Commercial Activity Remains Stable in 2019 Q3

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 shortterm credit spreads.

For more information, please contact: Gino Pezzani.

Bank of Canada Interest Rate Announcement – December, 2019

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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Light Up the Night

Have you ever noticed that December, so filled with the busiest days in the year, also happens to have the shortest days in the entire year? From summer onward, night slowly creeps up earlier and earlier each evening so that by the time we get to the solstice on roughly December 21, we face the shortest day of the year.

With those short days come long lists of errands to keep up with the hustle and bustle of the holidays and, if you are like me, you run out of daylight long before everything is completed. However, after the busy days draw to a close, those long nights are ripe for lingering around a table with friends and a second helping of dessert. And those cold winter mornings are the ideal time to put out food for the little birds that never seem to stop fluttering with joy. If you hang up holiday lights this time of year, consider this: you are not just hanging them up for yourself, but for everyone who is driving by on a dark evening and suddenly feels a bit of cheer at the sight of twinkling warmth.

Countless donation drives kick off in December with constant requests for contributions, but this month also makes for the perfect time to place a note of gratitude directly into the hands of someone you genuinely appreciate and tell them, with nothing held back, how they change your life for the better. No matter how much or how little time you have, give of yourself and light up the night.

The point is that we can choose how to perceive that short day in December just as we choose how to perceive the other 364 days in the year. The darkest day could not exist without the presence of light. Thank you for being a source of light in my life, and for being someone who can light up the night.

I’m sending back love and light with this letter, and hope you find joy in every day this December!


Gino Pezzani