The Bank of Canada raised its overnight policy rate this morning by 25 basis points to 4.75 per cent. In its statement accompanying the decision, the bank noted that the Canadian economy was stronger than expected in the first quarter and spending in interest rates sensitive sectors, like the housing market, has picked up. On inflation, the Bank continues to expect CPI inflation to ease to 3 per cent by summer, however, monthly inflation continues to trend about two times higher than its 2 per cent target, a circumstance the Bank fears could become persistent without immediate action. 

After signalling a pause in its monetary tightening just a few months ago, the Bank of Canada has already changed course. While inflation has come down significantly, core inflation has been stubbornly trending around 4 per cent, and with home prices already recovering across the country, inflationary pressures are rising.  In the Bank's estimation, interest rates will need to move higher to slow the economy and bring inflation back to its 2 per cent target. The Bank will likely raise its overnight rate at least once more to 5 per cent.  Those expectations are already being priced into 5-year Canadian bond yields, which rose to their highest level since October 2022 following the rate decision. That increase will prompt mortgage lenders to follow suit, likely bringing 5-year fixed mortgage rates back to above 5.5 per cent.   

Link: https://mailchi.mp/bcrea/bank-of-canada-interest-rate-announcement-2sv9ev4btu 

For more information, please contact: Gino Pezzani.

Artificial intelligence (AI) continues to advance, and ChatGPT 4 now stands on the shoulders of the wildly popular ChatGPT 3 and 3.5 AI tools. As ChatGPT 4 rolls out, it might prove even more disruptive.

Launched in late November 2022, ChatGPT 3.5 was a resounding success. The bot's website, Chat.openai.com, received only 153,000 visitors in November.

Visits climbed to 266 million in December and 616 million in January. Since then, the website has seen more than 1 billion searches a month. Perhaps traffic will cool, but ChatGPT 4 will drive even more engagement.

ChatGPT 4 might also drive revenue growth. OpenAI expects revenues to hit at least 200 million this year and one billion in 2024.

OpenAI makes money by lending its AI solutions to various platforms for a price. The company has also rolled out a $20 monthly subscription plan that offers faster services and exclusive access to ChatGPT 4.

ChatGPT 4 could become handy for everyday uses, such as checking prices, shopping, meal planning, and travel and vacation planning—nearly anything that requires aggregated data.

What makes ChatGPT 4 a better solution than ChatGPT 3 and 3.5? As you might expect with AI, the newest iteration is smarter. OpenAI claims that ChatGPT 4 is ten times more powerful than ChatGPT 3.5, although they haven't fully explained how. Reported internal evaluations did find ChatGPT 4 to be 40% more likely to produce factual responses, 60% less likely to make up stuff, and 82% less likely to respond to disallowed requests. Producing violent content, among other things, is banned.

Want to work out but feel too tired due to the summer heat? Try these tips before you begin your workout to help you stay motivated!

Choose the right time of day. Try to exercise early in the morning or late in the evening, when it's cooler and more comfortable.

Stay hydrated. Drink plenty of water before, during and after your workout to prevent dehydration and keep your body functioning optimally.

Wear appropriate clothing. Choose lightweight, breathable clothing that will keep you cool and comfortable during your workout. 

Find a workout buddy. Exercising with a friend or family member can help you stay motivated and accountable, and make your workouts more enjoyable.

Mix it up. To maintain your interest and prevent boredom, try different types of exercises, such as swimming, rollerskating, biking or yoga.

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

In the first quarter of 2023, the BCREA Commercial Leading Indicator (CLI) held steady at 148, while the six-month moving average continued its downward trajectory to 149. Compared to the same quarter in 2022, the index was down by 5 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. However, 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 held steady due to an improvement in the financial component, completely offsetting a decline in employment, while the economic component was essentially unchanged. Spreads between corporate and government borrowing costs declined in the first quarter while Real Estate Investment Trust (REIT) prices rose, strengthening the financial component of the index. In contrast, the employment component of the index fell due to declines in both office employment (finance, insurance, and real estate) as well as manufacturing employment. Finally, the economic component of the index was essentially unchanged as rising wholesale trade was entirely offset by declining inflation-adjusted retail sales and manufacturing sales. 

