 new dwelling units were approved in this eight-month period.

If Alberta had been excluded from the national figure, the number of new units approved would have declined 3.1% on a cumulative basis.

Based on these results, the housing sector has remained clearly healthy. The favourable job market, a dynamic economy in western Canada, solid consumer confidence and still advantageous mortgage rates continued to sustain the nation's housing market.

Non-residential sector: Strong advances in all three components

Construction intentions in the non-residential sector recorded double-digit growth in all three components in August.

Intentions in the commercial sector increased 11.0% to $1.2 billion, the third increase over the last four months. This was the highest level since the record set in August 1989. A rise in the value of building permits for office buildings in Alberta and in Ontario were behind the gain. This component has been on upward trend since October 2005.

In the industrial component, intentions surged 29.1% to $436 million in August, after having dropped 48.6% in July. In Ontario, permits for industrial projects rose 27.4% to $170 million, the biggest advance (in dollars) among the provinces, thanks to proposed projects for manufacturing buildings.

All provinces showed increases, except for Manitoba and Newfoundland and Labrador. The industrial component has been on an upward trend since January 2006.

In the institutional sector, the value of permits rose 10.9% to $511 million, a second consecutive monthly increase. This was the result of large gains in nursing homes and in the government buildings category. The most significant increase in the institutional component occurred in Ontario, where the value of permits soared 77.5% to $223 million, the second highest level since March 2006.

Several economic factors were consistent with a fertile environment for the non-residential sector, including strength in retail and wholesale sectors, growth in consumer spending, declining vacancy rates for office buildings and corporate operating profits that were just short of the historic high reported in the fourth quarter of 2005.

The largest contributions to the monthly gain (in dollars) in the non-residential sector came from Ontario, Alberta and Quebec. Following important advances in July, both Saskatchewan and Manitoba recorded the largest drops (in dollars) in August.

However, for the first eight months of 2006, the value of non-residential permits increased by 43.3% in Saskatchewan and 18.1% in Manitoba compared to the same period in 2005.

At the national level, also on a cumulative basis, the value of commercial permits rose 14.0%, while industrial permits were up 6.5%.

In contrast, the value of institutional permits showed a slight 1.5% decrease compared to the same eight-month period last year. Alberta and Quebec recorded the largest advances (in dollars).

Metropolitan areas: Calgary, Edmonton and Vancouver far ahead

Among the metropolitan areas, Calgary, Edmonton and Vancouver showed the largest advances (in dollars) in terms of total building permits for the first eight months of 2006 compared with the same period last year.

In Calgary and Vancouver, higher construction intentions for both residential and non-residential buildings fuelled the gain. In Edmonton, the rise came solely from the housing sector.

Each of the eight metropolitan areas west of Ontario posted double-digits gains. Together, they accounted for 56.4% of the cumulative gain at the national level.

In contrast, Hamilton and Ottawa posted the largest drops (in dollars). Among the five metropolitan areas showing declines, only Québec was outside Ontario.

The most important decreases in the residential sector came from Montréal and Québec. However, these two centres, along with Calgary and Vancouver, showed the largest gains in the non-residential sector.

In Montréal and Québec, projects in the institutional component contributed to the strong results. In Calgary and Vancouver, commercial permits mainly fuelled the advance.

Value of building permits, by census metropolitan area1
	July 2006r	August 2006p	July to August 2006	January to August 2005	January to August 2006	January-August 2005 to January-August 2006
	Seasonally adjusted
	$ millions		% change	$ millions		% change
St. John's	29.2	32.0	9.7	236.6	240.7	1.8
Halifax	44.2	46.4	5.0	387.1	422.8	9.2
Saint John	14.2	24.9	75.5	98.0	121.8	24.2
Saguenay	15.0	25.7	71.3	111.9	133.6	19.4
Québec	82.0	105.5	28.6	797.3	779.1	-2.3
Sherbrooke	14.4	19.2	33.1	169.1	190.3	12.6
Trois-Rivières	22.4	39.7	77.4	116.4	172.7	48.4
Montréal	502.7	486.8	-3.2	3,888.4	3,923.7	0.9
Ottawa–Gatineau, Ontario/Quebec	167.7	209.4	24.8	1,556.5	1,491.1	-4.2
Ottawa–Gatineau (Que. part)	56.6	41.2	-27.2	272.9	329.5	20.7
Ottawa–Gatineau (Ont. part)	111.1	168.2	51.4	1,283.5	1,161.6	-9.5
Kingston	16.5	18.9	14.2	137.1	179.9	31.2
Oshawa	82.7	57.6	-30.3	613.6	604.5	-1.5
Toronto	897.6	968.2	7.9	6,986.1	7,039.7	0.8
Hamilton	63.7	102.0	60.1	712.5	588.2	-17.4
St. Catharines–Niagara	43.2	88.2	103.9	371.5	379.8	2.2
Kitchener	47.6	55.3	16.1	645.5	646.8	0.2
London	55.3	87.4	58.1	560.4	633.5	13.1
Windsor	16.2	36.9	128.3	315.6	350.3	11.0
Greater Sudbury / Grand Sudbury	14.7	36.7	149.8	123.6	146.4	18.5
Thunder Bay	6.0	15.6	160.1	90.3	60.6	-32.9
Winnipeg	109.7	60.7	-44.6	452.0	592.1	31.0
Regina	41.7	20.3	-51.4	170.7	217.0	27.1
Saskatoon	38.6	34.0	-11.9	241.8	297.9	23.2
Calgary	462.2	477.2	3.2	2,517.9	3,352.5	33.1
Edmonton	242.3	370.4	52.8	1,800.3	2,202.8	22.4
Abbotsford	8.4	13.9	65.3	214.9	249.2	16.0
Vancouver	445.4	596.0	33.8	3,619.0	4,042.0	11.7
Victoria	109.5	65.2	-40.5	456.8	528.9	15.8
r revised p preliminary Note: Data may not add to totals as a result of rounding.

