Despite the reopening of retail outlets across the country as health restrictions eased, Canadian seasonally-adjusted retail sales declined 0.6% to $55.8 billion in July. The overall decline was driven by drops in sales at food and beverage stores (-3.4%) and building material and garden equipment and supplies dealers (-7.3%). According to Statistics Canada's survey, just 0.5% of retailers were closed at some point in July. Preliminary estimates, based on roughly 50% of respondents reporting so far to the agency, indicate that retail sales rose 2.1% in August. 

In BC, sales declined 1.2% after hitting record levels in the prior two consecutive months. Compared to the same month last year, retail sales were up 9.1% in the province. Only food and beverage store sales and health and personal care sales were not up on a year-over-year basis in July. In the Greater Vancouver region, sales dropped by 2.7% month-over-month, but were up 14.9% year-over-year. 

In July, Canadian e-commerce sales declined sharply from $3.9 billion to $2.9 billion dollars. As a result, e-commerce declined from 6.2% of total retail sales in June to 4.6% in July. This decline occurred as health restrictions eased across the country and Canadians shifted to brick-and-mortar retail. 
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Vancouver, BC – September 14, 2021.  The British Columbia Real Estate Association (BCREA) reports that a total 9,507 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in August 2021, a decrease of 7.1 per cent over August 2020. The average MLS® residential price in BC was $901,712, a 17.2 per cent increase from $769,691 recorded in August 2020. Total sales dollar volume was $8.6 billion, an 8.9 per cent increase from last year.

“Home sales around the province have essentially returned to normal after a record setting spring,” said BCREA Chief Economist Brendon Ogmundson. “However, we continue to see a drought in the total supply of listings as well as downward trend in new listings activity.”

Total active residential listings were down 37.9 per cent year-over-year in August and were 42 per cent below normal levels for the month of August.

Year-to-date, BC residential sales dollar volume was up 102.2 per cent to $82 billion, compared with the same period in 2020. Residential unit sales were up 67.8 per cent to 89,980 units, while the average MLS® residential price was up 20.5 per cent to $911,245.
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Canadian employment grew for the third consecutive month in August, rising by 90,000 to 18.97 million (0.5%, m/m). Most Canadian jurisdictions had fully implemented public health reopening plans by the time Statistics Canada conducted surveys, while tourists from the United States were allowed to enter Canada without quarantining for the first time since the pandemic began. As a result, Statistics Canada is reporting positive employment figures for the month across most indicators. Canadian employment is now -0.8% (-156k) below its February 2020 pre-pandemic level, the highest level since the onset of the pandemic.

In August, Canadian employment growth was driven by gains in the private sector and the services sector, especially in food & accommodation and information, culture and recreation sectors. Gains were broadly distributed across demographic groups. The Canadian unemployment rate declined by 0.4 to 7.1%, the lowest level since the onset of the pandemic. 

In BC, employment grew by 14,400 to 2.67 million (0.5%, m/m), once again hitting the highest level since the pandemic began. For the third consecutive month, British Columbia was the sole province with employment above its pre-pandemic level. The unemployment rate declined by 0.4 in August to 6.2%, the lowest level since the pandemic began. BC has the third lowest unemployment rate in Canada, following Manitoba and Quebec.
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The Bank of Canada maintained its overnight rate at 0.25 per cent this morning, a level it considers its effective lower bound. The Bank reiterated what it calls "extraordinary forward guidance" in committing to leaving the overnight rate at 0.25 per cent until slack in the economy is absorbed and inflation sustainably returns to its 2 per cent target. The  Bank projects that will not occur until the second half of 2022. The Bank is also continuing its quantitative easing (QE) program, purchasing $2 billion of Government of Canada bonds per week. In the statement accompanying the decision, the Bank noted that the the supply-chain disruptions and the pull-back in housing market activity that caused an unexpectedly weak second quarter of GDP growth were likely one-time issues and stronger growth should prevail over the second half of the year.

While inflation continues to run ahead of the Bank of Canada's 2 per cent target, the driving force behind rising prices is still isolated to a few categories of spending. In particular, the rising price of gasoline and the run-up in Canadian home prices since last year.  Home prices in Canada are beginning to flatten out, which should mean a fading impact on inflation over the next year. Likewise, the impact of gas prices should continue to decline as base-year effects have less influence.  Other issues putting upward pressure on consumer prices are being driven by bottlenecks and supply shortages – which are issues that monetary policy cannot address. Higher interest rates may stifle demand, but they do not fix microchip shortages.

We expect the Bank of Canada will proceed with caution, especially given the fourth wave of COVID. The unexpected contraction of GDP in the second quarter may push the closing of the output gap out by one or two quarters. That likely means a new time-line for the Bank to raise its policy rate with the earliest increase coming in mid-2023.
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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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