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at the bell

Ryan McVay

Office market shows strength

It's not just the Canadian residential housing market that is showing signs of resilience: Office buildings are holding their own quite nicely.

In fact, office market activity across the country "remains quite buoyant," according to economist Adrienne Warren of Scotiabank Group.

The national central office-vacancy rate fell in the third quarter to 5.8 per cent from 6.4 per cent in the second quarter and a cyclical peak of 7.5 per cent in mid-2010, data from Cushman & Wakefield indicates.

Limited new supply, coupled with strong growth in office-based hiring, have contributed to a tightening of the market in most major centres, Ms. Warren writes.

The biggest turnaround? Calgary. Record leasing demand fuelled by a resurgent resource sector helped pull down the city's central vacancy rate to 6.4 per cent last quarter from a whopping 9.1 per cent in the second quarter, and an average of 12 per cent in 2010.

The lowest office vacancy rate in the country was in St. John's: 1.8 per cent.



Business over the next few quarters may scale back their expansion plans amid continued uncertainty over the global economy, thus tempering leasing demand, warns Ms. Warren.

Waiting for Russian reform

Will Russia ever get its act together? The country, notorious for poor investor protection and an unreliable business environment, could benefit greatly from its likely accession to membership in the World Trade Organization. But the transformation will occur only if WTO membership triggers major reforms to the way business is conducted, say Capital Economics economists Neil Shearing and Liza Ermolenko.

WTO membership could allow Russian consumers to gain access to cheaper imports and the Russian government might also be spurred to reduce state subsidies, the authors write in a recent report. It might also put a damper on the country's protectionist tendencies, they say.

On the export side, things are less clear. Oil and gas account for over half of Russian exports and already trade at zero or near-zero tariffs. Thus, the usual benefits that new WTO members enjoy – namely, a reduction in tariffs on exports and access to new markets – are likely to be relatively small for Russia.

WTO accession "in itself is unlikely to significantly boost [foreign direct investment]unless it acts as an anchor for wider reforms to clean up the business environment," the Capital Economics economists wrote.





A new strut in Uncle Sam's step?

The worst seems to be over for consumer confidence levels in the United States.

A key driver in the drop in consumer confidence over the past few months has been the stock market's poor performance, says Ian Shepherdson, chief U.S. economist at High Frequency Economics. With the recent rebound, it would be reasonable to think that the consumer-confidence indicators should improve, he writes in a recent note.

The latest readings from the two key monthly measures of consumer expectations – the Conference Board and the Michigan survey – indicate that a more positive outlook is emerging, he says.

The question, though, is whether a change in consumer sentiment would make an actual difference to the economy in the near term, he writes.

Both "retail sales and broader measures of consumers' spending have been much stronger than implied by the confidence surveys for some time.

"We have argued that this is probably because the unique depth and duration of the Great Recession and its aftermath – unique, that is, for people not around during the 1930s – means that people no longer think they understand the vicissitudes of the economy. But everyone understands the Dow – up good; down bad! – so the stock market has become people's proxy for the economic outlook."





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