The Canadian economy rose 0.2% in January, up for the eighth consecutive month. Goods-producing sectors rose 0.8% while services-producing industries remained flat on Omicron-related restrictions. Canadian real GDP is roughly 0.4 per cent above its pre-pandemic, February 2020 level. Preliminary estimates suggest that output in the Canadian economy grew 0.8% in February.

With a high preliminary estimate for February, the Canadian economy appears to be on a strong growth path as it emerges from the Omicron-related slowdown. The Bank of Canada has noted that the slack in the Canadian economy is largely absorbed, which is partly why it hiked rates from 0.25% to 0.5% in early March. Amid strong GDP growth and high inflation, the expectation is that the bank will again raise rates at its upcoming announcement on April 13th by another 0.25% or even 0.5%. BCREA forecasts that the bank will continue raising rates until the overnight policy rate reaches 1.75 per cent, the level which prevailed prior to the COVID-19 crisis.

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

For more information, please contact: Gino Pezzani.

In BC in January, home sales remained flat, while new listings rose and starts fell. Sales rose in all areas of the province except Northern BC and the Lower Mainland. Rental costs in Vancouver and Victoria remain broadly elevated relative to most other points since the onset of the pandemic. 

Retail sales in BC rose to a fresh record in January as Omicron waned and are now 14 per cent above February 2020 levels. As of March, restaurant reservations in Vancouver are at roughly 75 per cent of the pre-pandemic level. In BC, Google’s measure of movement trends is currently about 18 per cent below pre-pandemic levels.

Although aggregate employment in BC has recovered to pre-pandemic levels, the accommodation and food service sector was about 13 per cent below the pre-pandemic level in February. The labour market has served high-income workers much better than low-income workers. Employment in high-income industries is about 10 per cent above pre-pandemic employment levels, while employment in low-income industries is about 6.5 per cent below pre-pandemic employment levels.

Manufacturing and exports edged up in January, while imports declined slightly. 

Consumer confidence declined slightly in February, while business confidence drifted sideways. 

The number of US and non-US tourists has been rising each month since restrictions were eased last summer, with US tourists reaching 58 per cent of pre-pandemic levels in December.    

For a more comprehensive overview of BC's economic recovery, click here.

For more information, please contact: Gino Pezzani.

Canadian seasonally-adjusted retail sales rose 3.2% to $58.9 billion in January. The increase was driven by a rebound in sales at motor vehicle and parts dealers (+5.3%) and new car dealers (+5.5%). Sales rose in 9 of 11 subsectors of the economy. Core retail sales, which strips out gasoline and vehicle and parts sales, increased 2.9% in January. In volume terms, sales were up 2.9%. 

In BC, seasonally-adjusted sales rose 4% in January. Compared to the same month last year, retail sales were up 2.1% in the province. In the Greater Vancouver region, sales rose 5.4% month-over-month and were up 11% year-over-year. 

In January, Canadian e-commerce sales declined 28% to 3.2 billion. As a result, e-commerce decreased from 6.9% of total retail sales in December to 6.3% in January. This percentage remains elevated relative to pre-pandemic levels. 

For more information, please contact: Gino Pezzani.

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

Canadian housing starts rose by 18.1k (7.9%) to 247.3k units in February at a seasonally-adjusted annual rate (SAAR). Comparing year-over-year, starts were down from February of 2021 (7.4% y/y). Single-detached housing starts were largely unchanged from January at 78.1k, while multi-family and others rose 12% to 169.2k (SAAR). 

In British Columbia, starts were down 10.1% in February, falling to 35.5k units SAAR in all areas of the province. In areas in the province with 10,000 or more residents, single-detached starts rose 3.1% m/m to 7.4k units while multi-family starts declined 15.1% to 23.9k units. Starts in the province were 21.9% below the levels from February 2021. Starts were down by 5.1k units in Vancouver, 0.5k in Kelowna, and 0.6k in Abbotsford, but rose 1.5k in Victoria from last month. The 6-month moving average trend declined 4.5% to 40.4k in BC in February. 

For more information, please contact: Gino Pezzani.
Link: https://mailchi.mp/bcrea/canadian-housing-starts-february

Vancouver, BC – March, 2022. The British Columbia Real Estate Association (BCREA) reports that a total of 8,902 residential unit sales were recorded by the Multiple Listing Service^® (MLS^®) in February 2022, a decrease of 18.8 per cent from February 2021. The average MLS^® residential price in BC was $1.109 million, a 24.9 per cent increase from $887,866 recorded in February 2021. Total sales dollar volume was $9.9 billion, a 1.5 per cent increase from the same time last year. 

