GDP Falls 0.1% The Canadian economy shrank in January, with GDP falling 0.1%, according to Statistics Canada. Results were below economists’ expectations of 0.1% growth. It was the largest decline since May 2016. The drop was driven by a 3.6% decline in oil and gas extraction as well as falling real estate activity as new mortgage qualification rules kicked in. Construction spending rose 0.5% as builders continued to ramp up home construction; wholesale and retail trade also rose in January. A sharp drop off in Canadian economic growth is expected this year as households with high debt levels trim spending. The federal budget for 2018 projects 2.2% growth this year and 1.6% growth in 2019. Economists say there are a host of downside risks to the Canadian economy from abroad, particularly US trade and tax policy. Unemployment Steady at 5.8% Employment in Canada was essentially unchanged in April and the unemployment rate held steady at 5.8%. On a year-over-year basis, employment grew by 278,000 (+1.5%). The increase was due to gains in full-time employment, which rose 2.6%; part-time work declined. Among the provinces, employment rose in Manitoba and Nova Scotia, while it declined in Saskatchewan. Employment increased in professional, scientific and technical services, as well as in accommodation and food services. Employment declined in wholesale and retail trade and in construction. Canada's unemployment rate inched down to 5.8% in February, and the Canadian economy added about 15,000 new jobs after losing 88,000 jobs in January. Health-care and social assistance sectors added jobs, while wholesale and retail trade and manufacturing shrank. By province, New Brunswick and Nova Scotia added jobs, while Saskatchewan lost some. There was little change everywhere else. Economists said that despite the decline in the unemployment rate, the overall report was neutral, as part-time jobs accounted for all of the gains, and full-time jobs declined by 40,000, the first decline in six months. Most of the gains were driven by public-sector employment, which increased by 50,000 jobs. Most economists agree that public-sector job growth is not sustainable, and private-sector job gains are needed to maintain growth. But the economy only added 8,000 private-sector jobs in February, while losing 43,000 self-employed positions. Consumer Confidence Rises Consumer Confidence in Canada increased to 55.72 in February from 55.12 in January, according to The Conference Board of Canada’s Index of Consumer Confidence. Consumer confidence in Canada averaged 53.27 from 2010 until 2018, reaching an all-time high of 56.40 in August of 2014 and a record low of 46.80 in February of 2016. The monthly Index of Consumer Confidence is constructed from responses to four attitudinal questions posed to a random sample of Canadian households. Consumer Prices Rise 2.3% The consumer price index (CPI) rose 2.3% in March on a year-over-year basis after rising 2.2% in February, according to Statistics Canada. Prices were up 0.3% from February. On a seasonally adjusted basis, monthly prices rose 0.1%. Core inflation remained relatively unchanged, rising in a range from 1.9% to 2.1%, based on the three preferred gauges used by the Bank of Canada, for an average of 2.0%. Higher gasoline prices at the pump were a big contributor to rising prices. Interest Rates Steady The Bank of Canada (BOC) held rates at 1.25%, saying that slower first quarter growth of about 1.3% was largely a result of housing markets’ responses to stricter mortgage rules and sluggish exports. The BOC is expecting the economy to rebound in the second quarter with 2.5% growth. Analysts expect the BOC to tolerate above-target inflation for a period of time rather than risk economic growth stalling by raising rates quickly. One more rate increase is expected this year, but not until July at the earliest. The BOC has raised rates three times over the past 12 months. Canada U.S. Trade Updates Members of the Trump administration have recently hinted that withdrawing from NAFTA is not in their current plans. A congressional gathering heard Treasury Secretary Steven Mnuchin express some optimism about getting a deal based on ongoing meetings. Mnuchin said "It is a major priority of ours to renegotiate the deal." Canadian minister Justin Trudeau also struck a cooperative tone during an address he made in mid-February in California, saying that both the US and Canada benefit greatly from NAFTA. Housing and Construction News The trend for housing starts in Canada was stable in March at 226,842 units, compared to 225,804 units in February 2018, according to Canada Mortgage and Housing Corporation (CMHC). This trend measure is a six-month moving average of the monthly seasonally adjusted annual rates (SAAR) of housing starts. The standalone monthly SAAR of housing starts for all areas in Canada fell 2.5% to 225,213 units in March, down from 231,026 units in February. The SAAR of urban starts decreased by 2.8% in March to 208,237 units. Multiple urban starts decreased by 7.3% to 144,578 units in March while single-detached urban starts increased by 9.5% to 63,659 units. Rural starts were estimated at a seasonally adjusted annual rate of 16,976 units. Over the past six months multifamily starts have trended higher while single-family starts have declined. Home sales plunged 23% in March and the national average price dropped 10% from March 2017, although home sales were up 1.3% from February 2018. The drop in sales was expected after several policy measures were implemented to cool Canada’s hot housing market, including changes to regulations and increases in interest rates. Market activity was below year-ago levels in 80% of local markets and all major urban centers with the exception of Montreal and Ottawa. The Royal Bank of Canada (RBC) joined Toronto-Dominion Bank (TDB) in raising posted rates for five year fixed mortgages. RBC’s new rate will be 5.34% and TDB’s new rate will be 5.59%. Canada’s other major banks are reportedly considering pricing changes as well. At the same time, banks are reducing rates on variable-rate mortgages. Retail Sales Rise 0.3% Retail sales rose 0.4% month over month in February to a seasonally adjusted C$49.76 billion, according to Statistics Canada. Excluding sales at motor vehicle and parts dealers, retail sales were flat at C$36.44 billion. Four of the 11 retail sub-sectors recorded higher sales in February, with motor vehicle and parts dealers rising 1.4% and general merchandise store sales rising 2.0%. Seven Canadian provinces reported sales growth in February, with Ontario accounting for the majority of the gain with sales of C$18.33 billion. In Canada, retail sales account for about half of all consumer spending, and are considered a proxy for overall consumer spending. Canada Retail Notes Canadian Tire is revamping their loyalty program and expanding it into their other stores, including Sport Check and Marks. Triangle Rewards is the loyalty program’s first major overhaul since Canadian Tire launched a digital app and loyalty card in 2014 to complement their paper Canadian Tire “money” program. Tire Money will continue to be handed out at stores to debit or cash-paying customers who do not have a loyalty card or app. Lowe’s Canada is rolling out its ECO products program in all corporate RONA, Reno-Depot and Lowe’s stores across the country. The program clearly identifies with the ECO seal more than 3,500 products that represent more environmentally friendly alternatives. To kick off the program, a tree will be planted for each ECO product that was sold on Earth Day, Sunday, April 22. Amazon reportedly wants to add a million square feet of office and commercial space in downtown Vancouver and is looking at renting the old Vancouver post office, a mammoth 686,000-square-feet structure that takes up an entire block. Amazon has stated that they plan to double the workforce in Vancouver to 2,000 people by 2020. © Robert Bosch Tool Corporation. All rights reserved, no copying or reproducing is permitted without prior written approval.
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