These are stories Report on Business is following Tuesday, Oct. 9, 2012.

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IMF cuts Canada outlook

The International Monetary Fund is taking a dimmer view of Canada, cutting its economic forecasts and warning of the threats from the housing market and swollen consumer debt levels.

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"In Canada, the key priority is to ensure that risks from the housing sector and increases in household debt remain well contained and do not create financial sector vulnerabilities," the IMF said today in updated global projections that, over all, paint a bleak picture of the world in the post-crisis era.

"Thus far, mortgage credit growth has slightly decelerated in response to the measures taken by the authorities, including tighter mortgage insurance stands," it said in its lengthy report.

"If household leverage continues to rise, additional measures may need to be considered."

The Canadian government has already moved several times to tame the mortgage market and take the froth off house prices. The latest move by Finance Minister Jim Flaherty, in July, has helped cool the market, and most, though not all, observers, now see a soft landing.

Mr. Flaherty moved amid record high levels of debt to disposable income.

The IMF also cited the obvious, Canada's "strong economic and financial ties" to the U.S. economy, and, thus, how the country is "equally exposed" to the threats faced by America.

"In addition, an important domestic vulnerability in Canada relates to the housing market," it added, again stressing its main theme where we're concerned.

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"A sharp or sustained decline in house prices could seriously set back the leveraged household sector and domestic demand."

The IMF trimmed its forecasts for economic growth in Canada – to 1.9 per cent this year and 2 per cent next, down in each case by 0.2 from earlier projections – and warned unemployment will remain stubbornly at 7.3 per cent.

It always warned in its report that the threat of a severe world slowdown are "alarmingly high," cutting its global forecast for growth to 3.3 per cent this year and 3.6 per cent next.

"The probability of global growth falling below 2 per cent in 2013 – which would be consistent with recession in advanced economies and a serious slowdown in emerging market and developing economies – has risen to about 17 per cent, up from about 4 per cent in April 2012 and 10 per cent (for the one-year-ahead forecast) during the very uncertain setting of the September 2011 WEO," it said, referring to its world economic outlook.

Ultimately, the group said, its forecasts depends on "critical policy action" in the 17-member euro zone and the United States, and "it is very difficult to estimate the probability that this action will materialize."

Economists Derek Holt and Dov Zigler of Bank of Nova Scotia noted the IMF's use of language, notably the comment about an 'alarmingly high' risk, and why it matters.

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"What's the difference between 'alarmingly' and, say, 'stupendously' or 'nightmarishly'?" they said.

"The IMF flags that 'the answer depends on whether European and U.S. policy makers deal proactively with their major short-term economic challenges."

Housing starts dip, but still strong

A dip in condo development helped pull down the overall pace of construction starts last month.

The annual rate of housing starts declined in September to 220,215, Canada Mortgage and Housing Corp. said today, down from 225,328 a month earlier.

"The monthly decrease posted in September was mostly due to a decrease in urban multiples starts," said deputy chief economist Mathieu Laberge.

"As expected, the number of multiples starts in Ontario, particularly in Toronto, reverted back to a level more in line with the average pace of activity over the last six months. Following a period of elevated housing starts activity due to strong volumes of multi-family unit pre-sales in 2010 and 2011, the pace of housing starts is expected to moderate."

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Today's report tells us over all that homebuilding is hardly slowing at this point, aside from the noted slowdown in Toronto's condo market.

"Canadian homebuilding barely showed signs of letting up in September, tracking a 220,000 pace, much stronger than the street's 205,000 call, and even our above-consensus estimate," said economist Emanuella Enenajor of CIBC World Markets.

"That comes on the heels of a slightly upwardly revised 225,300 pace of homebuilding in August," she said in a research note.

"While urban single and multiple unit homebuilding decelerated modestly in September, rural starts managed to eke out gains, buoying the overall tally. Note that multi-family starts remain 12 per cent above year-ago levels, with singles tracking roughly flat."

Ms. Merkel goes to Athens

You've got to question how Angela Merkel plays to her audience.

She told Greeks on a visit to Athens today that she wants the country to remain in the euro zone, and that they have achieved much. At the same time, she added at a news conference with Prime Minister Antonis Samaras, "much remains to be done."

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What the Greeks don't want to hear is that more austerity is needed. Cutbacks have crippled the country, and the protesters who met the German chancellor's arrival are a sign of this.

Demonstrators clashed with police using stun grenades, according to reports.

"Workers have taken to the streets to vent their anger at the German chancellor, who has become the face of austerity in Greece," said market analyst David Madden of IG in London.

"Unionists view her as the big bad bully who is forcing Greek politicians into making further cuts to an already weak economy," he said in a research note.

"The nation is in its fifth year of recession and a sixth is looking likely, so it no wonder there is opposition to additional cuts. The reality of the situation is that if Greece doesn't get its hands on the next cash injection it will be bankrupt within months; what size of protests would there be then?"

Workers depressed

More than 22 per cent of Canadian employees say they currently suffer from depression, with an additional 16 per cent reporting they have experienced depression previously, according to results of a new survey today.

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Meanwhile, more workplace managers and supervisors are getting training in how to deal with an employee showing signs of depression, says the national survey conducted by polling and research firm Ipsos Reid, The Globe and Mail's Bertrand Marotte reports.

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