Canadian Retail Sales - September 24, 2013

BCREA ECONOMICS NOW

Canadian retail sales rose 0.6 per cent in July on a monthly basis and were 3 per cent higher year-over-year. Retail sale were led by higher sales at gas stations, which grew 3.2 per cent, the largest increase among the 11 retail sub sectors.  Given today's data release, third quarter GDP growth is likely tracking in a range close to 2 per cent.

Retail sales in BC posted dipped 0.1 per cent from June to July but were 2.1 per cent higher year-over-year. Following an anemic sub-2 per cent growth in 2012, BC retail sales have grown just 0.6 per cent year-to-date in 2013.  

Canadian Consumer Price Inflation - September 20, 2013

BCREA ECONOMICS NOW


Canadian inflation registered 1.1 per cent in the twelve months to August, a slight deceleration from July's rate of 1.3 per cent. Core inflation, which strips out the most volatile components of the CPI, such as food and energy prices, increased 1.3 per cent in August. Consumer prices in BC actually fell 0.1 per cent in the 12 months to August largely as a result of the elimination of the HST. 

Given that inflation continues to run well below the Bank of Canada's 2 per cent target, we expect very little urgency from the Bank of Canada in raising interest rates. Our expectation remains that the Bank will begin withdrawing monetary stimulus in late 2014 or early 2015.

US Federal Reserve Open Market Committee Announcement - September 18, 2013

BCREA ECONOMICS NOW


To the surprise, and delight, of financial markets, the US Federal Reserve’s Open Market Committee (FOMC) opted not to taper its purchases of long-term US Government bonds citing continued headwinds from fiscal policy as well as tightening financial conditions from higher long-term interest rates. As we discussed in our most recent edition of the BCREA Mortgage Rate Forecast, the impetus to slow bond purchases was always conditioned on an improving economy. 

Recent signals from the labour market and consumer prices have not supported that now is the time to reign in monetary stimulus. Chairman Bernanke made clear that the Fed’s decision on when to slow or end quantitative easing will be data dependent, resting in particular on a three-part criteria of improved economic growth, a stronger labour market and inflation moving towards the Fed’s target of 2 per cent.


Canadian bond yields, which had been bid up in anticipation of the taper, slumped on the news, falling from an intra-day high of 2.16 per cent to 2.04 per cent. However, unless the US economy seriously falters in coming months, the taper remains on the horizon and so we do not expect 5-year mortgage rates to be significantly influenced.

US Housing Starts - September 18, 2013

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US housing starts rose close to 1 per cent in August to a seasonally adjusted annual rate (SAAR) of 891,000 units. 

Housing starts had reached a multi-year high of 1.02 million (SAAR) in March but have slowed to a less than 900,000 SAAR pace since then. Slower construction activity is likely a result of rising US mortgage rates and a slowdown in job-growth in recent months.

Although US new home construction has slowed of late, it is still well above the historical lows seen since the 2008 financial crisis. This has translated to a significant boost to the BC economy, as exports of BC wood products (representing about a fifth of all BC exports) have risen 30 per cent this year. 

Canadian Manufacturing Sales - September 17, 2013

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Canadian manufacturing sales rebounded strongly from a decline in June, posting an increase of 1.7 per cent in July. Stronger sales were recorded across the manufacturing sector as 15 of 21 manufacturing subsectors increased.

In BC, manufacturing sales rose 1 per cent from June but were 1.1 per cent lower than July 2012. Sales of BC wood products rebounded in July following a sharp decline in June, rising 3.1 per cent month-over -month and 13 per cent compared to July 2012.  Overall manufacturing sales continue to be pulled lower by weak demand for non-durable goods such as food, textiles and in particular BC pulp and paper. Sales of non-durable goods are down 6 per cent year-to-date while total manufacturing sales are up 1.3 per cent. 

Housing Market Turnaround Continues Unabated

Vancouver, BC – September 16, 2013.  
The British Columbia Real Estate Association (BCREA) reports that a total of 6,863 residential sales were recorded by the Multiple Listing Service® (MLS®) in BC during August, up 28.6 per cent from August 2012. Total sales dollar volume was 39.7 per cent higher than a year ago at $3.66 billion. The average MLS® residential price in the province was $533,400, up 8.6 per cent from August 2012.

