Canadian Monthly GDP (August 2018) – October, 2018

There were more treats than tricks in today’s monthly GDP data. The Canadian economy expanded for a seventh consecutive month in August, growing at a 0.1 per cent monthly rate. Growth was driven by the oil and gas and finance and insurance sectors. The output of real estate agents and brokers jumped 2 per cent, the third straight monthly increase. However, output from Canadian real agents and brokers remained close to 17 per cent lower than the December 2017 level prior to the introduction of the B20 mortgage stress test.

With two months of third quarter GDP data now available, we are tracking overall third quarter growth at close to 2 per cent. With the economy on solid footing, the Bank of Canada will continue to raise its policy rate over the next year. While we expect that the next move will be in January, a December rate hike can not be ruled out completely.

For more information, please contact: Gino Pezzani.

US Real GDP Growth Q3’2018 – October, 2018

US real GDP growth remained strong in the third quarter at 3.5 per cent, albeit down from 4.2 per cent in the second quarter. Economic growth was led by a strong contribution from consumer spending, which grew at its fastest rate since 2014, while an accumulation of business inventories made its largest contribution to growth since 2015. Government spending grew at its fastest rate in two years, but business investment slowed and net exports created their largest drag on growth in 33 years as US tariffs dampened trade. Today’s data gives the US Federal Reserve further reason to keep tightening monetary policy, which will put further upward pressure on medium term interest rates in the US and Canada.

The US economy has been riding high this year from debt-financed government stimulus, but that growth is expected to slow in 2019 as that stimulus fades and higher interest rates and a continued trade war act to slow the economy.

For more information, please contact: Gino Pezzani.

Bank of Canada Interest Rate Announcement – October, 2018

The Bank of Canada raised its target for the overnight rate by 25 basis points to 1.75 per cent this morning. In the statement accompanying the decision, the Bank noted that the Canadian economy is expected to average growth of 2 per cent over the second half of 2018 before slowing to 1.9 per cent next year.  The renegotiation of NAFTA is expected to lower uncertainty and boost business investment and exports while households spending and the housing market are stabilizing after the implementation of the B20 mortgage stress test. Inflation is expected to remain close to 2 per cent over the Bank’s two year projection horizon.

The resolution of NAFTA negotiations earlier in the fall paved the way for the Bank of Canada to resume its rate tightening this morning.  While inflation data came in slightly soft in September, the Canadian economy is still operating above its long-run trend which should keep inflation near the Bank’s 2 per cent target. The Bank will meet one final time in 2018 at its December meeting, at which we expect policymakers will maintain the target rate at is current level before raising the target rate to 2 per cent in January 2019.  As the target rate continues on its path higher, Canadian mortgage rates will continue to rise, ultimately resulting in a 6 per cent qualifying rate by the end of 2019.

For more information, please contact:  Gino Pezzani.

BC Home Sales Continue at Slower Pace in September

Vancouver, BC – October, 2018. The British Columbia Real Estate Association (BCREA) reports that a total of 5,573 residential unit sales were recorded by the Multiple Listing Service® (MLS®) across the province in September, a 33.2 per cent decrease from the same month last year. The average MLS® residential price in BC was $685,749, down 1.1 per cent from September 2017. Total sales dollar volume was $3.8 billion, a 34 per cent decline from September 2017.

“BC home sales continue at a slower pace compared to last year,” said Cameron Muir, BCREA Chief Economist. “The impact on affordability and purchasing power caused by the mortgage stress test and moderately higher interest rates are negating the effect of the extraordinarily strong performance of BC’s economy over the last five years.”

Year-to-date, BC residential sales dollar volume was down 21.3 per cent to $45 billion, compared with the same period in 2017. Residential unit sales decreased 22.5 per cent to 63,251 units, while the average MLS® residential price was up 1.5 per cent to $716,096.

For more information, please contact:  Gino Pezzani.

Canadian Building Permits – October, 2018

The total value of Canadian building permits rose 0.4 on a monthly basis in August to $8.1 billion on broad strength in the non-residential sector. Residential building permits declined for a third consecutive month.

In BC, the total value of permits reached a record high of $1.8 billion, smashing the previous record set earlier this year by nearly 13 per cent. Residential permits increased 17 per cent from July and were up 31 per cent year-over-year. Non-residential permits were up 77 per cent on a monthly basis and passed the $600 million threshold for the first time as the result of large office building projects in Vancouver.

Construction intentions August were mixed in BC’s four census metropolitan areas (CMA):
• Permits in the Abbotsford-Mission CMA increased 11 per cent on a monthly basis to $31.3 million. Year-over-year, permit values were down 9 per cent.
• In the Victoria CMA, total construction intentions were down 9 per cent to $71.1 million, a 40 per cent decline over this time last year.
• In the Kelowna CMA, permits values decreased by 14.5 per cent on a monthly basis to $96.6 million, but were up 4 per cent year-over-year.
• In the Vancouver CMA, the value of permits rose 66.4 per cent on a monthly basis and accounted for three quarters of all permit values in BC. Most of the increase came from the City of Vancouver, though the City of Burnaby issued over $250 million worth of apartment building permits in August.

For more information, please contact: Gino Pezzani.