Canadian Inflation

The Consumer Price Index (CPI) rose 1.2 per cent in the 12-months to March, a slight acceleration from the 1 per cent inflation registered in the first two months of the year. Lower gasoline prices, which remain the primary drag on growth in consumer prices, fell 19.2 per cent compared to last year. Inflation measured by the Bank of Canada's core CPI index, which excludes fuel, food and other volatile components, continued to trend above the Bank's 2 per cent target, posting and increase of 2.4 per cent in March. In BC, inflation registered 1 per cent on the heels of 0.8 per cent inflation in February. 

 Copyright BCREA - reprinted with permission 

BC Home Sales Post Strongest March in Eight Years

The British Columbia Real Estate Association (BCREA) reports that a total of 9,101 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in March, up 37.6 per cent from the same month last year. Total sales dollar volume was $5.8 billion, an increase of 57.1 per cent compared to a year ago. The average MLS® residential price in the province rose to $641,799, up 14.1 per cent from the same month last year.

"BC home sales climbed significantly in March," said Cameron Muir, BCREA Chief Economist. "More homes traded hands last month than any March since 2007. On a seasonally adjusted basis, March posted the most home sales of any month since December of 2009."

"Rock bottom interest rates and rising consumer confidence have strengthened housing markets in most regions of the province, added Muir. "Many board areas are now exhibiting sellers' market conditions with home prices advancing well above the overall rate of inflation."

During the first quarter, BC residential sales dollar volume was up 33.2 per cent to $12.7 billion, compared to the same period last year. Residential unit sales were up 22.5 per cent to 20,139 units, while the average MLS® residential price was up 8.7 per cent at $630,435.

Copyright BCREA - reprinted with permission 

Bank of Canada Interest Rate Announcement

The Bank of Canada announced this morning that it is maintaining its target for the overnight rate at 0.75 per cent. In the press release accompanying the decision, the Bank noted that temporary sector-specific factors as well as pass-through effects from a lower Canadian dollar to import-prices is keeping core inflation close to its 2 per cent target in spite of increasing slack in the economy. The Bank now expects the growth impact of low oil prices to be more front-loaded than assumed in January and for growth to rebound beginning in the second quarter with real GDP growth projected at 2.5 per cent on average through the middle of 2016.  Weak first quarter growth will translate to a widening of the Canadian output gap and downward pressure on projected inflation, but the Bank expects a higher rate of growth in the second half will push the economy back onto its previous trajectory, reaching full-capacity around the end of 2016. 

Since unveiling a surprise interest rate cut in January, each successive Bank of Canada announcement has brought heightened anticipation. However, stable oil prices, a low Canadian dollar and firm core inflation mean that the Bank is likely to take a wait and see approach as to the ultimate impact of low oil prices on the Canadian economy. Monetary policy generally operates with a four to six quarter lag, which is why the Bank opted to reduce its target rate in January to cushion the potential impact of low oil prices. Unless the Bank anticipates further shocks to the economy or a deepening impact on growth and employment arising from the oil sector, it may ultimately hold rates constant for the remainder of the year. 

Copyright BCREA - reprinted with permission 

Canadian Employment

Canadian employment grew by 29,000 jobs in March while the national unemployment rate remained at 6.8 per cent. Total hours worked, which is strongly correlated with economic growth, rose just 0.1 per cent compared to March 2014.   First quarter job gains amounted to a fairly healthy 63,000 new jobs, though mostly concentrated in part-time work.

In BC, employment increased by 5,700 jobs in March, though all in part-time work. Full-time employment fell by approximately 5,700 while part-time employment was up 11,300. The provincial unemployment rate declined 0.2 points to 5.8 per cent.

Copyright BCREA - reprinted with permission 

Canadian Building Permits

The value of Canadian building permits fell for a second consecutive month in February, dropping 0.9 per cent on a monthly basis.

In contrast, the total value of building permits issued in BC rose 17.4 per cent on a monthly basis. Non-residential permits increased 17 per cent while residential sectors increased 18.7 per cent in February. On a year-over year basis, total permits were up 15.9 per cent compared to last February.

Construction intentions were mixed in BC's four census metropolitan areas (CMA). Permits in the Abbotsford-Mission CMA fell 3.3 per cent on a monthly basis but were 20.8 per cent higher year-over-year. In the Kelowna CMA, permits declined 47.8 per cent from January and were 21.6 per cent lower year-over-year. In the Victoria CMA, permit activity was up 11.6per cent on a monthly basis and was 72 per cent higher year-over-year. In the Vancouver CMA, permits recovered from a weak January, jumping 50.9 per cent on a monthly basis and 16.6 per cent year-over-year

 

Copyright BCREA - reprinted with permission 

Canadian Monthly GDP (January)

The Canadian economy contracted 0.1 per cent in January as weakness in the wholesale and retail trade sector offset surprising gains in oil and gas extraction.  While January's reading on GDP growth showed some softness in the economy, it was actually better than expected and certainly far from the "atrocious" start to the year expected by the Bank of Canada.  However, given available data for the remainder of the first quarter, the Canadian economy is tracking at only 0.5 per cent growth in real GDP, with risk of an outright contraction of the economy.  That could be enough to spur further monetary stimulus,  though financial markets have been recently betting that the Bank stays on hold for the remainder of the year. 

Copyright BCREA - reprinted with permission 

Canadian inflation

The Consumer Price Index (CPI) rose 1 per cent in the 12-months to February, matching the increase from January. Lower gasoline prices were the largest contributor to the downward trend in consumer prices, falling 21.8 per cent compared to last year. The Bank of Canada's core CPI index, which excludes fuel, food and other volatile components, increased 2.1 per cent in February, following a 2.2 per cent increase in January.  In BC, inflation registered just 0.8 per cent.

Core inflation edged lower in February but remains slightly above the Bank of Canada (BoC) target of 2 per cent.  Since the Bank's March interest rate announcement, oil prices have weakened significantly and, as expected, incoming data has been soft and the Canadian dollar has lost some ground. Given recent data, the odds of the Bank of Canada lowering its target rate at its April meeting are probably about even.

Copyright BCREA - reprinted with permission