US Economic Growth (Q3'2015)

US real GDP grew at a 1.5 per cent annual rate in the third quarter, well below most economists expectations. Growth was pulled lower by exports while private domestic demand, which includes personal consumption and business investment, rose at a relatively robust 3.2 per cent . Importantly, this is a preliminary release for US real GDP and will be revised in subsequent months. Second quarter GDP was revised from an initial 2.5 per cent up to 3.9 per cent. 

Today's disappointing economic growth numbers should temper expectations for a December rate hike by the US Federal Reserve. If the Fed does indeed decide to tighten monetary policy at its final meeting in 2015, it is increasingly unlikely that that decision will be supported by trends in growth and inflation, but rather by a long-held desire to move rates off of the zero lower bound.

Copyright BCREA - reprinted with permission 

US Federal Reserve Interest Rate Decision

The US Federal Reserve ("the Fed") opted to leave its key interest rate unchanged at its current level of between zero and 0.25 per cent. In its accompanying statement, the Fed cited that inflation continues to run below the Fed's long-run objective of 2 per cent and US economy activity was expanding at a moderate pace, hampered by a high dollar and attendant softness in exports. The Fed anticipates that it will only be appropriate to raise its target rate once the labor market shows further improvement and it can be reasonably confident that inflation will move back to its 2 per cent target over the medium term.

Most economists agreed that the Fed was unlikely to raise rates at the October meeting, preferring to wait until December before initiating a lift-off from the zero rate policy that has prevailed since 2008. A global economic slowdown since the summer has provided a significant amount of cover for the Fed to put off raising rates until it can better grasp the impact of slower global growth and a high US dollar on the US economy. The Fed also wants to be "reasonably confident" that its preferred measure of inflation, which is currently tracking at just 1.4 per cent, will  reach 2 per cent over the medium-term, usually defined as about 2 years.  Our modeling suggests a somewhat low-probability that inflation will reach 2 per cent before the end of 2016.  If that holds, and the Fed puts off tightening longer than currently expected, key bond yields in both the US and Canada should remain low, meaning low mortgage rates will continue throughout next year. 

Copyright BCREA - reprinted with permission 

Canadian Retail Sales

Canadian retail sales rose for a fourth consecutive month, increasing 0.5 per cent in August. On a year-over-year basis, sales were up 2.8 per cent. However, sales were higher in only 4 of 11 retail sub-sectors with strong sales of motor vehicles continuing to account for a large share of gains.  Stripping out sales of motor vehicles, retail sales were essentially flat.  In BC, retail sales were up 1.4 per cent on a monthly basis and 7 per cent compared to August 2014. Year-to-date, retail sales in the province are up 7.2 per cent over last year.

Given today's data release, Canadian real GDP is currently tracking at between 2.5 and 3 per cent in the third quarter, a significant bounce-back following two quarters of modest decline in the economy.

Copyright BCREA – reprinted with permission 

Bank of Canada Interest Rate Decision

The Bank of Canada announced this morning that it is maintaining its target for the overnight rate at 0.5 per cent. In the press release accompanying the decision, the Bank noted that inflation is evolving in line with the Bank's outlook, though total inflation remains near the bottom of the Bank's 1 to 3 per cent target range.  Removing the impact of low oil prices and other temporary factors, the Bank judges that the underlying trend in inflation is currently 1.5 to 1.7 per cent.  The negative impact of low commodity prices is still being felt in the Canadian economy, prompting the Bank to trim its growth projection for 2015 to just 1 per cent, as well as revising down its forecast for real GDP growth in 2016 and 2017 to 2 per cent and 2.5 per cent respectively. 

Growth in the Canadian economy appears to be firming in the second half of the year. Third quarter real GDP growth is currently tracking at 2.5 per cent on an annual basis and core inflation continues to hover near the Bank's target of 2 per cent. Moreover, the outlook for growth next year may be somewhat brighter than the Bank currently forecasts given the spending intentions of the new Canadian government.  If so, some of the burden on monetary policy will be lifted, making further rate cuts less likely. We expect that the Bank will remain on hold through the rest of 2015 and much of 2016, with a chance of tighter monetary policy toward the end of next year. 

Copyright BCREA - reprinted with permission 

Best Rates Dominion Lending

Strong Housing Demand Pulls Inventory to an Eight Year Low

The British Columbia Real Estate Association (BCREA) reports that a total of 8,553 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in September, up 12 per cent from the same month last year. Total sales dollar volume was $5.2 billion, up 18 per cent compared to the previous year. The average MLS® residential price in the province rose to $605,258, up 5.3 per cent from September 2014.

