Seasonally-adjusted Canadian retail sales fell by 1.2% in October to $50.9 billion, driven by lower sales at motor vehicle and parts dealers and at building material and garden equipment and supplies dealers. Retail sales were down in 8 of 11 sub-sectors, representing 81% of retail sales. Regionally, 6 of 10 provinces reported declines in October, led by Ontario (-2%), Quebec (-1.7%) and Saskatchewan (-1.7%). In contrast, increases in retail sales were reported in Manitoba (1.1%) and Alberta (0.4%).


In B.C., seasonally-adjusted retail sales fell by 0.9% to $7.1 billion in October, driven by a decline in home furnishing sales and sales in sporting/hobby/books/music. Vancouver also reported a monthly decrease of 1.9% in sales. Compared to the same time last year, B.C. retail sales were down by 0.7% in October.

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Vancouver, BC – December 12, 2019. The British Columbia Real Estate Association (BCREA) reports that a total of 6,616 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in November, an increase of 27.5 per cent from the same month last year. The average MLS® residential price in the province was $746,939, an increase of 5.5 per cent from November 2018. Total sales dollar volume was $4.94 billion, a 34.4 per cent increase from the same month last year.

"After several months of strong gains, home sales are now firming around long-run averages," said BCREA Chief Economist Brendon Ogmundson. "We expect 2020 will be a much more typical year for markets compared to the volatility of recent years."

MLS® residential active listings in the province were down 6.6 per cent from November 2018 to 31,310 units, and down for a seventh straight month on a seasonally adjusted basis. Overall market conditions remain balanced with a sales-to-active listings ratio of 21 per cent.

Year-to-date, BC residential sales dollar volume was down 6 per cent to $50.23 billion, compared with the same period in 2018. Residential unit sales were 3.9 per cent lower at 72,106 units, while the average MLS® residential price was down 2.2 per cent year-to date at $696,574.

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Canadian employment decreased by 71,000 jobs in November, led by Quebec (-45,000), BC (-18,200) and Alberta (-18,000). This brought the national unemployment rate up from 5.5% in the previous month to 5.9% in November. November's decline was largely driven by private-sector employment, while self-employment and public-sector employment was little changed. Most of the decrease was reported in manufacturing (-28,000), natural resources (-6,500) and in public administration (-25,000). Compared to the same month last year, Canadian employment is up 1.6%.  

Employment in BC fell by 18,200 jobs in November, completely wiping out the previous month's gain. The decline was driven by full-time employment (-20,500), which more than offset gains in part-time employment (2,300). By Industry, employment losses were generally broad-based. In contrast, employment was up in finance/insurance/real estate/leasing. The provincial unemployment rate rose by 0.3 percentage points to 5%. Compared to one year ago, employment in BC is up by 0.7% (18,100) jobs.  

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The BCREA Commercial Leading Indicator (CLI) fell slightly to 135.3 in the third quarter of 2019. The index remains unchanged compared to the same time last year.

Provincial economic activity continued to slow in the third quarter of 2019, with declines in retail and manufacturing sales more than offsetting a gain in wholesale trade. This left the economic activity component of the CLI negative for the fifth consecutive quarter. Office employment was up for the fifth consecutive quarter, edging out a decline in manufacturing employment, which resulted in a positive change in the employment component of the CLI. The financial component of the CLI was positive for a third straight quarter. The underlying trend in the CLI has been relatively flat over the past five quarters, suggesting a stable environment for commercial real estate activity in the province.

Following several years of robust growth, the BC economy continues to slow in 2019. Weak manufacturing sales in petroleum and coal, and lower retail sales at gasoline stations and auto dealers, put a drag on economic activity in the third quarter. Wholesale trade sales were positive in the third quarter due to a large expansion in machinery and equipment.

Employment growth in key commercial real estate sectors such as finance, insurance, real estate and leasing continues to be strong, up by 7,600 jobs in the third quarter. This measure of office employment now sits at an all-time high, signalling strong future demand for office space. In contrast, manufacturing employment fell by 4,200 jobs from the previous quarter.

The CLI’s financial component was positive in the third quarter due to an increase in benchmark Canadian REIT prices, which more than offset the expansion of short term credit spreads.