"After sitting on the sidelines for much of 2012, home buyers were out in force during the summer months,” said Cameron Muir, BCREA Chief Economist. “Fear of a housing market hard landing has given way to a sense of urgency to lock-in a mortgage at a low interest rate."

While higher mortgage interest rates are on the horizon, BCREA forecasts the five-year posted mortgage rate to be 50 basis points higher a year from now. The impact on consumer demand is expected to be largely offset by stronger economic conditions and the associated employment growth.

Year-to-date, BC residential sales dollar volume was up 1.5 per cent to $26.5 billion, compared to the same period last year. Residential unit sales were down 0.6 per cent to 49,849 units, while the average MLS® residential price was up 2 per cent at $532,130

Canadian Housing Starts - September 10, 2013

Canadian housing starts registered 180,291 units at a seasonally adjusted annual rate (SAAR) in August, down from 193,021 in July.  The trend in Canadian new home construction remained relatively unchanged at 187,000 units SAAR over the past six months, a rate that is roughly in-line with Canadian household formations.  On a year-over-year basis, housing starts were down 20 per cent. 

New home construction in BC urban centres fell 19 per cent from July to 24,990 SAAR . On a year-over-year basis, total starts were 10 per cent lower than August 2012. Single-detached starts were 14 per cent higher over last year, while multiples declined 19 per cent.

Looking at census metropolitan areas (CMA) in BC, total starts in the Vancouver CMA were 14 per cent lower year-over-year at 1,530 units. Single family starts rose 16 per cent while multiples tumbled 21 per cent. In the Victoria CMA, total starts were down 5 per cent compared to last year as a 42 per cent jump in single family starts was offset by a 13 per cent decline in multiples. New home construction in the Kelowna CMA fell 20 per cent year-over-year. The decline was broad-based with both single family and multiples lower. In the Abbotsford-MIssion CMA, starts were off 21 per cent compared to August 2012 due to a sharp drop off in multiples starts. 

Canadian and US Employment - September 6, 2013

Canadian employment increased by 59,000 in August, offsetting a loss of 39,000 jobs in July. The Canadian

unemployment rate fell 0.1 points to 7.1 per cent. Over the past six months, employment gains have averaged 12,000 per month and total employment has grown 1.4 per cent in the past 12 months.

In BC, employment grew by 6,200 jobs, though that growth was entirely concentrated in part-time work. The provincial unemployment rate ticked lower by 0.1 points to 6.6 per cent. Year-to-date, employment growth in BC is flat while the level of total employment in August is 0.3 per cent lower than in 2012.

In the US, firms added 169,000 jobs to payrolls in August, while the unemployment rate fell to 7.3 per cent. However, payrolls were revised 100,000 lower for June and July,  The quarterly pace of job growth so far in the third quarter is nearly 50,000 jobs slower than in the second quarter and 70,000 off the pace set in the first quarter. Given that slowdown, a tapering of Federal Reserve bond purchases may not proceed in the fall as previously expected. If so, that would relieve some of the current upward pressure on long-term interest rates and mortgage rates.

BC Commercial Leading Indicator Rises in Second Quarter

Vancouver, BC – September 5, 2013. The BCREA Commercial Leading Indicator (CLI) rose for the

second consecutive quarter, increasing 1.2 points from the first quarter of 2013. The index is currently sitting at 113.4. On a year-over-year basis, the CLI is 0.2 per cent above the second quarter of 2012. The index reached an all-time high of 116.1 in the second quarter of 2007.

An increasing CLI in the first half of 2013 offset a sharp decline in the final quarter of 2012 to produce an overall flattening in the index’s underlying trend. This indicates that growth in the commercial real estate sector should continue at an average pace through the remainder of 2013.

"The second quarter saw a significant increase in the CLI as economic activity and office employment rebounded,” said Brendon Ogmundson, BCREA Economist. “However, rising long-term interest rates may present an obstacle to growth in the second half of 2013."