Continued Stabilizing Commercial Activity in 2019 Q2

The BCREA Commercial Leading Indicator (CLI) rose by 0.7 points to 135.7 in the second quarter of 2019. Compared to this time one year ago, the index is unchanged.

Slowing provincial economic activity continued in the second quarter of 2019, with declines in retail sales and wholesale trade more than offsetting gains in the manufacturing sector. This meant the economic activity component of the CLI remained negative for the fourth consecutive quarter. Meanwhile, employment was up in office and manufacturing, resulting in a positive change in the employment component of the CLI. The financial component of the CLI was positive for a second straight quarter. The underlying trend in the CLI has been relatively flat over the past four quarters, suggesting a continued stabilizing environment for commercial real estate activity.

Following several years of robust growth, the BC economy continues to slow in the first half of 2019. Broad-based declines in retail sales put a drag on economic activity, particularly in the sub-sectors of motor vehicles and parts, food and beverage, and gasoline.

Following several years of robust growth, the BC economy continues to slow in the early part of 2019. The economic activity component of the CLI posted a third consecutive quarterly decline, led by the personal and household goods, and building material and supply components of wholesale trade.

Employment growth in key commercial real estate sectors was strong in the second quarter. Office employment in finance, insurance, real estate and leasing was up by 6,700 jobs. This measure of office employment now sits at an all-time high, signalling strong future demand for office space. Meanwhile, manufacturing employment rebounded by 6,300 from the previous quarter.

The CLI’s financial component was positive in the second quarter, as a narrowing of short-term credit spreads offset a decline in benchmark Canadian REIT prices.

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

For more information, please contact: Gino Pezzani.

Stats Centre August 2019 for Housing in Great Vancouver

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Canadian Employment – Sept, 2019

Canadian employment increased in August by 81,100 jobs. An increase in the participation rate kept the unemployment rate unchanged at 5.7%. Leading the increase in August was part-time employment (57,200) and almost entirely in the private sector on the service side. Regionally, the largest gains in employment were reported in Ontario (57,800) and Quebec (19,700).

In contrast, employment in BC fell by 8,300 jobs in August. This marks the third consecutive monthly decline. The August decline was driven by part-time employment, raising the provincial unemployment rate by 0.6 percentage points to 5%. Compared to one year ago, employment in BC is up 3% (73,800 jobs).

For more information, please contact:  Gino Pezzani.

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BC Homes Sales Set to Normalize in 2020

BCREA 2019 Third Quarter Housing Forecast Update

Vancouver, BC – September, 2019. The British Columbia Real Estate Association (BCREA) released its 2019 Third Quarter Housing Forecast Update today.

Multiple Listing Service® (MLS®) residential sales in the province are forecast to decline 5 per cent to about 75,000 units this year, after recording 78,505 residential sales in 2018. MLS® residential sales are forecast to increase 11 per cent to 82,700 units in 2020, just below the 10-year average for MLS® residential sales of 85,800 units.

“BC markets are showing signs of recovery after nearly a year and a half of policy-induced declines,” said Brendon Ogmundson, BCREA Deputy Chief Economist. “We expect that recovery to continue into next year, with home sales normalizing around long-term averages.”

A recovery in home sales has slowed the accumulation of resale inventory, with active listings still well short of the previous peak in 2012. That leaves market conditions at the provincial level essentially balanced with little upward pressure on prices. We anticipate that the MLS® average price will decline 2.4 per cent in 2019 before rising modestly by 3 per cent to $718,000 in 2020.

To view the BCREA Housing Forecast PDF, click here.

For more information, please contact:  Gino Pezzani.


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Bank of Canada Interest Rate Decision – September, 2019

The Bank of Canada left its target for the overnight rate unchanged at 1.75 per cent this morning. In the statement accompanying the decision the Bank noted escalated trade tensions between the US and China has resulted in weakened business investment, lower commodity prices and heightened global risk. While the Canadian economy posted strong growth in the second quarter of this year, the Bank attributes that growth to temporary factors unlikely to be repeated in the back half of the year. Overall, the Bank judges that the economy is operating close to its potential and inflation is in line with its target. However, rising uncertainty in the global economy is impacting economic growth and further escalation may require additional monetary stimulus.

While the Bank of Canada, as expected, opted to not follow other central banks in lowering its policy rate, it has left the door open to lowering rates should developments in the global economy warrant doing so. Currently, economic conditions in Canada do not require further stimulus, and policymakers remain weary of re-igniting a build-up in household debt particularly after imposing policies designed to bring those debt burdens down. We expect the Bank will therefore remain on hold as long as current economic risk does not reach a tipping point, such as an impending recession in the United States. As the uncertain global outlook keeps bond yields down, Canadian mortgage rates should stay near their current sub-3 per cent level for some time.

For more information, please contact: Gino Pezzani.

Back to School

The National Retail Foundation has been conducting its annual Back-to-School and Back-to-College surveys since 2003 and uncovered a few facts from math class:

    • More than half of all school supply consumers plan their shopping around online sales.
    • Men spend $115 more on average than women on back-to-college.
    • Shoppers spend more on back-to-school supplies than on Mother’s Day, Father’s Day and Valentine’s Day combined.
    • Teachers reported spending $479 each on average and 7% reported spending more than $1,000.
    • Back-to-college drives the majority of spending: an expected $55.3 billion for this year alone.

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Canadian Real GDP Growth (Q2’2019), August 2019

The Canadian economy rebounded in the second quarter, surging at an annual rate of 3.7 per cent. That follows two quarters of lackluster sub-1 per cent real GDP growth.  Growth was primarily led by a recovery in export volumes which masked underlying weakness in domestic demand, which actually declined as household spending slowed and business investment declined.

Despite a solid second quarter growth, we are forecasting that the Canadian economy will expand by only 1.5 per cent this year, a slight deceleration from 1.8 per cent growth in 2018.  Moreover, inflation remains closely tied to its 2 per cent target, and unemployment remains very low, which should translate to a sidelined Bank of Canada. That said, risks to the economy are very clearly tilted to the downside. The US continues to flirt with potentially disastrous trade wars and global financial markets are anticipating a US recession in the next twelve months.  Should those fears be realized, the next move by the Bank will certainly be to lower its overnight rate.

For more information, please contact:  Gino Pezzani.