Geoff Cowling

The Canadian economy expanded 3.7 per cent in the first quarter of 2017, led by an acceleration in household consumption spending as well as a nearly 3 per cent rise in business investment. The latter is a particularly welcome sign for the economy given that business investment had declined in eight of the previous nine quarters.  A build up of inventories, especially in the manufacturing sector was also a significant contributor to growth in the first quarter, but also signals a slowing in the second quarter as firms produce fewer goods and wind down that inventory.

Although the Canadian economy has grown much faster than the Bank's estimate of potential growth for three consecutive quarters, it is not expected that the economy will sustain that level of growth for much longer. We forecast that real GDP growth will fall back to an average of 1.5 per cent quarterly growth for the remainder of 2017. However, the strong start to the year means that annual growth for this year is likely to register close to 2.5 per cent, the strongest economic growth in three years. Despite faster growth, a significant amount of slack remains in the economy and there is therefore very little pressure on inflation. Without a signal that inflation is going to push higher, the Bank will remain sidelined at least until early 2018 when it expects remaining slack in the economy will be eliminated.

Copyright British Columbia Real Estate Association. Reprinted with permission.

Vancouver, BC – May 30, 2016. The BCREA Commercial Leading Indicator (CLI) increased for the fifth consecutive quarter, rising 0.5 index points from the fourth quarter of 2016 to the first quarter of 2017. The index now sits at 128.0, a 4 per cent increase from a year ago and a 0.4 per cent gain on a quarterly basis.

“The rising CLI mirrors the overall robust trend in the provincial economy," says BCREA Economist Brendon Ogmundson. "The commercial real estate sector stands to benefit from BC's strong economic growth through increased demand for commercial space and the attraction of invesment dollars."

The underlying CLI trend, which smooths often noisy economic data, continues to push higher due to ongoing strength in economic activity, particularly from the retail and wholesale trade sectors. That uptrend signals further growth in investment, leasing and other commercial real estate activity over the next two to four quarters.

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The Bank of Canada announced this morning that it is holding the target for its overnight rate at 0.5 per cent. In the press release accompanying the decision, the Bank noted that inflation is broadly in line with the Bank's projection, though intense retail competition is pushing inflation temporarily lower.  The Bank also noted that the tightening of mortgage regulations implemented in the Fall of 2016 have yet to have a substantial cooling effect on markets but it does expect those measures will contribute to a more sustainable debt profile for Canadian households.

Although the Canadian economy has expanded well above the Bank's estimate of potential growth for three consecutive quarters, including a first quarter that is tracking at close to 4.5 per cent growth in real GDP, the Bank is not optimistic that the economy will sustain that level of growth for much longer.  Moreover,  despite faster growth, a significant amount of slack remains in the economy and there is therefore very little pressure on inflation. Without a signal that inflation is going to push higher, the Bank will remain sidelined at least until early 2018 when it expects remaining slack in the economy will be eliminated.

Copyright British Columbia Real Estate Association. Reprinted with permission.

Canadian manufacturing sales increased 1 per cent from April to March, as sales of transportation equipment and food sales flourished. Overall, sales were higher in 16 of 21 manufacturing sub-sectors, reflecting broad-based strength in the Canadian economy. 

The BC manufacturing sector continued to be a significant driver of provincial growth in March, posting a 2.9 per cent increase in sales, led by a 10.5 per cent jump in wood products. On a year-over-year basis,  total manufacturing sales were up 4.7 per cent.  While manufacturing has been one of the stand-out sectors in the BC economy since last summer, headwinds from US trade policy, particularly new tariffs on softwood lumber, could take the air of the sectors in coming months.

Copyright British Columbia Real Estate Association. Reprinted with permission.

Vancouver, BC – May 15, 2017. The British Columbia Real Estate Association (BCREA) that a total of 9,865 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in April, down 23.9 per cent from the same period last year. Total sales dollar volume was $7.19 billion, down 25.4 per cent from April 2016. The average MLS® residential price in the province was $728,955, a 2 per cent decrease from the same period last year.