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The Bank of Canada held its overnight rate at 1.75 per cent this morning. In the statement accompanying the decision, the Bank noted that there is evidence that the global economy is stabilizing and that US recession concerns are waning, though trade conflicts remain the biggest threat to the Canadian economy.  The Bank expects modest growth in 2020 and for inflation to closely track its 2 per cent target.

With many central banks around the world lowering their policy rates,  why is the Bank of Canada holding firm? Simply, the Bank judges the potential of lower rates igniting a further accumulation of household debt as a greater risk to the Canadian economy than the risk from deteriorating global economic conditions.  Canadian policymakers have committed to bending the curve on the Canadian household debt-to-income ratio, through a combination of higher interest rates and stricter mortgage policy.

 Balanced against the goal of restraining debt, the Bank sees the risk of a further disruption in global trade as manageable.  The outlook for Canadian economic growth is roughly in line with trend growth for the economy and inflation is expected to be well tethered to its 2 per cent target. As long as that outlook holds, we expect that the Bank will remain on the sidelines in 2020.

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US Real GDP Growth (Q4'2016) - January 27, 2017


US real GDP growth registered a weaker than expected 1.9 per cent growth the final quarter of 2016, and 1.6 per cent growth for the year as a whole.  Growth was pulled lower by a widening US trade deficit, while consumer demand and business investment were robust. Most economists expect US economic growth to accelerate to about 2.2 per cent in 2017.

The pace of economic growth in the United States could be a key determinant in the BC housing market this year. While faster US growth is generally positive for the BC economy, a stronger pace of growth along with a possibly significant shift in the fiscal outlook due to the large tax cuts and ramped-up spending plans of the Trump administration, is already translating to rising long-term interest rates as markets anticipate higher inflation and consequent monetary tightening by the US Federal Reserve. In turn, that uptrend in rates is putting pressure on Canadian mortgage rates, with many lenders increasing their best offered rates. 

 

Copyright British Columbia Real Estate Association. Reprinted with permission.



Canadian Retail Sales - January 20, 2017


Canadian retail sales inched 0.2 per cent higher in November.  Sales were higher in just 5 of 11 sub-sectors, with motor vehicle and parts dealers and building materials supplies leading the way.  E-commerce sales accounted for 3 per cent of total retail sales, the highest proportion to date in 2016.  Given today's data,  we are currently tracking fourth quarter Canadian real GDP growth at 1.5 per cent. 

In BC, retail sales were down 0.7 per cent on a monthly basis, but were 5.5 per cent higher year-over-year.  Year-to-date, retail sales in the province are up 6.5 per cent. 


Copyright British Columbia Real Estate Association. Reprinted with permission.


Canadian Manufacturing Sales - January 19, 2017


Canadian manufacturing sales rose 1.5 per cent in November after posting a moderate decline the previous month.  Sales were higher in 14 of 21 manufacturing sub-sectors. After adjusting for inflation, the total volume of sales was 1.2 per cent higher. 

In BC, where the manufacturing sector is a significant employer and a key driver of economic growth, sales were up 2.4 per cent on a monthly basis and 9.2 per cent year-over-year. The manufacturing sector has been on a significant upswing after a slow first half with sales posting nearly 8 per cent growth over the second half of the year. That growth is adding to already strong momentum in other sectors and supporting housing demand across BC communities where manufacturing, particularly of forestry products, is an important driver of local economic activity. 


Copyright British Columbia Real Estate Association. Reprinted with permission.


Bank of Canada Interest Rate Announcement - January 18, 2017


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 uncertainty in the global outlook, particularly with regard to policies in the United States, is undiminished. The Canadian economy is forecast to grow 2.1 per cent in both 2017 and 2018, implying the Canadian economy will return to full capacity in mid-2018.  On inflation, the Bank noted that it continued to be lower than expected but should return to it 2 per cent target in coming months.

Political uncertainty in the United States will likely govern the direction of both policy rates and long-term bond yields over the next year. The interest rate on 5-year government of Canada bonds has risen to its highest point in a year, which is adding upward pressure to mortgage rates offered by Canadian lenders.  While the Canadian economy is forecast to post steady growth in 2017, overall slack in the Canadian economy remains persistent.  Without a significant uptick in economic growth, inflation will likely continue to trend at or below the Bank's 2 per cent target.  That, along with lingering uncertainty, will keep the Bank sidelined through 2017 with a chance of lowering its target rate should current downside risks to the economy become realized.


Copyright British Columbia Real Estate Association. Reprinted with permission.

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