Value of building permits, by province and territory
	July 2006r	August 2006p	July to August 2006	January to August 2005	January to August 2006	January-August 2005 to January-August 2006
	Seasonally adjusted
	$ millions		% change	$ millions		% change
Canada	5,334.4	5,775.1	8.3	39,354.2	42,913.6	9.0
Residential	3,430.5	3,601.1	5.0	24,671.8	27,033.4	9.6
Non-residential	1,903.9	2,174.0	14.2	14,682.4	15,880.3	8.2
Newfoundland and Labrador	43.7	48.4	10.8	340.7	344.2	1.0
Residential	31.1	30.6	-1.7	216.4	233.8	8.0
Non-residential	12.6	17.8	41.9	124.2	110.3	-11.2
Prince Edward Island	18.8	22.2	18.2	170.9	145.9	-14.6
Residential	9.6	10.7	11.2	82.5	86.4	4.8
Non-residential	9.2	11.5	25.5	88.4	59.5	-32.7
Nova Scotia	87.1	109.8	26.1	751.5	850.4	13.2
Residential	46.5	62.5	34.3	509.7	567.2	11.3
Non-residential	40.6	47.3	16.7	241.8	283.2	17.1
New Brunswick	75.5	97.2	28.8	534.7	629.5	17.7
Residential	39.2	43.9	12.0	314.9	352.2	11.9
Non-residential	36.2	53.3	47.1	219.8	277.2	26.1
Quebec	996.6	1,010.2	1.4	7,513.8	7,721.7	2.8
Residential	665.0	652.1	-1.9	5,234.5	5,068.5	-3.2
Non-residential	331.6	358.2	8.0	2,279.3	2,653.2	16.4
Ontario	1,777.7	2,109.4	18.7	15,626.0	15,406.7	-1.4
Residential	1,190.0	1,316.2	10.6	9,432.0	9,559.3	1.3
Non-residential	587.7	793.2	35.0	6,194.0	5,847.5	-5.6
Manitoba	151.9	100.3	-33.9	734.1	920.7	25.4
Residential	70.7	68.2	-3.5	422.1	552.4	30.9
Non-residential	81.2	32.2	-60.4	311.9	368.3	18.1
Saskatchewan	132.9	79.6	-40.1	558.6	732.8	31.2
Residential	31.3	36.8	17.6	249.6	290.1	16.2
Non-residential	101.7	42.8	-57.9	308.9	442.7	43.3
Alberta	1,123.1	1,222.4	8.8	6,460.9	8,677.8	34.3
Residential	759.6	726.1	-4.4	3,841.8	5,403.2	40.6
Non-residential	363.5	496.3	36.5	2,619.1	3,274.7	25.0
British Columbia	907.8	960.8	5.8	6,555.0	7,351.4	12.1
Residential	582.5	649.0	11.4	4,310.4	4,864.7	12.9
Non-residential	325.3	311.9	-4.1	2,244.7	2,486.7	10.8
Yukon	5.0	7.3	46.0	39.3	71.5	81.9
Residential	2.4	1.8	-26.8	27.6	26.1	-5.4
Non-residential	2.6	5.6	114.7	11.7	45.4	287.2
Northwest Territories	2.7	4.4	60.9	60.5	21.2	-64.9
Residential	2.1	2.4	17.8	23.5	12.6	-46.6
Non-residential	0.6	1.9	197.5	37.0	8.7	-76.6
Nunavut	11.8	3.1	-73.7	8.2	39.9	384.7
Residential	0.7	1.1	57.5	6.6	17.0	156.7
Non-residential	11.1	2.0	-81.8	1.6	23.0	1,311.9
r revised p preliminary Note: Data may not add to totals as a result of rounding.