“BC home sales are on an upward trend this spring, led by a sharp increase in consumer demand in the Lower Mainland," said Cameron Muir, BCREA Chief Economist. The seasonally adjusted annual rate (SAAR) of home sales was over 106,000 units in April, significantly above the five-year SAAR for April of 89,000 units.

The supply of homes for sale declined 17 per cent from April 2016. On a seasonally adjusted basis, active residential listings have declined 50 per cent since 2012 and are now at their lowest level in over 20 years. The imbalance between supply and demand is continuing to drive home prices higher in most regions, further eroding affordability.

Year-to-date, BC residential sales dollar volume was down 31.8 per cent to $21.3 billion, when compared with the same period in 2016. Residential unit sales declined 25.0 per cent to 30,757 units, while the average MLS® residential price was down 9.2 per cent to $692,220.

The total value of Canadian building permits declined 5.8 per cent to $7 billion in March, the second consecutive monthly decline.

BC posted the largest decrease at the provincial level due to fewer permit applications for multiple family residential projects, slowed perhaps by the record number of units already under construction.  The total value of permits fell 21.4 per cent on a monthly basis and 11.4 per cent year-over-year. Residential permits were down close 26 per cent on both a monthly basis and 14 per cent lower year-over year while non-residential permits were down 4 per cent on a monthly basis and 2.5 per cent year-over-year.

Construction intentions were actually higher across three of BC's four census metropolitan areas (CMA). Permits in the Abbotsford-Mission CMA increased 53 per cent from February to March and were up 29 per cent year-over-year. The Victoria CMA saw permit values increase 10 per cent on a monthly basis but were 6 per cent lower year-over-year. In the Kelowna CMA, permits rose 60 per cent on a monthly basis were more than triple the value in March 2016. Conversely, the Vancouver CMA, where construction is probably at capacity, posted a 40 per cent monthly decline in permit activity on a monthly basis and was down 32 per cent year-over-year.

Copyright British Columbia Real Estate Association. Reprinted with permission.

Canadian housing starts declined to 214,098 units at a seasonally adjusted annual rate (SAAR) in April following a surge in new home construction in March that saw a pace of over 250,000 units SAAR.  The six-month trend in Canadian housing starts continues to trend higher at about 214,000 units SAAR.

In BC, total housing starts were 44,604 units SAAR, a 1 per cent dip from the previous month and 1 per cent higher compared to April 2016.  Single detached starts declined 9 per cent month-over-month but were 16 per cent higher year-over-year. Multiple unit starts increased 2 per cent month-over-month and were down 3 per cent year-over-year.

Looking at census metropolitan areas (CMA) in BC: 

• Total starts in the Vancouver CMA were flat month-over-month and down 7 per cent year-over-year with declines posted in both single and multiple units starts. 
• In the supply constrained Victoria CMA market, housing starts jumped 25 per cent from March as new multiple unit projects broke ground. However new home construction was well off the pace set in 2016 with total starts down 26 per cent year-over-year . 
• New home construction in the Kelowna CMA dropped 24 per cent on a month-over-month basis after a strong March. However, year-over-year, total housing starts were four times higher than April 2016.
• Housing starts in the Abbotsford-Mission CMA were down 26 per cent from March but were up close to 60 per cent compared to April 2016 due to a stronger pace of multiple unit starts.

Copyright British Columbia Real Estate Association. Reprinted with permission.

Canadian employment was essentially flat from March to April, though compared to April 2016, employment is 1.5 per cent higher.  The national unemployment rate moved 0.2 points lower to 6.5 per cent, the lowest level since October 2008.

While employment across Canada was little changed, job growth in BC continues to surge. The province posted 11,300 new jobs in April BC and has added 80,000 jobs in the past 12 months, largely in full-time work. The provincial unemployment rate remained at 5.5 per cent in April as new additions to the labour force kept pace with employment gains.

Copyright British Columbia Real Estate Association. Reprinted with permission.

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