Canadian Monthly Real GDP (January 2020) – March, 2020

The Canadian economy grew  0.1 per cent on a monthly basis in January as weather and labour disputes offset more positive developments in some sectors.  Before the abrupt change in the world economy due to the COVID-19 outbreak, the Canadian economy was set to grow a solid 1.8 per cent in the first quarter.  We may start to see the impact of COVID-19 starting with February’s GDP data though the impact will mostly be observed in April, which is likely to show an unprecedented decline in economic activity.

Once the outbreak is contained, the Canadian economy should post a strong recovery due to pent-up demand, large amounts of fiscal stimulus and historically low interest rates.

Canadian Retail Sales (Jan) – March, 2020

A weak report to start off 2020. Seasonally-adjusted Canadian retail sales were up by 0.4% in January at $52 billion. The rise in January was driven by auto dealers and gas stations. Minus these two sub-sectors and sales were down 0.3% in the month. Sales were up in 4 of 11 sub-sectors, representing 48% of retail sales. The impact of COVID-19 on the retail sector will become more evident in the months to come. Statistics Canada notes that respondent comments for February shows that business activities have been impacted.

Regionally, 8 of 10 provinces reported monthly increases in January. Notable increases were reported in Quebec (1.7%) and Alberta (1.6%). In contrast, retail sales were down in Ontario (-0.8%).

In BC, seasonally-adjusted retail sales were unchanged at $7.3 billion in January. Looking at the non-seasonally adjusted change shows a different picture. Retail sales in January were down from the previous month in all sub-sectors, except at auto dealers and gas stations. Meanwhile, Vancouver reported a monthly decrease of 1% in retail sales. Compared to the same time last year, BC retail sales were down by 0.4% in January.

For more information, please contact: Gino Pezzani.

Canadian Inflation (Feb) – March, 2020

Canadian inflation, as measured by the Consumer Price Index (CPI) rose by 2.2 per cent in February year-over-year, down from a 2.4 per cent increase in January. Excluding the impact of gasoline prices, national CPI rose by 2.0 per cent year-over-year, matching last month’s increase. Gas prices rose less on a year-over-year basis as a result of lower global demand following the COVID-19 spread, and tensions between oil-producing countries. The Bank of Canada’s three measures of trend inflation was unchanged, averaging 2.0 per cent in February. Prices rose in seven of eight major components, led by transportation (4.4%) and shelter (2.3%).

In B.C., CPI grew to 2.4 per cent year-over-year, slightly above last month’s increase of 2.3 per cent. Notable increases in prices were for recreation (2.0%) and gas (1.7%), where the increase for gas was largely due to the regional Pacific Northwest market. In contrast, prices for food was the only componenet to report a price decline (-0.5%).

Given recent events around the spread and containment efforts of COVID-19 (e.g., temporary closure of stores and service providers), continued tensions between oil-producing countries, the lowering of interest rates, and disruptions to global supply chains, we expect significant impact on prices going forward.

For more information, please contact: Gino Pezzani.

BCREA Market Intelligence Report: Sketching Out the Potential Impact of COVID-19 on the BC Housing Market

The latest BCREA Market Intelligence Report: Sketching Out the Potential Impact of COVID-19 on the BC Housing Market explores the potential impacts of COVID-19 on BC home sales and prices through 2020. Click here to read the full report.

Summary Findings:
• While it’s unknown how the unfolding COVID-19 outbreak will impact the economy in the long-term, BC is facing a sudden stop in economic activity with little guidance to when things may return to normal.

• Based on our scenario analysis, BC home sales and prices will likely face declines in the spring and early summer but should recover along with the wider economy in the second half of the year, contingent on the outbreak resolving.

• The postponed change to the mortgage stress test rate, originally slated for April 6, 2020, will mute the impact of falling interest rates for the BC housing market.

For more information, please contact: Gino Pezzani.

Bank of Canada Interest Rate Announcement – March, 2020

Today, in an emergency inter-meeting policy action, the Bank of Canada again lowered its overnight rate by 50 basis points to 0.75 per cent. This follows the previous cut to 1.25 per cent on March 4, 2020. This move is in response to the spread of COVID-19, which according to the Bank is “having serious consequences for Canadian families, and for Canada’s economy”. In its statement, the Bank noted that lower interest rates will help to support confidence in households by lowering borrowing costs for new purchases and for those renewing their mortgages. Additionally, lower prices for oil will weigh heavily on the economy.

We expect this rate cut to be followed by an additional reduction of the Bank’s overnight rate at its April 2020 meeting.

For more information, please contact: Gino Pezzani.