Note to readers

Unless otherwise stated, this release presents seasonally adjusted data, which ease comparisons by removing the effects of seasonal variations.

The Building Permits Survey covers 2,380 municipalities representing 95% of the population. It provides an early indication of building activity. The communities representing the other 5% of the population are very small, and their levels of building activity have little impact on the total.

The value of planned construction activities shown in this release excludes engineering projects (e.g., waterworks, sewers or culverts) and land.

For the purpose of this release, the census metropolitan area of Ottawa–Gatineau is divided into two areas: Ottawa–Gatineau (Quebec part) and Ottawa–Gatineau (Ontario part).

TORONTO - The Toronto Area resale housing market showed solid activity throughout September with 6,622 sales to maintain the year's strong performance, Toronto Real Estate Board President Dorothy Mason announced October 4.

"Though the overall sales pace is at more normalized levels, 2006 remains within one per cent of 2005's all time record pace for the year," Mrs. Mason said.

The average price of a home during September was $349,142, up five per cent from the $335,334 recorded last September.

According to Jason Mercer, Senior Market Analyst for the Canada Mortgage and Housing Corporation, good economic conditions continue to provide strong support for the housing market.

"While trending lower, sales are forecast to remain near record levels through 2007," Mr. Mercer said. "Steady job creation and low borrowing costs are key factors underlying continued strong demand for existing homes." In Toronto's east end, Guildwood / Scarborough Village E08 showed 37 per cent more overall transactions than the previous September as condominium sales in the area nearly doubled from the year before.

Strong results were seen in North York during the month, including a 27 percent jump in overall transactions in North York City Centre West / Willowdale C07 compared to September 2005. Strong detached home sales contributed to the increase.

"We are still seeing healthy sales levels consistent with a housing market that is in very good shape," Mrs. Mason said. "Prices are increasing steadily and demand is based on real need. It's an excellent time to take advantage of these conditions by getting into the market or making a move to another home."

TORONTO - Economic growth and concern for the physical environment need to be integrated into a single concept of sustainability. This can be done by improving measurement and reducing overlap in provincial and federal environment regulations, the Conference Board argues in a new publication.

"Let's recognize that economic growth cannot come at the expense of the physical environment," said Glen Hodgson, Vice-President and Chief Economist. "Improved measures of sustainability will help us understand the relationship between growth and its impact on the environment."

The briefing, Sustainability: A Winning Merger of Growth and the Environment, further argues that environmental regulatory processes in Canada are reasonably well-designed, but they are not functioning well. Approvals for new mills, mines, oil and gas developments, and electrical generation and transmission are based more on processes than scientific and environmental evidence. Thus, they take too long and are too cumbersome. Moreover, regulatory duplication among different levels of government makes approval processes complex and costly.

The briefing also outlines the concept of industrial ecology, in which cities would use resources more efficiently and produce less waste. The final report of the Conference Board's Canada Project, Mission Possible: Sustainable Prosperity for Canada, will offer more detailed ideas on principles of sustainable economic growth when it is published in early 2007.

This briefing is being published to coincide with the release of the

Carbon Disclosure Project Canada 280 report by the Conference Board in Toronto

on Wednesday, October 4, at the Toronto Stock Exchange Gallery, beginning at

9:30 a.m.

Sustainability: A Winning Merger of Growth and the Environment is drawn

from the first volume of The Canada Project's final report, Mission Possible:

Sustainable Prosperity for Canada.

CALGARY - The latest Decima-Investors Group Index of Canadian Consumer Confidence show that confidence declined slightly over the last quarter, but continues to outpace the US index for the fourth quarter in a row.

The Decima - Investors Group Index is based upon a series of five questions that probe perceptions of current and future economic conditions. The Canadian index is closely modeled on the University of Michigan's Index of Consumer Sentiment.

<< - The Canadian index stands at 86.1, down 2.5 points from last quarter.

- The Canadian index remains slightly above the US equivalent, although the gap between the two countries has narrowed, as US confidence increased by 2.9 points to 82.0.

- Confidence among residents of Quebec (-4.9), Manitoba and Saskatchewan (-4.9) dropped over the Quarter. >>

Looking at the subcomponents of the index points up the fact that the Canadian index moved downward due to a softening of personal rather than macro-economic expectations, and that expectations for the near term (next year) dropped more than expectations for the longer term (five years).

According to Decima CEO Bruce Anderson "Canadians continue to feel that the Canadian economy is robust, despite signs that the current year may feature slower growth than in the recent past. Over time, many people have come to expect that economic cycles will be more gentle than severe, and that they are better positioned personally to weather an economic downturn."

