The Canadian economy expanded by 0.4 per cent. That is below Statistics Canada's original preliminary estimate of 0.7 per cent and follows a slight contraction in July.  The continued easing of restrictions was a main driver of growth in August, with increases in the accommodation and food service, retail trade and transportation sectors making strong contributions.  

However,  Statistics Canada's preliminary estimate for September  GDP is showing flat growth, which points to overall third quarter growth registering about 2 per cent on an annualized basis, in line with third quarter growth in the United States and well under the Bank of Canada's more rosy forecast of 5.5 per cent.  The middle quarters of 2021 have been fairly disappointing in terms of economic growth, with the economy contracting in the second quarter and underwhelming in the third. However, we anticipate that the economy will bounce back in the fourth quarter with Canadian real GDP expanding 4 per cent and carrying momentum into 2022.

Link:  https://mailchi.mp/bcrea/canadian-monthly-gdp-august-2021

For more information, please contact: Gino Pezzani.

BCREA 2021 Fourth Quarter Housing Forecast

Vancouver, BC – October, 2021. The British Columbia Real Estate Association (BCREA) released its 2021 Fourth Quarter Housing Forecast today.

Multiple Listing Service^® (MLS^®) residential sales in the province are forecast to rise 29 per cent to 121,450 units this year, after recording 94,013 sales in 2020. In 2022, MLS^® residential sales are forecast to pull back 15 per cent to 102,750 units.

“After a frenzied start to the year, activity in BC housing markets has settled back to a level that is broadly in-line with long-run trends. The strength of the first half of this year has sales on track to easily break the previous record for annual sales,” said BCREA Chief Economist, Brendon Ogmundson. “While we do not anticipate a repeat of the record-setting market of 2021, we do expect housing market activity to remain vigorous in 2022,” added Ogmundson. 

Given strong demand and very low active listings, particularly in smaller markets around BC, the average home price in BC is projected to rise 17 per cent in 2021. Prices are forecast to rise about 3 per cent in 2022 as the composition of home sales changes due to normalizing demand for single-family homes and a recovery in active listings helps the market balance out.

For more information, please contact: Gino Pezzani.

To view the BCREA Housing Forecast PDF, click here.

In September, sales, new listings and housing starts in BC all declined somewhat from August, extending the calming trend relative to peaks in March. While MLS^® sales rose slightly in most regions of the province, a decline in the large market of the lower mainland caused a decline overall. Rental rates remain elevated in Victoria and Vancouver relative to pre-pandemic levels amid generally high consumer price appreciation.

Retail sales in BC rose in August to a fresh record, with sales 8.6 per cent above the same month last year. As of October, restaurant reservations in Vancouver are near the highest level since the onset of the pandemic, at roughly 80 per cent of the pre-pandemic level. This contrasts with a drop in reservations in Montreal and Toronto relative to post-pandemic peaks in late August. In BC, Google’s measure of movement trends remains high, although below the peak in late summer, currently about 14 per cent below pre-pandemic levels.

Although aggregate employment has recovered in BC to pre-pandemic levels, the accommodation and food service sector is about 9 per cent below the pre-pandemic level. 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 per cent below pre-pandemic employment levels. Manufacturing in BC dropped for a second month in August mostly due to a 18 per cent drop in sales of wood products. Exports in the province edged up in August, while imports surged 21 percent to a fresh record. Consumer and business confidence in BC contracted slightly in September amid new COVID-19 restrictions. In August, US tourists finally began reentering the province, hitting roughly 20 per cent of the February 2020 level. 

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

BCREA's updated COVID-19 Recovery Dashboard is available here. 

For more information, please contact: Gino Pezzani.

Canadian seasonally-adjusted retail sales rose 2.1% to $57.2 billion in August. The rise was driven by sales at food and beverage stores (4.8%), gasoline stations (3.8%), and clothing and clothing accessories stores (+3.9%). COVID restrictions were generally eased across the country in August. According to Statistics Canada's survey, just 0.6% of retailers were closed at some point in August. Preliminary estimates, based on roughly 54% of respondents reporting so far to the agency, indicate that retail sales declined 1.9% in September. 

In BC, sales rose 1% to a fresh record in August, erasing a drop in July. Compared to the same month last year, retail sales were up 8.6% in the province. Only food and beverage store sales, electronics and appliance sales, and health and personal care sales were not up on a year-over-year basis in August. In the Greater Vancouver region, sales rose 2.7% month-over-month and were up 16.2% year-over-year. 

In August, Canadian e-commerce sales rose from $2.8 billion to $3 billion. As a result, e-commerce increased from 4.6% of total retail sales in July to 4.9% in August. This percentage is lower than at most points since the onset of the pandemic but is elevated compared to pre-pandemic levels. 

Link:  https://mailchi.mp/bcrea/canadian-retail-sales-august-2021

For more information, please contact: Gino Pezzani.

