Unemployment Rises to 8.1%
Consumer Prices Rise 0.5%
The Consumer Price Index (CPI) rose 0.5% in March and was up 2.2% year over year after rising just 1.1% year over year in February. On a seasonally adjusted monthly basis, the CPI increased 0.1% in March. Excluding energy, the CPI rose 1.1% year over year. Prices rose in five of the eight major components in March, with the steepest increases in transportation and shelter. Gasoline prices led the increase in consumer energy prices, rising 5.0% in March and 35.3% year over year, the largest gain in gasoline prices since March 2000. The price increase was mainly driven by growing global oil demand, as well as the continuation of production cuts by OPEC. Year-over-year prices rose more rapidly than in February in every province, largely due to the across the board increase in the cost of gasoline. 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 Grows 0.4% in February
GDP grew 0.4% in February after growing 0.7% in January. This 10th consecutive monthly increase continued to offset the steepest drops on record in March and April 2020. However, total economic activity was still about 2% below February 2020, before the pandemic. Services-producing industries were up 0.6%, while goods-producing industries contracted (-0.2%) for the first time since April. Overall, 14 of the 20 industrial sectors expanded in February. Retail trade activity jumped 4.5% in February after two months of decreases, as 10 of the 12 subsectors were up. General merchandise stores grew 6.0%, while building material and garden equipment and supplies dealers were up 3.5%, benefiting from continued growth in home alteration and improvement activity. Non-store retailers, which include ecommerce and catalog sales, increased for the fourth month in a row, growing 0.5% in February. Construction rose 2.0% in February after growing in the previous two months, as all subsectors were up. Residential building construction jumped 4.7% as all types of construction recorded growth, led by home alterations and improvements and by single-family home construction. Repair (+0.5%), engineering and other construction activities (+0.2%), and non-residential building construction (+0.3%) were all up in February. Preliminary information indicates an approximate 0.9% increase in real GDP for March.
Interest Rates Steady
The Bank of Canada (BOC) kept key interest rates at 0.25% in April even though they had upwardly revised their forecast for the first quarter. The bank pointed to new, more transmissible variants of CV19 as the biggest risk to the recovery. They also stated that they will most likely raise rates before the Fed raises rates in the US. They now think inflation will move back into the 2% range sometime next year, and they will probably raise rates during the second half of 2022. 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. They also raised their forecast significantly for GDP growth this year to 6.5%.
Housing and Construction News
Canadian housing starts rose 21.6% in March after falling 13.5% in February and the seasonally adjusted annualized rate of housing starts rose to a record 335,000 units, well ahead of expectations. Much of the gain came from a big jump in multiple unit urban starts. Single-detached urban starts rose 3.6% to 78,615 units. Analysts said part of the reason for the big jump was unseasonably warm weather in many parts of the country.
Home sales continued to rise in March, up 5.2% from February 2021 and 76.2% from March 2020 at the beginning of the shutdowns caused by the pandemic, according to the Canadian Real Estate Association (CREA). Inventory fell to just 1.7 months at the end of March, the lowest level on record. Listings rose more than 50% from last March to 105,001 and were up 7.5% on a seasonally adjusted month-over-month basis. The actual national average home price in March rose 31.6% year over year to $716,828. Home prices soared across the board, not just in the pricier markets like Toronto and Vancouver. Mortgage rates are expected to remain low.
Prices for Canadian homes are expected to rise 5.5% this year, according to the latest edition of the Mortgage Professionals Canada (MPC) survey. The survey noted that despite higher prices, very low interest rates have actually made Canadian homes more affordable. Surging housing prices have been driven by a combination of record low rates, increased household savings and a desire for more space.
Retail Sales Rise 4.8%
Retail sales reversed two consecutive monthly declines and rose 4.8% in February to $55.1 billion after falling to $52.5 billion in January. Sales rose in 9 of 11 subsectors, representing 34% of retail sales. Core retail sales, which exclude gasoline stations and motor-vehicle and parts dealers, rose for the first time in three months, increasing 3.8% in February. Core retail sales were up in most subsectors. In volume terms, retail sales increased 4.3% in February. Overall retail sales rose in six provinces, with Quebec and Ontario leading the gains. Statistics Canada said most retailers continued to report sales despite the fact that approximately 12% of retailers were closed at some point in February for an average of two business days.
Retail Ecommerce Sales Soar
On an unadjusted basis, retail ecommerce sales rose 92.0% year over year to $3.1 billion in February, accounting for 6.8% of total retail trade. The share of total retail sales attributed to ecommerce dropped 1.3% in February, as more brick-and-mortar stores were allowed to open their doors to in-person shopping. On a seasonally adjusted basis, retail ecommerce fell 5.7% in February.
Amazon is launching their Intellectual Property (IP) Accelerator in Canada, which is designed to make it easier and more cost-effective for small-and-medium-sized businesses (SMBs) to obtain trademarks, protect their brands and remove infringing goods both in Amazon’s stores and the broader marketplace. The IP Accelerator directly connects Canadian business owners with a curated network of local law firms that charge reduced, pre-negotiated rates on key services. Amazon does not charge for the service; SMBs pay the law firm directly. Businesses also have early access to Amazon’s brand protection tools, brand registry and automated, data-driven protections. Amazon says that more than 30,000 Canada-based third-party sellers have thrived on the Amazon online marketplace.
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