Canadian real GDP grew 4.5  per cent on a monthly basis in May. May's increase follows an 11.6 per cent contraction in April, the largest monthly decline in GDP since the series started to be recorded in 1961. Despite the rise in GDP in May the Canadian economy is still 15 per cent below its February, pre-COVID-19 level. Statistics Canada's preliminary estimate for second quarter GDP is a decline of 12 per cent from the first quarter, or an annualized decline of close to 50%.

With an increase in GDP in May and a preliminary estimate of 5 per cent growth in June, it would appear that the Canadian economy is recovering from the COVID-19 induced recession. That recovery is already well underway in BC housing markets, with home sales recovering pre-COVID-19 levels in early summer.
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A good news report. The easing of pandemic restrictions across the country led to an 18.7% surge in seasonally-adjusted Canadian retail sales in May to $42 billion. Leading the growth was motor vehicle and parts dealers, followed by an increase in sales in almost all other subsectors. Although sales increased in May, retail sales remain 20% below pre-pandemic levels.  

Sales were up in all provinces in May, the most notable increases were in Quebec (33%), Manitoba (24%), New Brunswick (21%) and Nova Scotia (20%). In BC, seasonally-adjusted retail sales were up by 12% ($6.4 billion) and by 14% ($2.8 billion) in Vancouver. Retail sales were up in all subsectors as brick and mortar stores begin to reopen, with the largest comebacks reported in clothing, and sporting and hobby. Despite the growth, sales at clothing stores are 55% below pre-pandemic levels and -24% at sporting and hobby stores.


E-commerce sales were still strong in May, up by 113% year-over-year at $3.8 billion. E-commerce comprised 8% of total retail sales in May, down from 10% in the previous month. This excludes Canadians purchasing from foreign e-commerce retailers.  
    
Advance estimates provided by Statistics Canada for June suggest that retail sales increased by 24.5%. This reflects the gradual reopening of the majority of provinces in the country with the exception of Ontario, which was still in the early stages of reopening in June. The magnitude and consistency of recovery in Canada's retail sector will continue to depend on consumers' willingness to venture out given that confirmed COVID-19 cases are back on the rise, including in BC. Also, on how quickly individuals can return to work, and for those unemployed, to find new employment.

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A good news report. The easing of pandemic restrictions across the country led to an 18.7% surge in seasonally-adjusted Canadian retail sales in May to $42 billion. Leading the growth was motor vehicle and parts dealers, followed by an increase in sales in almost all other subsectors. Although sales increased in May, retail sales remain 20% below pre-pandemic levels.  

Sales were up in all provinces in May, the most notable increases were in Quebec (33%), Manitoba (24%), New Brunswick (21%) and Nova Scotia (20%). In BC, seasonally-adjusted retail sales were up by 12% ($6.4 billion) and by 14% ($2.8 billion) in Vancouver. Retail sales were up in all subsectors as brick and mortar stores begin to reopen, with the largest comebacks reported in clothing, and sporting and hobby. Despite the growth, sales at clothing stores are 55% below pre-pandemic levels and -24% at sporting and hobby stores. 

E-commerce sales were still strong in May, up by 113% year-over-year at $3.8 billion. E-commerce comprised 8% of total retail sales in May, down from 10% in the previous month. This excludes Canadians purchasing from foreign e-commerce retailers.  
    
Advance estimates provided by Statistics Canada for June suggest that retail sales increased by 24.5%. This reflects the gradual reopening of the majority of provinces in the country with the exception of Ontario, which was still in the early stages of reopening in June. The magnitude and consistency of recovery in Canada's retail sector will continue to depend on consumers' willingness to venture out given that confirmed COVID-19 cases are back on the rise, including in BC. Also, on how quickly individuals can return to work, and for those unemployed, to find new employment. 
 


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The Bank of Canada held its overnight rate at 0.25 per cent this morning, a level it considers its effective lower bound. In addition, the Bank is continuing its quantitative easing program, committing to large-scale asset purchases of at least $5 billion per week of Government of Canada bonds along with continued purchases of provincial and corporate bonds.  In the statement accompanying the decision, the Bank noted that the economic outlook remains extremely uncertain, but global economic activity is picking up. Financial conditions have improved, oil prices have rebounded, and pent-up demand in the Canadian economy has lead to a bounce in output and employment. The Bank expects that the Canadian economy will contract close to 8 per cent this year, but will build momentum into the second half of this year, leading to the economy growing 5.1 per cent in 2021.  The Bank further noted that the economy will require extraordinary monetary policy support and the Bank will hold its policy rate at its effective lower bound until slack in the economy is absorbed and inflation has returned to its 2 per cent target.

Like the Bank, BCREA is projecting that the Canadian, and BC economy will start to recover in the third quarter.  Positive signs of recovery are emerging in the housing market, with sales in BC recovering their pre-COVID-19 level in June.  With the Bank committing to holding its policy rate at 25 basis points until slack in the economy is absorbed, and continuing its quantitative easing program of asset purchases, Canadian mortgage rates should remain at current historical lows for quite some time, providing a significant boost to the BC housing market.
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Vancouver, BC – July 14, 2020. The British Columbia Real Estate Association (BCREA) reports that a total of 8,166 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in June 2020, an increase of 16.9 per cent from June 2019. The average MLS® residential price in BC was $748,155, a 9.1 per cent increase from $685,968 recorded the previous year. Total sales dollar volume in June was $6.1 billion, a 27.5 per cent increase over 2019.

“Sales around the province surged back to pre-COVID-19 levels in June,” said BCREA Chief Economist Brendon Ogmundson. “While there are some temporary factors that may have pushed demand forward, we are cautiously optimistic that market activity will remain firm.”

Although listings activity has normalized along with sales, active listings are still down close to 20 per cent year-over-year and, as a result, many markets are seeing upward pressure on prices.

Year-to-date, BC residential sales dollar volume was up 0.6 per cent to $24.7 billion, compared with the same period in 2019. Residential unit sales were down 8 per cent to 32,875 units, while the average MLS® residential price was up 9.4 per cent to $751,722.   
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Canadian real GDP decreased 11.6 per cent on a monthly basis in April, reflecting the first full month of measures put in place to halt the spread of COVID-19.  April's decline follows a 7.5 per cent contraction in March.  April's decline was the largest monthly decline in GDP since the series started to be recorded in 1961. The Canadian economy is now 18 per cent below its February, pre-COVID-19 level.

While the decline in April was unprecedented, there is some potential good news in this morning's GDP report.  Statistics Canada indicates that its preliminary estimate for May shows real GDP rising 3 per cent, which could signal the start of an economic recovery. Signs of that recovery can already be seen in housing markets, with home sales rising sharply across many markets in May and June.
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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. 


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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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