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  • US Economy
  • Housing
  • Power Tool Industry
  • Distribution
  • Canada
  • Market Trends
  • PDF

 

Canada

Canada July 2022

7/11/2022

 
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  • The unemployment rate fell by 0.2% in June to 4.9%, the fourth consecutive month at the lowest rate on record since comparable data became available in 1976. In January 2021 unemployment peaked at 9.4%.
  • Employment fell by 43,000 jobs in June after holding steady in May.
  • Employment rose in some sectors but fell in retail and among people aged 55 and older. Employment in services-producing sectors declined while employment in goods-producing sectors rose.
  • Construction added 23,000 jobs. 
  • The labour market has become increasingly tight over the past several months.
  • With the labour market tightening, average hourly wages for employees rose 5.2% to $31.24 after rising 3.9% in May.

Consumer Prices Rise 7.7%
The Consumer Price Index (CPI) rose 7.7% year over year in May after rising 6.8% in April, according to Statistics Canada. It was the largest year-over-year increase since January 1983. It was the fifth consecutive month the CPI has been over 5%; the last time the CPI was over 5% was in 1991. Inflation has exceeded the Bank of Canada’s (BoC) target range of 1% to 3% for fourteen consecutive months. Price increases were broad-based in May. Excluding the volatile food and energy categories, the core CPI was up 6.3% year over year after rising 4.2% in April. On a monthly basis the CPI was up 1.4% in May after rising 0.6% in April. The jump in May was the largest monthly increase since the introduction of the series in 1992. Energy prices were up 34.8% year over year and grocery prices and shelter costs remain elevated. New home prices are beginning to show signs of moderating.
 
Bank of Canada Raises Rates to 1.5%
The Bank of Canada (BoC) raised rates by half a percentage point in early June as part of their efforts to get inflation back under control. The move was widely expected, but the BoC warned of higher inflation and more rate hikes ahead as they move aggressively to try to tamp down inflation while still avoiding a recession. The BoC also raised rates in March and April after holding borrowing costs at record lows for the first two years of the pandemic. Inflation hit a three-decade high of 6.8% in April. The bank’s comments could foreshadow a .75% increase ahead.
 
First Quarter GDP Rises 0.8%
GDP grew 0.8% in the first quarter of 2022, mainly on the strength of increased business investment and household consumption, according to Statistics Canada. It was the third consecutive increase in quarterly GDP. Investment in residential construction rose for a second consecutive quarter, up 4.3%, as renovations (+9.3%), resale costs (+4.6%) and new construction (+0.2%) all increased. Aside from Alberta and the territories, new construction increased in every province.
 
Household spending rose 0.8% in the first quarter, the third consecutive quarterly increase, as spending rose on most goods and services despite limited capacity restrictions throughout Canada on in-person shopping and services.
 
Outlays for durable goods increased 2.6% in the first quarter, following a 0.3% increase in the fourth quarter of 2021. Aside from the third quarter of 2020, this was the largest quarterly increase of durable goods outlays in five years.
 
Outlays for services rose 0.7% in the first quarter, a seventh consecutive quarterly increase. Increases in wages and reductions in spending pushed the household savings rate up to 8.1%, which followed a 6.9% savings rate in the fourth quarter of 2021. By comparison, the average household savings rate over the decade prior to 2020 was 3.5%.
 
Housing and Construction News
Housing starts rose 8% in May to 287,257 units compared with 265,734 in April. The increase was primarily due to an increase in urban starts and multiunit construction, according to Canada Mortgage and Housing Corporation (CMHC). The level of starts remains historically high and has been well above 200,000 units since 2020.
 
Home sales continued to fall in May, dropping nearly 9% from April and down 22% year over year to 53,720 homes, according to the Canada Real Estate Association (CREA). Realtors report that prospective buyers are able to negotiate more than they could in previous months and are once again asking for home inspections. The average seasonally adjusted price in May fell 4% from April to $700,438 and was up just 3% from May 2021. CREA forecast the national average home price will rise by 10.8% on an annual basis to $762,386 in 2022 and expects the largest gains to come from the Maritime provinces, Ontario and Quebec. The national average home price is expected to rise by another 3.1% to $786,282 in 2023. Excluding the Greater Toronto and Vancouver areas reduces the national average price by $138,000. Sellers are still coming to terms with how the market has shifted and some are even holding back on listing their homes.
 
Home prices have gone up 53% nationally over the past two years, according to a report from Bank of Canada. The percentage of homes bought by investors has also gone up from 19% to 22%; many investors borrowed against their homes to take advantage of skyrocketing home prices. Rising mortgage rates and prices are pushing more people to the sidelines and making it tougher for investors to sell homes. The report noted there could easily be a 10% correction in home prices, although that will vary from region to region.
 
Retail Sales 
Retail sales increased 0.9% to $60.7 billion in May. Sales were up in 6 of 11 subsectors, representing 43.3% of retail trade, led by higher sales at general merchandise stores (+4.2%). Core retail sales, which exclude gasoline stations and motor vehicle and parts dealers, increased 1.0%. In volume terms, retail sales were up 0.9% in April. The largest decline in sales came from building material and garden equipment and supplies dealers, where sales fell 4.3%. It was the first decline in that sector in four months. Retail sales rose in eight provinces.
 
Retail Ecommerce Sales
On a seasonally adjusted basis, retail ecommerce sales were up 0.9% in April. On an unadjusted basis, retail ecommerce sales were down 21.0% year over year to $3.3 billion in April, accounting for 5.2% of total retail trade. The share of ecommerce sales out of total retail sales fell 2.0% compared with April 2021 as people shopped more in stores.
 
Retail Notes
Canadian Tire garnered a lot of positive free publicity when they lined the front lawns of homes in the Danforth neighbourhood in Toronto with massive pink flamingos, unicorns, garden gnomes and dairy cows, all part of an advertising campaign to celebrate the company’s centennial anniversary. Nearly 50 homeowners agreed in advance to place the floaties on their lawns. No word as to why they chose Danforth, but Canadian Tire has long appealed to middle-class homeowners in need of gardening tools and sports equipment for the kids and is now facing stiff competition from other retailers, including Walmart and Amazon.
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