Unemployment Rises to 5.4%
Consumer Prices Rise 3.4%
Consumer prices were up 3.4% year over year in May after being up 4.4% year over year in April. It was the smallest increase since June 2021. The slowdown was largely driven by lower year-over-year prices for gasoline. Excluding gas, the CPI was up 4.4% year over year. While the Bank of Canada (BoC) targets 2% annual inflation, their target for this year is to get inflation down into the 3% range. Interest rates have exceeded the bank’s target rate for the past two years. Central bank economists expect inflation to fall rapidly in the coming months, but it may take longer for interest rates to come down.
BoC Raises Interest Rates to 4.75%
The Bank of Canada (BoC) surprised everyone when they abruptly raised rates a quarter-point to 4.75% in June after previously signaling that rate increases were likely on hold for the foreseeable future. The move was in response to Canada’s surprisingly strong economy and fears that inflation might heat up. Rates are now at their highest level since 2001. Analysts are speculating that more rate increases may be forthcoming until demand and the resulting inflation cool down.
Housing and Construction News
Housing starts fell 23% in May to a seasonally adjusted annual rate of 202,494 units from a slightly revised 261,357 units in April as groundbreaking decreased on multiple unit and single-family detached urban homes, according to the Canadian Mortgage and Housing Corporation (CMHC). The decrease was greater than expected.
Canadian home sales rose 1.4% year over year in May to 54,000 units (not seasonally adjusted). Seasonally adjusted sales were up 5.1% from April to 40,220 units, according to the Canadian Real Estate Association (CREA). It was the fourth consecutive month of higher sales and the first time since June 2021 sales were up year over year.
Q1 GDP Rises 3.1%
GDP grew a robust 3.1% in the first quarter, well ahead of forecasts. Stronger than expected GDP and several months of good job growth made it more likely that the central bank would raise rates, which it did in early June.
GDP was essentially unchanged in April, although the manufacturing sector fell 0.6%, the first decline in four months. The construction sector rose 0.4% overall, although residential construction declined.
Retail Sales Rise 1.1% in April
Retail sales rose 1.1% to $65.9 billion in April after falling to $65.3 billion in March. Sales increased in eight of nine subsectors. Core retail sales, which exclude gasoline stations and fuel vendors and motor vehicle and parts dealers, increased 1.5% in April after increasing 0.3% in March. In volume terms, retail sales increased 0.3% in April. Sales were up in eight provinces.
Retail Ecommerce Sales Fall 6.1%
On a seasonally adjusted basis, retail ecommerce sales were down 6.1% to $3.6 billion in April, accounting for 5.5% of total retail trade compared with 5.9% in March.
Canadian Tire signed a seven year deal with Microsoft to use Microsoft’s Azure technology to modernize CT’s systems and infrastructure and leverage Azure’s AI capabilities in order to better serve Canadian Tire’s customers. Canadian Tire said the deal will “greatly expedite” their digital capabilities.
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