5 economic trends that are affecting you

Here's a look at  five trends on the horizon that will affect you in the next year from mortgage rates to food prices.

Gas prices to drop

  The good news for beleaguered drivers – you’re likely to get a break on prices this fall, according to a gasoline industry analyst.

Jason Toews, co-founder of Gasbuddy.com (and its sister site torontogasprices.com), says prices in the Greater Toronto Area have already dropped 9 cents a litre in the last two weeks, and are likely to slide even further over the next two to three months.

“It’s mostly supply and demand. In Canada, we tend to drive less in fall and winter because it’s colder,” said Toews, who added that’s not the only reason he expects gas to fall to as low as $1.05 per litre by year’s end. The average price of regular unleaded gasoline in the Greater Toronto Area right now is $1.225 per litre, down from $1.31 per litre two weeks ago.

“It’s actually cheaper for them to refine gasoline in the winter than during summer, because the additives they need to put in for winter time are cheaper,” said Toews. He estimates the cheaper production costs alone slash roughly two cents per litre off the pump price.

Mortgage rates may rise

Variable mortgage rates are already starting to creep up, and fixed rates could soon follow if Wednesday’s higher-than-expected inflation numbers turn out not to be a fluke, says mortgage expert Robert McLister.

Canada’s inflation rate hit 3.1 per cent in August, driven by rising food and energy prices, Statistics Canada revealed Wednesday. Even the so-called core inflation rate — which excludes food and energy — hit 1.9 per cent.

“Keep your eye on inflation. If the core rate goes above 2 per cent for a couple months in a row, then we’ll start to hear (Bank of Canada governor) Mark Carney talk about cooling things down,” said McLister.

Raising interest rates is a tool used by central bankers to slow down an economy, the thinking being that if borrowing becomes more expensive, less money is being spent, resulting in less economic activity.

Already, said McLister, the spread between fixed rates and variable rates has dropped to less than one per cent, as banks eliminate much of the discounting they give on variable rates.

Home prices to stabalise

Housing prices in the Greater Toronto Area won’t be skyrocketing as much over the next few months as they did over the last year or so, says an analyst with the Toronto Real Estate Board.

That’s because more houses are being put on the market, according to Jason Mercer.

“With the prices having risen the way they did, more people are going to start listing because they think they can take advantage of the prices they’ll get,” said Mercer. If enough people list, that can drive prices down.

“There’s no question that it’s been a seller’s market recently, but as more inventory comes onto the market, things will start to become more balanced,” Mercer said.

Still, Mercer isn’t expecting prices to be slashed – he just doesn’t think they’re going to rise as quickly.

“I still think there’s enough support for some price increases, but it’s not going to be what it has been,” Mercer said. The average price of a home in the Greater Toronto Area was $451,000 in August, up 10 per cent from the same time last year.

Food price increases to moderate

While food prices rose by four per cent in August (compared to the same period last year), that trend is unlikely to continue, says BMO senior economist Sal Guatieri.

That’s because a slumping North American and European economy means lower demand for the commodities — such as wheat, corn and rice — which had been driving food inflation, Guatieri explained.

“We see food prices leveling off this year, and perhaps by late next year, even falling,” said Guatieri of BMO’s forecasts.

Jobless rate to remain high

If you’re among the 7.3 per cent of Canadians out of work, don’t expect things to get much better this fall, cautioned BMO’s Sal Guatieri.

“We expect the economy to grow a bit in the second half of the year after shrinking a bit in the second quarter, but it’s not really going to be enough to move the jobless rate,” said Guatieri.
 
Also read:
5 things that will affect your finances