The Bank of Canada (BoC) is now expected to hold interest rates steady at 1.75% at their meeting in early December, in part because of the slump in Canadian heavy crude prices. The BoC has pegged the neutral rate at between 2.5% and 3.5%, so several more increases will eventually be on the way in order to prevent the economy from overheating. However, analysts expect the BoC to pause until oil prices recover, and speculate the next increase might be postponed until March 2019.
Unemployment Falls to Record 5.6%
The unemployment rate fell to 5.6% in November after falling to 5.8% in October, according to the latest labour force survey. It was the lowest rate of unemployment since data became available in 1976. Since November 2017 employment has grown by 1.2%, or 219,000 jobs, reflecting gains in full-time work. Employment increased in six provinces, led by Quebec and Alberta, and was little changed in the four Atlantic provinces, according to Statistics Canada. Employment in construction increased by 15,000, led by gains in British Columbia and tempered by a decline in Newfoundland and Labrador.
Consumer Confidence Rises to 57.05
Consumer Confidence in Canada increased to 57.05 in November from 55.25 in October. Consumer Confidence in Canada averaged 53.44 from 2010 until 2018, reaching an all-time high of 57.05 in November of 2018 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 2.4%
The Consumer Price Index (CPI) rose 2.4% on a year-over-year basis in October after rising 2.2% in September, according to Statistics Canada. On a seasonally adjusted monthly basis, the CPI increased 0.3%, with airfares, passenger vehicles and travel tours increasing the most, although prices rose across all 12 major components. Prices for durable goods rose 0.9% and prices for services rose 2.7%. Prices rose in all provinces. Gasoline prices climbed 12% year over year in October after rising by the same percentage in September.
Canada’s GDP edged down 0.1% in September, following seven consecutive months of growth. Lower output across all goods-producing industries (-0.7%) was the main reason for the decline. The output of services-producing industries edged up 0.2% as growth in most sectors more than offset declines in wholesale trade and in finance and insurance. Overall, 10 of 20 industrial sectors declined in September. The construction sector was down 0.6% in September, contracting for the fourth consecutive month. Residential construction was down for the fourth consecutive month, declining 1.0% on slower single, row and multi-unit dwelling construction along with housing alterations and improvements. Nonresidential construction grew 0.4%, partly offsetting two months of decline, led by industrial and commercial construction. Repair construction (-0.4%) and engineering and other construction activities (-0.8%) were also down.
Housing and Construction News
Housing starts rose to 205,925 units in October after falling to a slightly upwardly revised 189,730 units in September, according to Canada Mortgage and Housing Corp. Economists had expected starts to rise to 200,000. The pace of urban starts rose by 8.6% to 191,964 units after falling to 175,653 units in September. Single-detached urban starts fell 10.7% to 46,522 units. Rural starts were estimated at a seasonally adjusted annual rate of 13,961 units. The six-month moving average of the monthly seasonally adjusted annual rates was 206,171 in October, down from 207,809 in September. The increase came despite rising interest rates and more restrictive mortgage rules. Demand is being supported by the fastest population growth in 27 years and new households being formed by millennials.
Home sales fell 1.6% in October after falling 0.4% in September and were down 3.7% compared to October 2017, according to the Canadian Real Estate Association (CREA). It marked the third consecutive month-over-month decline. Home sales moved lower in more than half of all local markets, including Vancouver, BC’s Fraser Valley, Montreal, Edmonton and parts of Ontario. The declines more than offset gains in the greater Toronto area and Montreal. New listings fell 1.1% as well. Analysts noted that the markets are a long way from the highs seen in 2016 and early 2017 and expect a prolonged period of “calm” in the housing market.
Retail Sales Rise 0.2%
Retail sales edged up 0.2% to $50.9 billion in September following a relatively flat August. The gain was led by food and beverage stores and, to a lesser extent, general merchandise stores and motor vehicle and parts dealers. Sales were down at gasoline stations and building material and garden equipment and supplies dealers. Excluding gasoline stations, retail sales rose 0.4%. Sales were up in 6 of 11 subsectors, representing 75% of retail trade. After removing the effects of price changes, retail sales in volume terms increased 0.5%.
Retail sales were up 0.9% in the third quarter following a 1.1% gain in the second quarter. In volume terms, retail sales increased 0.4% in the third quarter. Most provinces reported that wildfires negatively impacted sales, with British Columbia feeling the biggest impact. On an unadjusted basis, retail ecommerce sales totaled $1.4 billion, representing 2.8% of total retail trade. On a year-over-year basis, retail ecommerce rose 16.9%, while total unadjusted retail sales increased 1.8%. In Canada, retail sales account for about half of all consumer spending, and are considered a proxy for overall consumer spending.
Canadian Tire’s Q3 revenues rose 4.4% to $3.63 billion from $3.27 billion and earnings per share exceeded expectations. Excluding petroleum, retail sales were up 2.6% over Q3 2017. The company said that their Triangle Rewards program has been exceptionally successful.
Canadian Tire rolled out ecommerce home deliveries nationwide but is not offering free shipping as of yet. Customers can pick up ecommerce orders for free in stores.
Canadian Tire became the first Canadian retailer to debut automated self-serve pickup towers. They’ve installed the
16-foot towers at five locations in Vancouver, Calgary, Saskatoon and Toronto. Customers can pick up their online purchases in less than a minute. Canadian Tire is also introducing a fleet of self-serve lockers and automated check-in terminals where customers enter a unique PIN code and staff delivers their online order directly to them.
Walmart Canada is also testing self-serve kiosks in two Canadian retail locations with plans to introduce the concept to 20 additional stores across the country by early 2019.
Home Depot Canada posted positive comps in local currency, but there are pressures from housing, as the government has made a conscious decision to slow down housing. Nevertheless, Home Depot reported that they are seeing good numbers from Canada and terrific online growth.
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