Canada August 2019
BoC Leaves Rates at 1.75%
The Bank of Canada (BoC) left interest rates unchanged at 1.75% in June after leaving them at the same rate in May. Canada is rebounding from a weak stretch that nearly brought the economy to a halt in late 2018 and early 2019. The BoC was widely expected to leave rates unchanged. The bank will continue to monitor data with a particular focus on developments in the energy sector and the effects of global trade tensions. The bank downgraded their 2019 global growth forecast to 3% from 3.2%. They are predicting economic growth in Canada of 1.3% this year, up slightly from their April forecast of 1.2% growth. Consumption in Canada is being supported by a healthy job market and rising wages, along with a stabilizing housing market.
The Bank of Canada will take over as administrator of a key interest rate benchmark that is undergoing an overhaul as part of global reforms to benchmarks, some of which have been vulnerable to manipulation. The BoC will assume duties for calculating and publishing the Canadian Overnight Repo Rate Average (CORRA) in the second quarter of 2020 and distribute it at no cost “as a public good." The reference rate for more than $1 trillion of Canadian financial instruments, mostly derivatives, is currently administered by financial data provider Refinitiv.
Unemployment Rises to 5.7%
The unemployment rate rose to 5.7% in July after ticking up to 5.5% in June. The unemployment rate rose because more people entered the job market looking for work, but overall the economy did not add a substantial number of jobs in July. Employment was up 1.9% year over year with a net gain of 353,000 new jobs. While employment was little changed overall in July, it decreased in Alberta, Nova Scotia and New Brunswick, and increased in Quebec and Prince Edward Island. In construction, employment grew by 25,000 in July, with notable increases in Quebec and Alberta. Compared with July 2018, construction employment was up 2.7%, or by an additional 38,000 jobs.
Consumer Confidence in Canada fell one point to 119.3 in June after rising in May. Only the Ontario and Saskatchewan–Manitoba indexes rose in June; all other regions posted declines. The monthly Index of Consumer Confidence is constructed from responses to four attitudinal questions posed to a random sample of Canadian households.
The Consumer Price Index (CPI) rose 2.0% in June on a year-over-year basis after rising 2.4% in May, according to Statistics Canada. On a seasonally adjusted monthly basis, the CPI dropped 0.1% in June after rising 0.4% in May. Energy prices continued to drop in June, falling 4.1%. Stable to slightly higher inflation and generally improving domestic data should allow the BoC to remain patient on interest rates.
GDP Rises 0.2%
GDP rose 0.2% in May to a seasonally adjusted 1.959 trillion Canadian dollars after rising 0.3% in April , according to Statistics Canada. Output in May was led by a rebound in manufacturing, with 13 out of 20 industrial sectors expanding. On a three-month rolling average, real GDP increased 0.7%. The construction sector was up 0.9% in May as nearly all types of construction increased. This was the fourth gain in five months for the sector, following a period of declining activity during the second half of 2018. Residential construction rose 2.2%, posting the strongest growth in more than a year, with double, row and other multi-unit dwelling construction expanding, along with home alterations and improvements. Residential repair construction rose 0.1%, but non-residential construction fell after five months of increases.
Housing and Construction News
The annual pace of housing starts picked up in June to a seasonally adjusted annual rate of 245,657 units after slipping to a downwardly revised 196,809 units in May. The results topped the 210,000 units that economists had expected. Urban starts increased by 26% in June to 234,238 units and the annualized pace of multiple-unit projects rose 31% to 185,804 units. Single-detached urban starts rose 8% to 48,434 units. Rural starts were estimated at a seasonally adjusted annual rate of 11,419 units. The six-month moving average of the monthly seasonally adjusted annual rates was 205,838 units in June, up from 200,530 in May. Every province in Canada posted a housing starts gain for the month of June. The impressive results may encourage the Bank of Canada to raise its economic outlook, according to analysts.
Home sales fell 0.2% in June after rising 1.9% in May and were up 0.3% compared to June 2018, according to the Canadian Real Estate Association (CREA). The modest decline was due to sales rising in some regions and falling in others rather than an overall decline. Gains were seen in the province of Quebec and in Southern Ontario, while home sales fell in the Greater Vancouver area, Calgary and Halifax as well as Newfoundland and Labrador.
Retail Sales Drop 0.1%
Retail sales dropped 0.1% in May to $51.5 billion after rising for the previous three months. Sales were down in 3 out of 11 subsectors, representing 39% of retail trade. Core retail sales fell 0.5%. Sales decreased in eight provinces but were higher in Quebec and Ontario. Sales at building material and garden equipment and supplies dealers rose 0.2% in May after falling 2.6% in April but were down 3.9% year over year. On an unadjusted basis, retail ecommerce sales reached $1.8 billion in May after rising to $1.6 billion in April, and accounted for 3.0% of total retail trade, compared with 2.0% of total retail trade in April 2016, the year when official monthly stats for ecommerce were first published. Compared with April 2018, retail ecommerce increased 21.8% in May 2019, while total unadjusted retail sales increased 1.6%.
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