For more information, please contact: Gino Pezzani.

Canadian real GDP was flat in March. Service-producing industries were unchanged from the prior month which goods producing industries edged down 0.1 per cent. Canadian real GDP is now roughly 3.6 per cent above its pre-pandemic, February 2020 level. Preliminary estimates suggest that output in the Canadian economy rose 0.2 per cent in April.

GDP grew 0.8 per cent in the first quarter of 2023, following roughly zero growth in the previous quarter. Almost all of this growth was concentrated in the month of January. Goods-producing sectors rose 0.1 per cent while services-producing sectors rose 0.9 per cent. The public sector (educational services, health care and social assistance, and public administration) was the largest contributor to growth for the third consecutive quarter. Exports rose 2.4 per cent in the first quarter, while imports rose just 0.2 per cent, spurring growth. Higher household spending on goods (1.5 per cent) and services (1.3 per cent) also pushed GDP upwards. Higher borrowing costs, meanwhile, caused housing investment to fall 3.9 per cent in the first quarter, with new construction (-6.0 per cent), renovations (-2.1 per cent), and ownership transfer costs (-1.5 per cent) all declining. Compensation of employees rose 1.7 per cent from the prior quarter, but disposable income nevertheless fell 1 per cent largely as a result of lower government transfers compared to last quarter. 

Canadian GDP outpaced expectations in the first quarter, expanding 3.1 per cent on an annualized basis. Following over a year of rate hikes from the Bank of Canada, the economy remains robust in many areas. A burst of economic growth at the start of the year supported a high first quarter growth rate, but April's preliminary GDP estimate shows growth continuing into the second quarter. Although housing markets swooned in the immediate aftermath of rate hikes, in recent months they have shown signs of a solid recovery. At 5 per cent, the Canadian unemployment rate remains near record lows. Meanwhile, inflation remains hot, with the year-over-year rate increasing to 4.4 per cent in April from 4.3 per cent in March. These indicators will put some pressure on the central bank to potentially change course following its 'conditional pause' on further rate hikes as of January. The Bank's rate decision next Wednesday will need to balance persistently hot numbers with the risk of overtightening given the long lags of monetary policy. 

Link: https://mailchi.mp/bcrea/canadian-economic-growth-real-gdp-q12023

For more information, please contact: Gino Pezzani.

June is a peculiar month, unlike any of the other months of the year. Mostly free of big holidays associated with indulgent behavior like devouring candies and costumes, June is famous for Father's Day, when we celebrate fatherhood and paternal relationships. However, tracing the origin of the word "father" down to the Latin word "Pater," we find patronage, which is a beautiful idea of supporting someone in their endeavors to make the world a better place.

Becoming someone's patron can come in different forms, ranging from being a booster at a local store to donations as an arts patron. People can also become community patrons, initiating programs that promote involvement, education, or entertainment for the common good of schools or other local organizations.

It's crucial to have a tribe or a trusted group of people that share personal and professional goals. Sometimes, being the tribe's center requires one to act as a patron, overseeing support to bring the tribe's causes to fruition.

As we find ourselves halfway through 2023, this is a good time to contemplate who we can include in our tribes and how we can connect people, forge alliances and make the world a better place. Finding purpose and causes to which one can dedicate their lives is a daunting task, but with dedication and direction, it's achievable… and extremely rewarding!

Summer offers us the perfect opportunity to spend time with friends and family, take advantage of the warm weather, and develop a plan to make a difference. Let June be the month where we find purpose, become patrons for what matters to us, and move forward with conviction and optimism.

Onward, and upwards!

Sincerely,

Gino Pezzani