Canadian Inflation – January, 2018

Canadian inflation, as measured by the Consumer Price Index (CPI), slowed slightly in December to 1.9 per cent year-over-year, down from 2.1 per in November. Excluding the price of gasoline, inflation was just 1.5 per cent. The Bank of Canada’s three measures of trend inflation continue to trend close to 2 per cent. In BC, provincial consumer price inflation was 2.0 per cent in the 12 months to December.

While it did cool in December, inflation in Canada is now pushing up against the Bank of Canada’s 2 per cent target after remaining fairly muted for much of the last year. Today’s release shows a general firming of inflation around 2 per cent which, if sustained, will mean further rate increases from the Bank this year.

For more information, please contact: Gino Pezzani.

Canadian Retail Sales – January, 2018

Canadian retail sales increased for a third consecutive month in November, rising 0.2 per cent on a monthly basis and 6.5 per cent year-over-year. Sales were higher in 6 of 11 sub-sectors representing 37 per cent of total retail trade. Excluding the decline in new motor vehicle sales, retail sales were up 1.6 per cent over October. Given today’s data release, we are tracking Q4 2017 Canadian economic growth at 2.4 per cent.

In BC, retail sales were essentially unchanged on a monthly basis but were 11.5 per cent higher than November 2016. Year-to-date, retail sales in the province have grown 9.7 per cent, reflecting strong job and robust economic growth in the province. We forecast that the BC economy grew close to 4 per cent in 2017 and will enter 2018 with significant momentum.

For more information, please contact: Gino Pezzani.


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Manufacturing Sales – January, 2018

Canadian manufacturing sales increased 3.4 per cent to a record high $55.5 billion in November, a height primarily achieved due to higher sales in the transportation equipment, petroleum and coal and chemical industries. Sales were up in 12 of 21 manufacturing sub-sectors, reflecting broad-based growth in the Canadian manufacturing sector.

In BC, manufacturing sales increased 0.7 per cent on a monthly basis and were up 7.1 per cent year-over-year. The BC manufacturing sector has thus far been able to move past disruptions in the forestry sector due to US trade policy, and has now posted four straight months of growth. Sales have moved higher in 8 of the lat 9 months and employment in the sector has been rising, contributing to BC’s overall strong job growth and associated housing demand.

For more information, please contact: Gino Pezzani.

Bank of Canada Interest Rate Announcement – January, 2018

The Bank of Canada opted to raise the target for its overnight interest rate this morning 25 basis points to 1.25 per cent. In the statement accompanying the decision, the Bank cited recent strong economic data and rising inflation as motivations for the rate increase. The Bank expects growth in the Canadian economy to slow to 2.2 per cent in 2018 and 1.6 per cent in 2019 with consumption and new home construction contributing less to growth than in years past. With the economy returning to full-capacity, inflation is forecast to remain at 2 per cent over the medium term. The Bank also flagged risk to its outlook from ongoing NAFTA negotiations and noted it would remain cautious in considering future interest rate adjustments.

With the Canadian unemployment rate hitting a 40-year low and inflation ticking higher in recent months, the Canadian economy would seem to be operating at full capacity. That argues for a more hawkish approach to monetary policy in order to bring interest rates closer to what the Bank estimates would be neutral for the economy, that is, a level in which the economy is neither running too hot nor too cold. While today’s rate increase was widely anticipated, it did come earlier in the year than previously expected and likely signals further rate increases to come in 2018. Canadian mortgage rates have already moved higher in anticipation of Bank of Canada tightening, which means a much tighter borrowing environment in 2018, particularly given newly implemented mortgage qualifying rules for low-ratio buyers.

For more information, please contact: Gino Pezzani.