Canadian GDP was essentially unchanged in May, with growth in services-producing industries (+0.4 per cent) offsetting declines in goods-producing industries (-1 per cent). GDP grew in 14 of 20 subsectors. Canadian real GDP is roughly 2.2 per cent above its pre-pandemic, February 2020 level. Preliminary estimates suggest that output in the Canadian economy grew 0.1 per cent in June.

Unlike the United States, which just experienced back to back quarters of negative GDP growth, the Canadian economy is on track to average a solid 3.5 per cent over the first half of 2022. However, the impact of a clearly slowing US economy and an aggressive Bank of Canada will likely start to slow growth toward the end of this year and into 2023. Indeed, bond markets are already beginning to price in the impact of slower growth (or even recession) with 5-year bond yields down more than 100bps in the last month. If that trend continues, 5-year fixed mortgage rates should follow, providing much needed relief to the housing market. With slower GDP growth, indications that inflation may be nearing its peak, and the fact that the bank's interest rate is now within its neutral range of 2-3 per cent, we expect the bank to begin slowing its pace of rate increases going forward.

Link:  https://mailchi.mp/bcrea/canadian-economic-growth-real-gdp-may-2022

For more information, please contact: Gino Pezzani.

Canadian seasonally-adjusted retail sales increased 2.2 per cent in May, hitting $62.2 billion. Sales grew in 8 of 11 subsectors, but were led by higher sales at gasoline stations and motor vehicle and parts dealers (+9.2 and +3.3 per cent respectively). Core retail sales, which strips out gasoline and motor vehicle and parts dealers, increased 0.6 per cent in May. In volume terms, sales were up 0.4 per cent. 

In BC, seasonally-adjusted sales rose 1.3 per cent in May. Compared to the same month last year, retail sales were up 3 per cent in the province. In the Greater Vancouver region, sales rose 0.8 per cent month-over-month and were up 4.5 per cent year-over-year. 

In May, Canadian e-commerce sales rose 6.5 per cent to 3.5 billion, corresponding to 4.9 per cent of retail sales. This percentage remains elevated relative to pre-pandemic levels, but is lower than during core months of the pandemic in 2020 and 2021. 

Link:  https://mailchi.mp/bcrea/canadian-retail-sales-may-2022

For more information, please contact: Gino Pezzani.

Canadian prices, as measured by the Consumer Price Index (CPI), rose 8.1 per cent on a year-over-year basis in June, up from 7.7 per cent last month. This was the fastest growth rate since January 1983. Excluding gasoline, the CPI rose 6.5 per cent year over year in June. Month-over-month, on a seasonally-adjusted basis, prices were up 0.6 per cent, down from 1.1 per cent last month. In BC, consumer prices rose 7.9 per cent year-over-year, down from 8.1 per cent last month. Average hourly wages grew 5.2 per cent year-over-year in June, indicating a decline in purchasing power. 

While June's CPI brought some encouraging early signs that inflation is peaking, we will need to see a sustained decline in the rate of inflation over the next several months to see any relief on mortgage rates. For now, markets are still expecting an aggressive Bank of Canada, singularly focused on bringing inflation back to its 2 per cent target.

Link: https://mailchi.mp/bcrea/canadian-inflation-june-2022

For more information, please contact: Gino Pezzani.

Canadian housing starts fell by 8.3k (3 per cent) to 273.8k units in June at a seasonally-adjusted annual rate (SAAR). Comparing year-over-year, starts were down from June of 2021 (1.6 per cent). Single-detached housing starts declined 3.9 per cent to 72.1k, while multi-family and others fell 2.6 per cent to 201.8k (SAAR). 

In British Columbia, starts rose 34.6 per cent in June, rising to 56.4k units SAAR in all areas of the province. In areas in the province with 10,000 or more residents, single-detached starts declined 10.3 per cent m/m to 6.9k units while multi-family starts rose 48.4 per cent to 46k units. Starts in the province were 15.3 per cent below the levels from June 2021. Starts were up by 7.9k units in Vancouver, 6.4k in Kelowna, and 1.0k in Abbotsford from last month, while declining by 1.3k in Victoria. The 6-month moving average trend rose 0.3 per cent to 43.1k in BC in June. 

