Unemployment Drops to 12.3%
Consumer Confidence Rises to 79.7
Consumer confidence climbed 16 points in June to 79.7, reaching roughly two-thirds of its pre-pandemic level, according to the Conference Board of Canada. Consumer confidence improved across all regions, with British Columbia showing the largest monthly increase among provinces (23.1 points), while Ontario posted the smallest uptick (9.3 points). The monthly Index of Consumer Confidence is constructed from responses to four attitudinal questions posed to a random sample of Canadian households.
Consumer Prices Fall 0.4%
The Consumer Price Index (CPI) dropped 0.4% year over year in May after dropping 0.2% in April, according to Statistics Canada. Prior to April, consumer prices had not fallen year over year since September 2009. Transportation prices contributed the most to the decline, primarily due to lower gas prices. Gasoline prices are expected to remain a drag on Canada’s annual inflation rate. For the year, the Conference Board now expects consumer prices to rise just 1.1%.
Canada’s GDP plunged 11.6% in April to 1.630 trillion Canadian dollars, roughly a 10-year low, according to Statistics Canada. The April plunge follows a revised 7.5% decline in March. The economy in April was 18.2% below the February level, the month before CV19 began to affect the economy. The record drop is not a surprise, and roughly in line with Statistics Canada’s advance projection of a 11% decline. April marked the peak of economic damage; Canada began to relax certain restrictions in May, with the country’s most populous province, Ontario, beginning to ease restrictions in June.
Interest Rates and Economic Outlook
Bank of Canada (BoC) maintained the key overnight interest rate at 0.25% in early June, and economists expect that the bank will stay the course for the foreseeable future.
Housing and Construction News
The annual pace of housing starts, excluding Quebec, fell 20.4% in May compared to April, according to Canada Mortgage and Housing Corp. (CMHC). Excluding Quebec, the annual pace fell to 132,576 starts in May compared with 166,477 in April as the pace of starts in Ontario slowed 40%. CMHC did not conduct their monthly starts and completion survey in Quebec in April following the introduction of pandemic measures in late March that brought construction in the province to a halt. The six-month moving average was 196,750 units, down from 198,644 in April. Permit issuance fell sharply in April. CMHC expects existing home sales to fall between 19% and 29% from their pre-pandemic levels before beginning to gradually recover in 2021.
Canada’s home sales jumped 56.9% in May after dropping a record 57.6% in April but were still down 39.8% from May 2019, according to the Canadian Real Estate Association (CREA). April sales volume was the lowest on record due to the effects of CV19 measures. According to CREA, there were 5.6 months of inventory available for sales at the end of May compared with 9 months at the end of April. The national average price for homes sold in May was $494,500, down 2.6% from May 2019. Excluding the Greater Vancouver and Greater Toronto areas, the average price was about $401,000. Generally speaking, small declines in prices have been seen in British Columbia while the decline in prices already occurring in Alberta accelerated. Prices across the rest of the Prairies have continued to stabilize.
Mortgage rates are expected to remain near historic lows until the economy shows signs of recovery, according to Can-Wise Financial Mortgage Brokerage. The BoC’s current target for the overnight rate is a historic low of 0.25%. According to Ratehub.ca, the best five-year fixed rate today is 2.14%.
April Retail Sales Fall 26.4%
Retail sales fell 26.4% in April to $34.7 billion after falling to
$47.1 billion in March. Statistics Canada noted that based on survey responses, approximately one-third of retailers were closed in April and the majority of those that remained opened did not offer in-store shopping. The decline was the largest on record and exceeded the 17.1% decline in the US, according to Statistics Canada. Like the US, sales were down in all 11 subsectors, representing 39.2% of retail trade. Sales were also down in all provinces. Retail sales in volume terms were down a record 25.2% in April, following an 8.2% decline in March, bringing total sales down by almost one-third (-31.3%) since the onset of the pandemic.
Retail Ecommerce Sales Soar
The CV19 pandemic led many Canadian retailers to start or expand their ecommerce platforms in April in response to physical distancing measures and brick and mortar store closures. On an unadjusted basis, sales accounted for a record high of 9.5% ($3.4 billion) of total retail trade in April. On a year-over-year basis, retail ecommerce more than doubled (+120.3%), while total unadjusted retail sales were down by close to one-third (-30.5%). When adjusted for basic seasonal effects, retail ecommerce grew 56.0%.
Amazon delivery drivers in Canada launched a $200 million class action suit claiming that the vast network of subcontracted delivery drivers are actually Amazon employees who have not received adequate compensation, job protection and benefits. The suit was filed on behalf of at least 2,500 drivers employed by courier companies contracted by Amazon. The class action still needs to be certified by a court before it can proceed to trial. Lawyers say that should happen next year. The entire gig economy’s employment model, which treats app-based workers as independent contractors, has come under increasing scrutiny in Ontario where the suit was filed.
Amazon plans to build a second fulfilment center in Ottawa, Ontario that will open in 2021. The center will create more than 1,000 full-time jobs. It will be Amazon’s eighth facility in Ontario and their 14th fulfillment center in Canada. Amazon has invested more than CAD $7.5 billion in Canada and employs more than 13,500 Canadians full-time.
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