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The BCREA CLI fell 0.4 points to 145.9 in the second quarter of 2024, while the six-month moving average also fell to 146.1. The index is unchanged from the same time last year.

Second Quarter Highlights:

• The economic activity index declined in Q2 by 0.57 points. Inflation-adjusted retail trade (-1.6 per cent), and wholesale trade (-2.4 per cent) both fell from the previous quarter, pushing the economic component down in spite of growth in manufacturing sales (+2.1 per cent).

• Office employment (financial, insurance, real estate, and professional services) rose by 3.2 per cent in the second quarter, while manufacturing employment increased by 0.6 per cent. The overall employment component rose by 0.76 points from the previous quarter, contributing positively to the index.

The financial component of the index also declined in the second quarter by 0.46 points. Real Estate Investment Trust (REIT) prices declined by -7.5 per cent, pushing the component down. However, interest rate spreads declined for a second consecutive quarter, indicating less perceived short-term risk in the economy. This offset some of the effects of declining REIT prices on the CLI, but the financial component was still negative on net.

For more information, please contact: Gino Pezzani.

The Bank of Canada lowered its overnight lending rate this morning by 25 basis points from 4.5 per cent to 4.25 per cent. In the statement accompanying the decision, the Bank noted that growth in the Canadian economy was slightly stronger than expected in the second quarter but showed signs of softer activity through the summer.  Inflation is evolving largely as expected, and the Bank judges the economy to be in excess supply which should put further downward pressure on price growth.

Focus has shifted from whether the Bank of Canada will lower rates, to how quickly, with some analysts even looking for larger 50bps cuts in the future. The trends to watch over coming months are the state of the Canadian labour market and whether inflation is following the Bank of Canada's forecast. As long as price growth isn't deviating from expectations, and employment is not significantly weaker, we should see continued rate cuts at an orderly 25bps pace until the Bank reaches its neutral range between 2.25 and 3.25 per cent in 2025. 

For more information, please contact: Gino Pezzani.

Canadian prices, as measured by the Consumer Price Index (CPI), rose 2.5 per cent on a year-over-year basis in July, down from a 2.7 per cent increase in June. Month-over-month, on a seasonally adjusted basis, CPI rose by 0.3 per cent in July. The deceleration in headline CPI was widespread across sectors, primarily driven by declining prices on electricity, passenger vehicles, and travel tours. Excluding gasoline, the CPI rose 2.5 per cent in July. Gasoline placed further upward pressure on inflation in July, with a year-over-year growth rate of 1.9 per cent compared to 0.4 per cent in June. Downward pressure from electricity and other factors drove shelter costs down from 6.2 per cent in June to 5.7 per cent in July year-over-year. Mortgage interest costs were up 21 per cent and rent was up 8.5 per cent from last July. Finally, durable goods costs fell 1.7 per cent while services costs rose 4.4 per cent year-over-year. In BC, consumer prices rose 2.8 per cent year-over-year, up from 2.6 per cent in June. The Bank of Canada's preferred measures of core inflation, which strip out volatile components, fell to between 2.4 and 2.7 per cent year-over-year in July.

Canada's inflation report for July continued the positive overall trends in June, with headline CPI reaching its lowest level since March 2021. This was achieved in part due to declines in nearly all travel-related services in July year-over-year. However, this is largely a base-year effect, as July 2023 experienced soaring travel-related prices due to it being the first summer without restrictions related to the COVID-19 pandemic.  Moreover, CPI-median and CPI-trim continue declining towards the mid-point of the Bank of Canada's target range. Taken together, July's inflation report bolsters the likelihood of a third consecutive rate cut from the Bank of Canada in September. 

https://mailchi.mp/bcrea/canadian-inflation-july-2024-august-20th-2024

For more information, please contact: Gino Pezzani.

Canadian housing starts rose 16 per cent to 279,509 units in July at a seasonally adjusted annual rate (SAAR). Starts were up 10.4 per cent from the same month last year. Single-detached housing starts were 2 per cent higher from last month at 54,189 units, while multi-family and others rose 20 per cent to 225,321 units (SAAR). 

In British Columbia, starts rose 18 per cent from last month to 47,987 units SAAR in all areas of the province. In areas in the province with 10,000 or more residents, single-detached starts fell 9 per cent to 4,376 units while multi-family starts rose 21 per cent to 41,414 units. Starts in the province were 1 per cent below the levels from July 2023. Compared with last year, year-to-date starts are up by 69 per cent in Kelowna, and 29 per cent in Abbotsford. Year-to-date starts are down by 18 per cent in Vancouver, 8 per cent in Nanaimo, and by 0.6 per cent in Victoria. 

Link: https://mailchi.mp/bcrea/canadian-housing-starts-july-2024

For more information, please contact: Gino Pezzani.

September brings a sense of new beginnings. The air cools, leaves hint at autumn and it's back-to-school time. For some people, this season means sending a little one to kindergarten — the tiny backpacks, new crayons and tearful parents at the classroom door. Others face sending a teen to middle or high school,l and balancing newfound independence with parental guidance.

Then there's sending a child to college, perhaps far away. Pride, worry, excitement and sadness mix as parents help settle their child into a dorm room and reflect on the 18 years that brought them to this point. Back-to-school season is a time to celebrate achievements and anticipate what's ahead. Whether you're a parent, student or nostalgic for those days, this season is special.

Appreciate teachers, administrators and everybody who dedicates themselves to education — they shape the future, one student at a time. Whether you’re packing lunches, helping with homework or cheering from afar, embrace this wonderful time.

Sincerely,

Gino Pezzani