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The BCREA Commercial Leading Indicator (CLI) rose 0.6 points to 147 in the second quarter of 2023, while the six-month moving average fell to 147. Compared to the same quarter in 2022, the index was down by 4.7 per cent.

It is important to note that the environment for commercial real estate remains highly abnormal and uncertain. The CLI is designed to interpret economic and office employment growth as positive indicators for commercial real estate demand. The recent strong growth in these indicators may not translate as readily into improved commercial real estate market conditions due to structural changes in the economy caused by the COVID-19 pandemic.

The CLI rose slightly in the employment and financial categories while declining in the economic category. An increase in real retail sales was offset by a decline in manufacturing sales. Meanwhile, a drop in inflation-adjusted wholesale trade pulled the economic component into negative territory. Spreads between corporate and government borrowing costs declined slightly in the second quarter, offsetting the impact of a slight weakening in prices of Real Estate Investment Trusts (REIT). This resulted in a net positive contribution from the financial component of the index. Finally, a rise in office employment (finance, insurance, and real estate) more than counteracted a drop in manufacturing employment, causing a net increase in the index’s employment component.

For more information, please contact: Gino Pezzani.

Canadian employment rose by 40,000 (0.2 per cent) in August. The Canadian unemployment rate remained flat at 5.5 per cent, pausing after having risen three prior consecutive months. Average hourly wages rose 4.9 per cent year-over-year to $33.47 in August, while total hours worked were up 2.6 per cent from August of last year.

Employment in BC rose 0.4 per cent to 2.79 million, while employment in Metro Vancouver rose 0.6 per cent to 1.58 million. The unemployment rate fell to 5.2 per cent in BC, down from 5.4 per cent in July, while falling to 5.8 per cent in Metro Vancouver. 

Link: https://mailchi.mp/bcrea/canadian-employment-august-2023-september-8th-2023

For more information, please contact: Gino Pezzani.

As summer winds to a close, higher borrowing costs have begun to permeate the Metro Vancouver housing market in predictable ways, with price gains cooling and sales slowing along the typical seasonal pattern.

Here's a summary of the August 2023 housing market statistics.

The link: August 2023 Market Insights | REBGV - YouTube

For more information, please contact: Gino Pezzani.

The Bank of Canada maintained its overnight rate at 5 per cent this morning. In the statement accompanying the decision, the Bank noted that the Canadian economy has entered a period of weaker growth, with slowing household spending and housing activity. On inflation, the Bank cited that recent data indicates inflationary pressures are broad-based and rising gas prices may cause a near term increase in CPI inflation. Meanwhile, core measures of inflation continue to trend near 3.5 per cent with little recent downward momentum.

Higher borrowing costs seemed to finally being felt as the Canadian economy contracted at an annualized rate of 0.2 per cent in the second quarter and the preliminary estimate for July showed zero growth.  However, with the inflation rising to 3.3 per cent as of the latest data in July, the effects of prior rate hikes still have work to do to bring inflation back down towards the Bank's target of 2 per cent. While the Bank of Canada decided to maintain its overnight rate at 5 per cent, persistent inflationary pressures are a concern and could still lead to future rate increases.

Link: https://mailchi.mp/bcrea/bank-of-canada-interest-rate-announcement-sl68zxi0f8

For more information, please contact: Gino Pezzani.

Canadian real GDP fell by 0.2 per cent from the prior month in June, following a 0.2 per cent increase in May. The decline was led by weak wholesale trade, which contracted 3 per cent. Construction activity contracted for the second consecutive month, falling 0.6 per cent primarily due to lower residential building construction (which has been down for 14 of the last 15 months). Offices of real estate agents and brokers, however, rose for the second consecutive month, up 3 per cent, led by higher home reselling activity in BC and Alberta. Canadian real GDP is now roughly 3.5 per cent above its pre-pandemic, February 2020 level. Preliminary estimates suggest that output in the Canadian economy was essentially unchanged in July.

GDP was roughly unchanged in the second quarter, after growing 0.6 per cent in the first quarter. The slowdown was driven in large part by weaker housing investment, which fell 2.1 per cent in the second quarter, the fifth consecutive decline. Slower new construction (-8.2 per cent) and renovations (-4.3 per cent) were both driven by higher borrowing costs. Household spending slowed to 0.1 per cent in the second quarter, while slower inventory accumulation and lower net trade also pulled growth downwards. Employee compensation rose 2.2 per cent and household disposable income rose 2.6 per cent, driving the household saving rate to 5.1 per cent in the second quarter.

Higher borrowing costs seemed to finally be widely felt in the second quarter as the Canadian economy posted a softer figure than expected this morning. The economy contracted at an annualized rate of 0.2 per cent, while the preliminary estimate for July was also flat month over month. Following a weak July employment figure, with the Canadian unemployment rate rising to 5.5 per cent, and amid other signs like softer household spending, the slight quarterly contraction in GDP provides support for the Bank of Canada to hold its key interest steady next Wednesday and perhaps conclude this tightening cycle. However, with the inflation figure rising to 3.3 per cent as of the latest data in July, the effects of prior rate hikes still have work to do to bring inflation back down towards the Bank's target of 2 per cent. 

Link: https://mailchi.mp/bcrea/canadian-economic-growth-real-gdp-q22023

For more information, please contact: Gino Pezzani.