"The slight drop in Canadian consumer confidence should be viewed with interest rather than concern," said Bill Chornous, Investors Group Investment Strategist. "When compared with Index results of one year ago, it is clear that Canadians remain quite confident about the current state of the economy and hold a positive outlook for the near and longer term."

The data for this index is based on a representative sample of 2,033 Canadians (18 years and older) surveyed between August 31st and September 11th, 2006. A sample of this size can be considered accurate within plus or minus 2.2 per cent, 19 times out of 20. The Decima teleVox is a national telephone survey conducted weekly by Decima Research Inc. Clients can commission their own customized, proprietary research questions on any of the weekly surveys.

HALIFAX - Atlantic Canada still stands as the country's most renovation-enraptured region, as a new survey from RBC Financial Group reveals the east coast has the highest percentage (80 per cent) of Canadians who plan to renovate or make improvements to their homes within the next two years.

"If the saying is true that 'a good home must be made, not bought,' then Atlantic Canadians are certainly not wasting any time," said Wendi Bacon, regional vice-president, Atlantic Canada. "I think we can expect to see a continued flurry of renovation activity across the Atlantic Provinces well into 2007."

According to the RBC survey, Atlantic Canadian homeowners are more likely than those in other regions of the country to be planning deck or patio renovations (38 per cent) and more likely to be planning work on their kitchen (32 per cent). The survey also found that the region has the highest percentage of homeowners who intend to install new windows or doors (29 per cent).

However, Atlantic Canada is also home to the least number of do-it-yourselfers in Canada, with only 42 per cent of east coast homeowners saying they will tackle a majority of their reno work on their own. Forty per cent said they will hire a contractor to look after the bulk of their renovations.

The RBC Survey also found that the majority (62 per cent) of homeowners planning renovations in the region are doing so to make their homes more attractive, while 25 per cent said they plan to renovate for safety and maintenance reasons. Another 18 per cent indicated they will be renovating simply to add to the enjoyment of their homes. Atlantic Canadians estimate they will spend an average of $10,195 on their planned renovation and home improvements, up from the national average of $8,982.

Other facts about Atlantic Canadian homeowners and renovations:

<< - Sixty-eight per cent have completed renovations in the last two years.

- Sixty per cent say they had a budget for their renovations and 36 per cent of those who did went over by an average of 81 per cent.

- When asked about their biggest renovation headache, 36 per cent cited the time it took for the renovations to be completed.

- A majority (75 per cent) said they would rather renovate than sell if their current home was in need of major renovations.

- They are among the least likely (63 per cent) to pay for all or most of their renovations with cash or savings.

- Of those who plan to finance, 40 per cent plan to use a line of credit, 14 per cent plan to use their credit cards, and 21 per cent will add-on to or refinance their mortgage to cover the cost.

- Forty-eight per cent will get their inspiration from family, friends or neighbours and 37 per cent said their ideas will be from big box stores.
>>
Atlantic Region - 80 per cent, down from 82 per cent in 2005 British Columbia - 65 per cent, down from 75 per cent in 2005
Alberta - 75 per cent, down from 76 per cent in 2005
Saskatchewan/Manitoba - 75 per cent, down from 77 per cent in 2005
Ontario - 71 per cent, down from 78 per cent in 2005
Quebec - 66 per cent, down from 71 per cent in 2005

These are some of the findings of an RBC Royal Bank poll conducted in English and French by Ipsos Reid between August 17 and 21, 2006. The online survey is based on a randomly selected, nationally representative sample of 2,367 Canadian homeowners. For Atlantic Canada, the sample size was 163 homeowners who had renovated or were considering renovations.

OTTAWA - A tumbling housing market will cut sharply into U.S. economic growth for the remainder of this year and throughout 2007, but the American economy will stave off a recession, according to the Conference Board's U.S. Outlook - Autumn 2006.

"The spectacular gains in U.S. housing prices over the past few years have come to a grinding halt, forcing households to curtail spending sharply," said Kip Beckman, Principal Research Associate. "Weaker housing demand will have a ripple effect across the American economy, yet the United States will not fall into recession next year because of strong growth in business investment and exports."

Growth in real gross domestic product is expected to slump in the fourth quarter of 2006, leading to an increase of just 2.2 per cent in 2007. Already under pressure from high oil prices, rising interest rates and weaker job growth, households will limit their spending. The decline in housing starts-by 10 per cent this year and almost 18 per cent in 2007-will negatively affect the construction sector, consumer spending, and consumer and business confidence.

Weaker U.S. home building and consumer spending will have repercussions for the Canadian economy, especially in sectors that supply the residential construction industry. However, strong consumer spending, buoyant capital investment and stable government spending will bolster overall Canadian economic growth. The Conference Board's Canadian Outlook - Autumn 2006 will be made public at the 2006 Business Outlook Briefing on Thursday, Oct. 5 at The Sutton Place Hotel in Toronto.