Canadian prices, as measured by the Consumer Price Index (CPI), rose 4.4% on a year-over-year basis in September, rising at the fastest rate since 2003. On a month-over-month basis, the CPI was up 0.2% in September. The Bank of Canada's preferred measures of core inflation (which use techniques to strip out volatile elements) rose an average of 2.7% year-over-year in September. Major drivers of the year-over-year price increase included transportation prices (+9.1%), shelter (+4.8%) and food prices (+3.9%) partly on continuing supply-chain difficulties. The homeowner replacement cost index, which measures the cost of replacing home structures, rose 14.4% year-over-year in September, which was the fastest rate since the 1980s. In BC, consumer prices were up 0.15% month-over-month, and up 3.5% on a year-over-year basis. 

Inflation continues to run ahead of the Bank of Canada's 2 per cent target. The driving force behind rising prices is still isolated to a few categories of spending. In particular, the rising price of gasoline and the run-up in Canadian home prices since last year. Those categories alone accounted for about half of the observed inflation in September. Home prices in Canada are beginning to flatten out, which should mean a fading impact on inflation over the next year. Likewise, the impact of gas prices should continue to decline as base-year effects have less influence. Other issues putting upward pressure on consumer prices are being driven by bottlenecks and supply shortages. Those shortages are unlikely to resolve quickly and so we anticipate that the current elevated rate of inflation will linger for some time to come. Inflation that is lingering above target for an extended period may put some pressure on the Bank of Canada, though we still expect the first rate increase to come toward the end of 2022.

For more information, please contact: Gino Pezzani.

Link: https://mailchi.mp/bcrea/canadian-inflation-september-2021

Canadian housing starts declined for the fourth consecutive month in September, but remain strong compared to typical pre-pandemic activity. Housing starts decreased by 11.6k to 251.2k units (-4.4% m/m) in September at a seasonally-adjusted annual rate (SAAR). Comparing year-over-year, starts were up significantly from September of 2020 (20.1% y/y). Single-detached housing starts dipped 5% in September to 76.7k, while multi-family and others declined 4% to 174.4k (SAAR). 

In British Columbia, starts declined for a third consecutive month, dropping sharply by 23.7% m/m to 35.9k units SAAR in all areas of the province. Single-detached starts rose 9.6% m/m to 7.9k units while multi-family starts offset this growth with a 32.5% decline to 23.7k units. Despite this, starts in the province remained 11% above the levels from September 2020. BC's six-month moving average for starts declined sharply following three months of gains. 

For more information, please contact: Gino Pezzani.

Link: https://mailchi.mp/bcrea/canadian-housing-starts-september-2021

Canadian employment grew for the fourth consecutive month in September, rising by 157,000 to 19.13 million (0.8%, m/m). During the survey period, several provinces had reintroduced or planned to reintroduce vaccine passports and indoor masking. Restrictions on international travelers entering the country were eased on September 7th, likely boosting tourism employment. 

The current employment level matches the figure from February 2020, meaning that the job market has technically erased the losses from the pandemic. Due to population growth, the employment rate remains 0.9 percentage points below February 2020 at 60.9%. The Canadian unemployment rate declined for a fourth consecutive month to 6.9%, the lowest level since the onset of the pandemic. 

In BC, employment grew by 12,300 to 2.682 million (0.46%, m/m), once again hitting the highest level since the pandemic began. For the fourth consecutive month, British Columbia was the sole province with employment notably above its pre-pandemic level. The unemployment rate declined by 0.3 in September to 5.9%, the lowest level since the pandemic began. BC has the third lowest unemployment rate in Canada, following Manitoba and Quebec. 

For more information, please contact: Gino Pezzani.
Link: https://mailchi.mp/bcrea/canadian-employment-september-2021

The Canadian economy contracted 0.1 per cent in July following growth of 0.6 per cent in June.  The level of GDP remains about 2 per cent below its pre-pandemic level of February 2020.  The majority of Canadian industries actually grew in July, led by re-opening of many provincial economies which led to a strong increase in the accommodation and food services sectors. That strength was more than offset, however, by declines in agriculture, manufacturing and wholesale trade. On the bright side, Statistics Canada's preliminary estimate for August real GDP is showing a strong bounce back, with output across the economy rising 0.7 per cent on a monthly basis. 

Given today's release, we are tracking 3rd quarter real GDP growth in Canada at about 3.5 per cent. The pace of the recovery remains uncertain due to the pandemic and especially the Delta variant driven rise in cases around the country. We saw this uncertainty at play in the second quarter when the economy unexpectedly contracted and again, though to a lesser extent, in July. We anticipate that some of the expected acceleration of economic growth may now be pushed into the fourth quarter of 2021 and the first half of 2022. As a result, we have trimmed our forecast for Canadian real GDP growth from about 6 per cent in 2021 down to 5 per cent.

For more information, please contact: Gino Pezzani.

Link:  https://mailchi.mp/bcrea/canadian-monthly-gdp-growth