Canada February 2023

Unemployment Falls to 5.0% in December 

• The unemployment rate fell to 5.0% in December after falling to 5.1% in November, just above the record low of 4.9% reached in June and July 2022. In January 2021 unemployment peaked at 9.4%.
• Employment rose by 104,000 jobs in December after rising by just 10,000 jobs in November. Much of the gain was concentrated in the private sector.
• Employment rose in several industries, including construction and warehousing.
• Employment increased in Ontario, Alberta, British Columbia, Manitoba, Newfoundland, Labrador and Saskatchewan in December. There was little change in the other provinces.
• Year-over-year wage growth remained above 5% for the seventh consecutive month. Wage growth needs to cool in order to tamp down inflation.

 
Consumer Prices Up 6.3%
Consumer prices were up 6.3% year over year in December after being up 5.4% in November. Falling gasoline prices and another drop in the homeowner’s replacement cost (HRC) index contributed to the decline. The HRC index has decelerated, on a year-over-year basis, every month since May 2022 when it rose 11.1%. On a monthly basis, the CPI fell 0.6% in December after rising 0.1% in November. On a seasonally adjusted monthly basis, the CPI was down 0.1%
 
Bank of Canada Raises Interest Rates
The BoC raised interest rates by 25 basis points to 4.50% in late January after raising them 50 basis points in December. The accompanying statement surprised analysts as the BoC indicated they might be ready to put rate increases on hold as long as the economy performs as expected. Rates are now at the highest level in fifteen years.
 
Housing and Construction News
Housing starts fell 5% month over month in December to a six-month average of 248,600 units, according to Canada Mortgage and Housing Corp. (CMHC). Single-family starts fell 11% to 44,900 units. Starts fell in all regions except Ontario.
 
Canadian home sales rose 1.3% in December after falling 3.3% in November, according to the Canadian Real Estate Association (CREA). New listings fell 5.7% from November. The association said there were 4.2 months of housing inventory on the market at the end of December, close to the monthly supply pre-pandemic but about a month below the long-term average. Home prices fell 1.6% in December and were down 7.5% year over year. Home sales were down 39% compared to December 2021. The association expects home sales to fall 0.5% this year after dropping nearly 25% in 2022, while average prices are projected to fall 5.9% after rising 2.4% last year. CREA forecasts that national home sales will rise slightly more than 10% in 2024, though that would still be below 2020 and 2021 figures, while the average home price is expected to recover 3.5% from 2023 prices.
 
A new report from TD Economics predicts Canada will see the weakest level of home sales since 2001 this year. The housing market outlook from economist Rishi Sondhi attributes the prediction to the poorest affordability level since the late 1980s and early '90s. Sondhi thinks that home sales will reach their bottom sometime in early 2023, after declining 20% from peak to trough.
 
Retail Sales Drop 0.1%
Retail sales decreased 0.1% to $61.8 billion in November. Sales decreased in 6 of 11 subsectors, representing 47.4% of retail trade. Sales at building material and garden equipment and supplies dealers fell 3.8%, leading the decline. Core retail sales, which exclude gasoline stations and motor vehicle and parts dealers, decreased 1.1%, their largest decline in 11 months. In volume terms, retail sales decreased 0.4% in November.
 
Retail Ecommerce Sales Fall 2.7%
On a seasonally adjusted basis, retail ecommerce sales were down 2.7% in November. On an unadjusted basis, retail ecommerce sales were down 3.5% year over year to $4.4 billion in November, accounting for 6.5% of total retail trade. The share of ecommerce sales out of total retail sales fell 0.6% compared with November 2021.
 
Retail Notes
Home Depot’s Canadian arm shared details from electronic receipts related to in-store purchases with Facebook owner Meta Platforms without the knowledge or consent of their customers, according to Canada's privacy regulator. An investigation by the Office of the Privacy Commissioner of Canada (OPC) found that by participating in Meta's offline conversions program Home Depot shared the e-receipts that included encoded email addresses and purchase information. The regulator added that the home goods chain stopped sharing customer information with Meta in October 2022, which was among the recommendations made by OPC. THD will not share data until they can implement measures to ensure valid consent. Home Depot and Meta did not immediately respond to Reuters requests for comment.
 
GDP Rises 0.1%
Canada’s GDP edged up 0.1% in November after rising by 0.1% in October, beating analysts’ estimates. Growth in service industries was partially offset by a 0.1% decline in goods-producing industries. Initial estimates from Statistics Canada indicate GDP remained steady in December.
 
Consumer Prices Fall 0.6%
The consumer price index fell 0.6% in December after rising 0.1% in November. It was the largest decline in consumer prices since April 2020, driven primarily by falling gasoline prices. The consumer price index rose 6.3% year over year in December, down from a 6.8% increase in November. Core prices cooled off slightly as well, rising 5.3% in December after rising 5.4% in November. Core inflation remained well above the Bank of Canada’s (BoC) target of 2% but is down significantly from 8.1% in June. 

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