“While sales are not keeping pace with the unprecedented level of activity we saw this time last year, demand continues to be quite strong,” said BCREA Chief Economist Brendon Ogmundson. “There are some encouraging signs that listings are recovering from historical lows, but there is a very long way to go before markets achieve balance.”
 
Provincial active listings were 19 per cent lower than this time last year with the total inventory of homes for sale in the province at just 16,000 units. That level of inventory is well below the roughly 40,000 listings needed for a balanced market.  

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

For more information, please contact: Gino Pezzani.

Canadian employment rose by 337,000 (+1.8%) in February more than reversing a 200,000 decline in January driven by Omicron-related public health measures, according to Statistics Canada. The labour market is increasingly tight, with the Canadian unemployment rate declining to 5.5%, a level lower than prior to the pandemic in February 2020 (5.7%) for the first time. The total hours worked (+3.6%) as well as the employment rate (+1.0%) also rose strongly.

As public health measures were partly lifted by the survey reference week in February, gains were concentrated in the Accommodation and Food Services (+114,000; +12.6%), and Information, Culture and Recreation (+73,000; +9.9%) sectors. Private sector employment rose by 2.8% to 347,000. On a year-over-year basis, wages were up 3.1%. The number of long-term unemployed Canadians fell by 51,000 (-19.4%) in February. 

In BC, employment rose more modestly than the rest of Canada (+21,000; 0.8%), but growth is very strong given that the province suffered no employment decline in January. Employment growth in February was concentrated in the Vancouver CMA (+18,000). Seasonally-adjusted employment in BC is not only above pre-pandemic levels, but hit a record high for a 5th consecutive month. The unemployment rate continued declining in BC, reaching 4.9%, the lowest rate since January 2020. Among the provinces, only Quebec, Saskatchewan, and Manitoba have lower unemployment rates. 

For more information, please contact: Gino Pezzani.
Link: https://mailchi.mp/bcrea/canadian-employment-february-2022

To view the full Commercial Leading Indicator PDF, click here.   

The BCREA Commercial Leading Indicator (CLI) fell to 149.7 from 150.6 in the fourth quarter of 2021, representing the second consecutive decline since the economy began recovering from the recession induced by COVID-19. Compared to the same time in 2020, the index was up by 3.8 per cent.

The CLI dropped in the fourth quarter due to declines in the financial and employment components of the index. The decline in the employment component of the index was driven by a 4.1 per cent decline in finance, insurance, and real estate (FIRE) employment and a 6.2 per cent decline in professional services employment. Workers in sales and services occupations drove much of those declines, with workers in this subsector down 6 per cent from two years prior as the economy adjusts to the post-pandemic reality. The drop in the financial component of the index was driven by the rising spread between government and corporate borrowing rates. This spread on 3-month bonds jumped from 5 to 15 basis points in the fourth quarter as investors demanded higher risk-premia over government treasuries for lending to firms.

The economic component of the index was flat from the prior quarter. Although wholesale trade rose 0.7 per cent and manufacturing sales rose 1 per cent from quarter three, these were offset by a 0.8 per cent decline in retail trade. Ongoing supply chain disruptions, Omicron lockdowns and a shifting composition of consumer spending continues to hold down growth in these economic variables driving the CLI.

It is important to note that while the BC economy generally continues recovering strongly, the environment for commercial real estate remains highly abnormal and uncertain. Although the CLI was designed to interpret specific sectoral activity and employment growth as positive indicators for commercial real estate demand, the recent strong growth of these indicators may not translate as readily into improved conditions in the commercial real estate market relative to the pre-pandemic period.

For more information, please contact: Gino Pezzani.

As widely expected, the Bank of Canada raised its overnight policy rate this morning to 0.5 per cent, an increase of 25 basis points. In the statement accompanying the decision the Bank noted that the invasion of Ukraine by Russia has added a major new source of uncertainty to the global economy, and it expects the fallout to include upward pressure on inflation and possible supply disruptions. However, economic growth in Canada finished 2021 stronger than expected and persistently higher inflation increases the risk up a continued upward move in inflation expectations. As such, the Bank states that it believes interest rates will need to rise further.

The Bank must now contend with inflation and inflation expectations that are much higher than the Bank is comfortable with, while also monitoring the potential impact of the Russian invasion of Ukraine on financial markets and commodity prices.  While we expect the Bank will continue to tighten, ultimately bringing its overnight rate to 1.75 per cent by early 2023, there is clearly more uncertainty in the global economy now than when the Bank decided to embark on this tightening cycle. That uncertainty is already being reflected in long-term Canadian interest rates, with the once rapidly ascending 5-year Govt of Canada bond yield falling about 30 basis points in recent days. 

Link:  https://mailchi.mp/bcrea/bank-of-canada-interest-rate-announcement-m3zj4psoqd

For more information, please contact: Gino Pezzani.