Canadian Q1 Real GDP Growth - May 31, 2013

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Canadian Q1 Real GDP Growth - May 31, 2013

The Canadian economy grew 2.5 per cent at an annual rate in the first quarter, the fastest pace of growth in over a year.  Strong Real GDP growth was helped by a 6.2 per cent annualized increase in exports which helped offset slower household consumption and residential investment.

While the Canadian economy grew at a healthy rate in the first quarter, the slowdown in residential construction, and household spending, as well as restraint in government expenditures, will have to be offset by stronger exports and business investment. While exports surprised to the upside in the first quarter, business investment was basically flat.  We expect growth to moderate through the remainder of 2013, with the Canadian economy ultimately expanding around 1.7 per cent this year.

Bank of Canada Interest Rate Announcement - May 29, 2013

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Bank of Canada Interest Rate Announcement - May 29, 2013

Today's interest rate announcement will be Mark Carney's last as Governor of the Bank of Canada, however that is the only meaningful change as the Bank once again opted to leave its overnight target rate at 1 per cent.  The Bank expects first quarter growth to be stronger then its original projection of 1.5 per cent, and forecasts that the remainder of the year will remain in line with its April projection. The Bank expects inflation will remain subdued before rising to 2 per cent in mid-2015 when the economy returns to full capacity. The Bank once again stated that the considerable monetary policy stimulus currently in place will remain appropriate for an unspecified "period of time" after which some withdrawal will likely be required.

The Bank of Canada remains caught between the rock of a muddling economy and the hard place of elevated household debt burdens. If the second half of this year unfolds as most forecasters expect, economic growth should accelerate, helping inflation to get back on a path to the Bank's 2 per cent target. However, if that scenario does not unfold and the economy continues its slow growth trend, the "period of time" the Bank has noted may stretch out longer than the Bank currently has in mind. Our own analysis of the Canadian economy suggests there will not be any movement on interest rates until late 2014.

BC Commercial Leading Indicator Points to Stability in Second Half of 2013

BC Commercial Leading Indicator Points to Stability in Second Half of 2013

Vancouver, BC – May 28, 2013. The British Columbia Real Estate Association (BCREA) Commercial Leading Indicator (CLI) bounced back in the first quarter of 2013, rising 0.4 points and partially offsetting the decline in the fourth quarter of 2012. The index is currently sitting at 112.2. On a year-over-year basis, the CLI is 0.2 per cent above the first quarter of 2012.

The increase in the index was the result of stronger economic activity, particularly in the manufacturing sector due to a large increase in wood products output. Momentum in Canadian real estate investment trusts (REIT) returns and narrower risk spreads translated to a positive contribution in the index’s financial component. The employment component of the index, however, continues to lag due to a sharp slowdown in manufacturing employment.

"The increase in the CLI following last quarter’s decline has meant an overall flattening in the index’s underlying trend,” said Brendon Ogmundson, BCREA Economist. “This indicates that the slowdown signaled previously for the first half of this year will likely give way to modest growth in the second half of 2013."

Canadian Consumer Price Inflation - May 17, 2013

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Canadian Consumer Price Inflation - May 17, 2013

Canadian inflation remained remarkably muted in April. Consumer price rose only 0.4 per cent in the 12 months to April, a significant deceleration from the already low 1 per cent reading in March. The dip in inflation was primarily the result of lower gasoline prices, though inflation was broadly weak across all CPI components. Core inflation, which strips out the most volatile components of the CPI, such as food and energy prices, increased 1.1 per cent in April. Consumer prices in BC actually declined, falling 0.8 per cent as consumers paid over 4 per cent less at restaurants due to the expiration of the HST.

Inflation is now running near the bottom of the Bank of Canada's 1-3 per cent control range, a situation which in normal circumstances would be a very strong sign of an impending interest rate cut. Indeed, if inflation continues to fall well short of the Bank's mandate of targeting 2 per cent inflation, it may become difficult for the Bank to continue to prejudice concerns about the state of household debt over the health of the wider economy.

US Housing Starts - May 16, 2013

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US Housing Starts - May 16, 2013

US housing starts fell to a five-month low in April, slumping nearly 17 per cent to 853,000 at a seasonally adjusted annual rate (SAAR). Housing starts had reached a 1.02 million (SAAR) pace in March. Slower construction activity in April likely reflects a temporary pause in the housing recovery underway down South. Building permits, a key proxy for future activity, increased 14.3 per cent.

The strong recovery in US home construction continues to boost BC wood product exports and manufacturing output. Sales of BC manufactured wood products rose 40 per cent year-over-year in March and are up 34 per cent through the first quarter.

BCREA Housing Market Update (May 2013)

Open House Saturday, May 18th with New Price

Property Sold By Mehrdad Halavi

Canadian Building Permits - May 6, 2013

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Canadian Building Permits - May 6, 2013

Canadian building permits rose 8.6 per cent in March to $6.5 billion, the third consecutive monthly advance. Much of the increase was a result of large increases in the Ontario and Alberta non-residential sector which pushed non-residential permits 19 per cent higher while residential permits posted a 1.7 per cent increase.

After a significant decline in February, BC building permits increases a modest 1.7 per cent in March, with balanced contributions to growth from the residential and non-residential sectors. However, on a year-over-year basis, total building permits were close to 7 per cent lower.

Looking at permit activity in BC's four major census metropolitan areas (CMA),  permits rose 43 per cent in the Kelowna CMA from February, but were 14 per cent lower year-over-year. In the Abbotsford-Mission CMA, permits jumped 70 per cent on a monthly basis but were 21 per cent lower than March 2012. In the Vancouver CMA, permits fell 12 per cent on both a monthly basis and year-over-year. Finally, in the Victoria CMA, permits more than doubled compared to February and were 9 per cent higher than March 2012.

Finance Minister Announces Stephen Poloz as New Governor of the Bank of Canada - May 2, 2013

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Finance Minister Announces Stephen Poloz as New Governor of the Bank of Canada - May 2, 2013

In somewhat of a surprise move, Finance Minister Jim Flaherty passed over presumptive favourite Senior Deputy Governor Tiff Macklem in naming Stephen Poloz as the new governor of the Bank of Canada.

Mr. Poloz spent 14 years with the Bank of Canada in numerous roles including Chief of the Bank's Research Department before moving on to Export Development Canada (EDC) where he served as the Chief Economist and, since 2011,  as the EDC's CEO and President.

While Mr. Poloz has been outside of monetary policy-making for some time and his views are relatively unknown, we do not expect the Bank's approach to change in a material way in the near future. The Bank will still operate under a flexible inflation targeting regime with a focus on medium-run inflation of 2 per cent and our view remains that interest rates will remain on hold over the next year while the Bank's forward guidance on rates will remain neutral.