Canada January 2023

• The unemployment rate fell to 5.0% in December after falling to 5.1% in November, just above the record low of 4.9% reached in June and July 2022. In January 2021 unemployment peaked at 9.4%.
  
• Employment rose by 104,000 jobs in December after rising by just 10,000 jobs in November. Much of the gain was concentrated in the private sector.
  
• Employment rose in several industries, including construction and warehousing.
  
• Employment increased in Ontario, Alberta, British Columbia, Manitoba, Newfoundland, Labrador and Saskatchewan in December. There was little change in the other provinces.
  
• Year-over-year wage growth remained above 5% for the seventh consecutive month. Wage growth needs to cool in order to tamp down inflation.
  

 
Consumer Prices Rise 6.8%
Canada’s inflation rate dipped to 6.8% in November after holding at 6.9% for the previous two months. Falling prices for gasoline and furniture were partially offset by faster growth in mortgage interest rates and rent. On a monthly basis, the CPI rose 0.1% in November following a 0.7% gain in October. On a seasonally adjusted monthly basis, the CPI was up 0.4%.The homeowners' replacement cost index, which is related to the price of new homes, slowed again in November, reflecting falling prices. This index has decelerated, on a year-over-year basis, every month since May 2022 when it rose 11.1%.
 
Bank of Canada Raises Interest Rates
The BoC raised interest rates by 50 basis points to 4.25% in early December, but signaled that the tightening that saw rates increase by a full 4% in just nine months to the highest level in fifteen years was nearing an end. However, they noted that inflation was still too high and did not give any indication they planned to begin easing rates in the near future. 
 
Housing and Construction News
Housing starts fell 0.2% in November to a seasonally adjusted annualized rate of 264,159 units, according to Canada Mortgage and Housing Corp. (CMHC). The decrease was less than expected. Analysts are still forecasting that starts will drop in 2023 as interest rates continue to rise and depress the rate of homebuilding. The six-month moving average of the monthly seasonally adjusted annual rate of housing starts fell 1% in November to 274,361 units. Urban multifamily starts rose 2% but single-detached units fell 7% in November after falling 11% in October.
 
Canadian home sales fell 3.3% in November after inching up for the first time in seven months in October, according to the Canadian Real Estate Association (CREA). The drop came as the number of newly listed homes fell 1.3% on a month-over-month basis in November. Home sales and prices fell in 2023 as rising interest rates increased the cost of borrowing for Canadian consumers. Home sales were down 38.9% compared to November 2021. The actual national average home price fell 12% year over year in November to $632,802. Market analysts say that home prices could drop another 12% in 2023.
 
Retail Sales Rise 1.4% 
Retail sales increased 1.4% to $62.0 billion in October after falling 0.5% in September. It was the largest increase in five months. Sales were up in 6 out of 11 subsectors, representing 84.4% of retail trade. The increase was led by higher sales at gasoline stations (+6.8%) and food and beverage stores (+2.2%). Core retail sales, which exclude gasoline stations and motor vehicle and parts dealers, increased 0.9%. In volume terms, retail sales were unchanged in October. Retail sales increased in nine provinces, led by a 2.6% increase in sales in Quebec and a 4.9% increase in metropolitan Montreal. Sales fell 0.3% in Ontario.
 
Retail Ecommerce Sales Fall 4.6%
On a seasonally adjusted basis, retail ecommerce sales were down 4.6% in October after falling 5.4% in September. On an unadjusted basis, retail ecommerce sales were down 3.6% year over year to $3.4 billion in October, accounting for 5.2% of total retail trade. The share of ecommerce sales to total retail sales fell 0.5% compared with October 2021.
 
GDP Rises 0.1% in October
Canada’s GDP edged up 0.1% in October, beating analysts’ estimates. Growth in service industries was partially offset by declines in goods-producing industries. Growth for September was revised up to 0.2%. Initial estimates from Statistics Canada indicate GDP remained steady in November.
 
Inflation Slows to 6.8% in November
The consumer price index was up 6.8% from November 2021, down from year-over-year increases of 6.9% in September and October, as the cost of gasoline and furniture fell. Grocery prices, rent and mortgage costs continued to exert the most upward pressure on the broader cost of living. Core inflation remained little changed at 5%, still well above the Bank of Canada’s (BoC) target of 2% but is down significantly from 8.1% in June. Analysts expect the BoC to raise interest rates again in January.

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