“Strong consumer demand has pulled down the inventory of homes for sale to its lowest level in eight years,” said Cameron Muir, BCREA Chief Economist. “Market conditions are favouring home sellers in some board areas, while contributing to relative balance between buyers and sellers in others.”

There was a five month supply of residential inventory province wide in September. A balanced market typically exhibits a 5-8 month supply of homes for sale.

The year-to-date, BC residential sales dollar volume increased 33.8 per cent to $49.5 billion, when compared with the same period in 2014. Residential unit sales climbed by 21.1 per cent to 79,170 units, while the average MLS® residential price was up 10.4 per cent to $624,659.

Copyright BCREA – Reprinted with permission 

Canadian Manufacturing Sales

Canadian manufacturing sales declined 0.2 per cent in August following three consecutive monthly increases. The decline was largely the result of falling sales in the energy sector, though motor vehicle and aerospace manufacturers also saw a dip in shipments. Overall, sales were lower in 8 of 21 Canadian manufacturing sub-sectors, representing about half of manufacturing sales.

In BC, where the manufacturing sector employs roughly 170,000 people, sales rose 0.1 per cent on a monthly basis and were up 2.9 per cent year-over-year.  A lower exposure to the energy sector has allowed BC manufacturers and exporters to continue to grow their sales this year, which has helped to contribute to the province leading the country in economic growth. We are currently tracking growth in the BC economy at approximately 2.7 per cent, compared with just 1.1 per cent for all of Canada.

Copyright BCREA – Reprinted with permission 

Canadian Employment

Canadian employment increased rose by 12,000 jobs in September, matching the rate of job creation in August. The national unemployment rate ticked higher by 0.1 points to 7.1 per cent as more people actively searched for work. Part-time employment accounted for all of September's gains while full-time work declined.  In spite of the decline in full-time employment, total hours worked, which is strongly correlated with economic growth, increased by a relatively strong 1.1 per cent compared to September 2014. 

In BC, a strong economy has lead to an increased rate of job creation. The province added 12,400 new jobs in September, including 10,600 full-time positions.  The provincial unemployment rate rose 0.3 points to 6.3 per cent as BC's economic performance has attracted new entrants to the labour force from both inside and outside of the province. Year-to-date, employment in BC is up just 0.8 per cent but has risen at a rate of 1.7  per cent over the past three months.

Copyright BCREA – Reprinted with permission 

Canadian Housing Starts

New home construction in Canada registered a robust 230,701 units at a seasonally adjusted annual rate (SAAR) in September, an 8 per cent increase over August.  The six-month trend in Canadian housing starts of 202,500 units SAAR continues to rise and is currently above the rate of household formations in Canada, a sign that new home construction could slow next year.

Housing starts in BC were up 7 per cent from August, rising to 27,331  units SAAR.  On a year-over-year basis, housing starts were down 2 per cent with single detached starts falling 5 per cent year-over year while multiple unit starts were flat compared to this time last year. Year-to-date, total housing starts in BC are up 10 per cent compared to 2014.

Looking at census metropolitan areas (CMA) in BC, total starts in the Vancouver CMA were down 7 per cent year-over-year in August as a result of slowing construction of multiple units, which fell 10 per cent year-over-year.  In the Victoria CMA, the rate of new home construction fell 54 per cent compared to September 2014 due to relative inactivity in multiple unit starts. Total housing starts in the Kelowna CMA were down 3 cent year-over-year as a dip in single detached starts dragged total starts lower.  Housing starts in the Abbotsford-Mission CMA more than tripled compared to this time last year as new multi-unit projects broke ground.

Copyright BCREA – Reprinted with permission 

Dominion Lending Best Rate Mortgages

This edition of the Weekly Rate Minder has the latest, best rates for Canadian mortgages. At Dominion Lending Centres, we work on your behalf to find the mortgage that suits your needs. Best of all — our service is free.* It's the selected lender that pays us and YOU get the best rate. *(O.A.C., E.&O.E.)• Our Best National Rates • Explore Mortgage Scenarios with Helpful Calculators on http://www.derekdiener.com

Terms Bank Rates Our Rates 6 Month 3.14% 3.10% 1 YEAR 2.89% 2.29% 2 YEARS 2.84% 2.09% 3 YEARS 3.39% 2.25% 4 YEARS 3.89% 2.49% 5 YEARS 4.64% 2.59% 7 YEARS 5.30% 3.39% 10 YEARS 6.10% 3.84% Rates are subject to change without notice. *OAC E&OE

Prime Rate is 2.70% Variable rate mortgages from as low as Prime minus 0.60%