Unemployment Falls to 7.5%
Consumer Prices Rise 0.3%
The Consumer Price Index (CPI) rose 0.3% in June after rising 0.5% in May and was up 3.1% year over year after being up 3.6% year over year in May, according to Statistics Canada. Prices rose at a slower pace in four of the eight major components on a year-over-year basis. Shelter prices rose 4.4% year over year in June, the largest yearly increase since September 2008. Prices for new homes continue to be impacted by shifting consumer preferences as well as higher building costs compared with June 2020. Gasoline prices continued to rise, but at a slower pace, and were up 10.5% from June 2020. The BoC had earlier projected that inflation would rise to about 3% because of the disparate comparisons to 2020, but should return to close to the bank’s target of 2% by the end of the year. Statistics Canada is attempting to balance the impact of the pandemic by removing items that were not available in March from the year-over-year comparisons.
GDP Falls 0.3% in April
Real GDP contracted 0.3% in April after 11 consecutive monthly increases. With the first decline in 12 months, total economic activity remained at about 1% below its level before the pandemic began affecting economic activity in February 2020.
Overall, 12 of 20 industrial sectors were down as gains in
goods-producing industries (+0.5%) were more than offset by contractions in services-producing industries (-0.6%).
Preliminary information indicates a 0.3% decrease in
real GDP in May. The retail trade, construction and real estate rental and leasing sectors contributed the most to the declines.
Retail trade retreated 5.5% in April, dampening the previous two monthly expansions, as 10 of 12 subsectors were down.
The construction sector rose 2.4% in April, up for a fifth consecutive month, as all components increased. Residential building construction rose 4.1%, leading the expansion with a fifth consecutive monthly increase. Continued growth in single-family homes and multi-unit dwellings construction more than offset lower activity in home improvements and renovations.
Repair construction increased 0.6%, while engineering and other construction activities grew 1.6%. Non-residential building construction rose 1.1%.
Interest Rates Steady
The BoC left its key interest rate on hold at 0.25% at their meeting in mid-July but said they would cut their weekly net purchases of government bonds from C$3 billion to C$2 billion. The BoC said they remain committed to keeping the interest rate unchanged until economic slack is absorbed, most likely sometime in the second half of 2022. The benchmark interest rate has been at 0.25% for more than a year.
Housing and Construction News
Canada housing starts fell 1.5% in June to a seasonally adjusted annual rate of 282,070 units after rising to 279,000 units in May, according to Canada Mortgage and Housing Corp. (CMHC). The annual pace of urban starts fell 1.8% in June to 251,190. Starts of single-detached urban homes fell 8.5% to 60,105. CMHC estimated rural starts at a seasonally adjusted annual rate of 30,880 units. The six-month moving average of the monthly seasonally adjusted annual rate of housing starts was 293,567 in June, up from 284,837 in May.
Home sales fell 8.4% in June after falling 7.4% in May and 12.5% in April, according to the Canadian Real Estate Association (CREA). CREA noted that three consecutive months of dropping sales is an indication of continuing fatigue and frustration among buyers dealing with sky-high prices and a shortage of homes. Sales were down in 80% of all local markets. The national average selling price actually dropped to $679,000 from $696,000 in May, but is still up 25.9% from June 2020.
Retail Sales Drop 2.1%
Retail sales fell 2.1% in May to $53.8 billion after rising to $58 billion in April. Sales decreased in 8 of 11 subsectors, representing 65.6% of retail trade, and also fell in eight provinces. Core retail sales, which exclude gasoline stations and motor vehicle and parts dealers, decreased 2.4%. In volume terms, retail sales decreased 2.7% in May. Retail sales fell primarily due to restrictions put back in place in response to a third wave of CV19 cases. Sales at building material and garden equipment and supplies dealers dropped 11.3% in May after dropping 10.4% in April. The two consecutive monthly declines in retail sales follows record sales of hardware, tools, renovation and lawn and garden products in March.
Retail Ecommerce Sales Climb
On a seasonally adjusted basis, retail ecommerce sales rose 2.1% in May. On an unadjusted basis, retail ecommerce sales were up 3.7% year over year to $4.2 billion in May, accounting for 7.0% of total retail trade. The share of ecommerce sales out of total retail sales was unchanged in May compared with April.
Amazon formally canceled Prime Day in Canada this year due to the impact of CV19 on Canadian operations. Amazon partially closed three Canadian distribution centers in Ontario in May after multiple employees tested positive. Amazon had previously postponed the event.
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