Unemployment Falls to 7.5%
The Consumer Price Index (CPI) rose 1.1% year over year in February after rising 1% in January. A big 5.0% increase in gasoline prices was behind much of the increase. Excluding gasoline, the CPI rose 1.0% in February, down from a 1.3% increase in January. On a seasonally adjusted monthly basis, the CPI rose 0.1% in February. The homeowners' replacement cost index, which is linked to the price of new homes, rose 7.0% year over year in February, as higher building costs, low interest rates and strong demand for homes with more space continued to push prices for new housing higher. It was the largest yearly gain recorded since February 2007. Meanwhile, year-over-year mortgage costs continue to decline as Canadians take advantage of low mortgage rates. Price growth slowed in most provinces but accelerated in Quebec.
GDP Rises 0.1% in December
GDP grew 0.1% in December after growing 0.7% in November, the eighth consecutive monthly gain. GDP remained 3% below pre-pandemic levels in February 2020. Goods-producing industries were up 0.6% and services-producing industries fell 0.1%. Sales in the retail trade sector fell 3.3% in December after seven consecutive months of growth, as 10 of 12 subsectors were down. December saw the reintroduction of lockdown measures across many parts the country including the closure of all non-essential retailing and strict capacity and physical distancing control at essential retailers. Construction rose 1.2% in December, following a 0.3% contraction in November, as the majority of subsectors increased. Residential construction grew 1.4% in December, and repair construction increased 1.5%.
Interest Rates Steady
The Bank of Canada (BOC) kept key interest rates at 0.25% even though they changed their forecast for the economy and now believe it will grow during the first quarter rather than contract as they forecast earlier in the year. The bank pointed to new, more transmissible variants of CV19 as the biggest risk to the recovery. They do not see inflation moving back into the 2% range until 2023. Interest rates have been at 0.25% for nearly a year; the bank cut rates three times in March 2020 as the pandemic began in order to keep credit flowing and ease costs for households.
Housing and Construction News
Canadian housing starts fell 13.5% in February compared with the previous month as both multiple and single-detached urban starts fell, according to the Canadian Mortgage and Housing Corporation. The seasonally adjusted annualized rate of housing starts fell to 245,922 units from a revised 284,372 units in January. Analysts had expected starts to fall to 245,000 units in February.
Home sales continued to rise in February, up 39.2% from February 2020, according the Canadian Real Estate Association (CREA). Sales in February were up 6.6% from January 2021. The actual national average home price in February was a record $678,091, up 25% from February 2020. Big price increases were not confined to traditionally hot real estate markets such as Toronto and Vancouver. The largest year-over-year gains, above 35%, came from the Lakelands region of Ontario’s cottage country, Tillsonburg District and Woodstock-Ingersoll. CREA said inventory remains at historic lows with more than 90% of listings selling in less than a month. Year-over-year prices are up in double-digits for most areas. Mortgage rates are expected to remain low.
Retail Sales Fall 1.1%
Retail sales fell in January for the second consecutive month, dropping 1.1% to $52.5 billion. Sales declined in 6 of 11 subsectors, representing 34% of retail sales. Core retail sales, which exclude gasoline stations and motor vehicle and parts dealers, also posted their second consecutive decline, falling 1.4% in January. Building material and garden equipment and supplies dealers’ sales rose 2.9% in January after dropping in December. With the resurgence of CV19 cases in Canada, provincial governments began to reintroduce physical distancing measures, which directly affected the retail sector. Sales declined overall in Quebec and Ontario. Statistics Canada said most retailers continued to report sales despite the fact that approximately 14% of retailers were closed at some point in January for an average of three business days.
Retail Ecommerce Sales Soar
On an unadjusted basis, retail ecommerce sales were up 110.7% year over year to $3.5 billion in January, accounting for 7.8% of total retail trade after rising 69.3% year over year in December. The continued rise in ecommerce sales coincided with an increase in store closures in January. On a seasonally adjusted basis, retail ecommerce rose 15.0% in January.
Canadian Tire and Toronto-based NuPort Robotics have partnered with the Ontario government to invest $3 million to commercialize the world’s first automated heavy duty trucking technology. The breakthrough technology offers a transportation solution for the middle mile, the short-haul shuttle runs that semi-tractor trailers make between distribution centres, warehouses and terminals each day. The project applies unique and made-in-Ontario artificial intelligence (AI) technology.
Canadian Tire CEO Greg Hicks said that their physical stores have been an enormous asset during the pandemic, because they essentially provide 22 million square feet of warehouse space that's within a 10-minute drive of 90% of Canadians. Canadian Tire celebrates their 100th anniversary next year.
Hudson’s Bay officially launched Marketplace, an online third-party sales platform, on their ecommerce website. They will reportedly use Marketplace to introduce new and expanded category offerings. Hudson’s Bay was founded in 1670 and operates 88 stores across Canada.
Amazon was ordered to close a massive fulfillment facility outside of Toronto for two weeks in order to control CV19 outbreaks. Amazon said they’ve poured $17 million into the facility’s coronavirus enhancements over the past year. The facility employs thousands of people. Amazon intended to appeal the ruling, saying that their own rigorous testing showed a positivity rate below 1%.
Amazon Canada celebrated International Women’s Day, March 8, by teaming up with renowned Canadian model Winnie Harlow, designer Diane von Furstenberg and eight other influential women to honor and support thriving female-led businesses in Canada, the US, India, Spain, France, Italy and more during a special virtual event.
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