Link: https://mailchi.mp/bcrea/canadian-housing-starts-june-2022

For more information, please contact: Gino Pezzani.

For the complete news release, including detailed statistics, click here.

Vancouver, BC – July, 2022. The British Columbia Real Estate Association (BCREA) reports that a total of 7,136 residential unit sales were recorded by the Multiple Listing Service^® (MLS^®) in June 2022, a decrease of 35.7 per cent from June 2021. The average MLS^® residential price in BC was $951,105, a 4.6 per cent increase from $909,657 recorded in June 2021. Total sales dollar volume was $6.8 billion, a 32.8 per cent decline from the same time last year. 

“While a still growing economy and robust population growth point to strong demand, it is increasingly difficult to satisfy that demand at current interest rates,” said BCREA Chief Economist. “As a result, sales activity across the province, but especially in more expensive markets, continues to slow.”

For the second straight month, year-over-year provincial active listings rose, with listing in June 16.4 per cent higher than this time last year. While active listings remain below what is typical for a balanced market, some markets and housing types have tipped into balanced or even buyers’ market territory as sharply higher mortgage rates push potential buyers to the sidelines.

Year-to-date, BC residential sales dollar volume was down 17 per cent to $53.5 billion compared with the same period in 2021. Residential unit sales were down 27.6 per cent to 51,202 units, while the average MLS^® residential price was up 14 per cent to $1.05 million.

For more information, please contact: Gino Pezzani.

The Bank of Canada surprised markets with a larger than expected full point increase in its overnight rate, bringing its key policy rate to 2.5 per cent.  In the statement accompanying the decision, the Bank noted that inflation is higher and more persistent than the Bank expected and will likely trend near 8 per cent through the summer before easing to 3 per cent by the end of 2023. Core inflation, which removes the more volatile components of the CPI, is rising at between 4 and 5 per cent, indicating broad price pressures throughout the economy. While the economy is experience strong growth this year, the impact of Bank of Canada rate tightening is likely to slow the economic growth from 3.5 per cent this year to just 1.75 per cent in 2023.

The overnight rate is now within the Bank's estimate of "neutral", or the level of its policy rate at which inflation should run at 2 per cent and the economy is operating at full-capacity. However, it is clear from the Bank's statement that it expects it will have to tighten rates above neutral to bring inflation, and expectations of inflation, back to its 2 per cent target level.  As of this morning, financial markets expect that the Bank of Canada will raise its overnight rate to above 3 per cent, and those expectations are currently embedded in 5-year fixed mortgage rates which have exceeded 5 per cent for the first time in over a decade. While there are encouraging, early signs that inflation is peaking, we will need to see a sustained decline in the rate of inflation over the next several months to see any relief on mortgage rates. 

Link:  https://mailchi.mp/bcrea/bank-of-canada-interest-rate-announcement-onidt16hpz

For more information, please contact: Gino Pezzani.

Canadian employment declined by 43,000 (-0.2 per cent) to 19.597 million in June, falling for the first time since January. As a result of fewer people looking for work, the Canadian unemployment rate also declined by 0.2 to 4.9 per cent, the lowest rate on record for a fourth consecutive month. Average hourly wages were up 5.2 per cent on a year-over-year basis, increasing from 3.9 per cent in May and 3.3 per cent in April. Wage gains remain below the inflation rate, however, which hit 7.7 per cent year-over-year in the most-recent data. Total hours worked rose 1.3 per cent in June, the first increase since March 2022.

Employment in BC grew by 6.1k to 2.747 million in June, while Metro Vancouver's employment fell by 6.5k month over month. The unemployment rate rose slightly in June to 4.6 per cent. Among the provinces, only Saskatchewan, Manitoba, and Quebec currently have lower unemployment rates. 

Link: https://mailchi.mp/bcrea/canadian-employment-june-2022

For more information, please contact: Gino Pezzani.