Canada May 2023
Unemployment Holds at 5.0%
Consumer Prices Rise 4.3%
Consumer prices were up 4.3% year over year in March after being up 5.2% year over year in February. It was the smallest increase since August 2021. On a monthly basis, the CPI was up 0.5% in March after rising 0.4% in February. On a seasonally adjusted monthly basis, the CPI rose 0.1%. Statistics Canada noted that inflation has slowed in recent months, rising 1.7% compared to six months ago, but prices remain elevated. Compared with 18 months ago, inflation has increased 8.7%. Shelter costs are rising more slowly now that home prices are falling, but mortgage costs are still increasing.
Bank of Canada Holds at 4.5%
The BoC held interest rates at 4.5% in early April after doing the same in early March. The BoC raised rates a quarter-point in January and increased rates a total of eight times between March 2022 and February of this year. Rates are currently at the highest level in fifteen years. The BoC noted that economic reports point to inflation decelerating and moving closer towards the goal of 2.0%. They now expect inflation to drop to around 3% over the summer.
Housing and Construction News
Housing starts fell to a seasonally adjusted annual rate of 213,865 units in March after climbing to 243,959 units in February, according to Canada Mortgage and Housing Corp. (CMHC). Analysts noted the decline was primarily due to starts returning to more normal, pre-pandemic levels.
Canadian home sales rose 1.4% in March after rising 2.3% in February. Although it was the second consecutive month of higher sales, sales were still down but were down 34.4% on an annual basis, according to the Canadian Real Estate Association. (CREA) The CREA’s Home Price Index edged up 0.2% on the month and was down 15.5% annually, while the national average selling price was down 13.7% from March 2022. Sales were in line with 2018 and 2019, and analysts noted that the market has probably blown through some of the pandemic-induced market frenzy. New listings continued to trend down as people anxious to take advantage of high prices drop out of the market.
Retail Sales Fall 0.2%
Retail sales decreased 0.2% to $66.3 billion in February after rising to $66.4 billion in January. Sales fell in 4 of 9 subsectors, representing 48.0% of retail trade. The decline was led by lower sales at gasoline stations and general merchandise retailers. Core retail sales, which exclude gasoline stations and fuel vendors and motor vehicle and parts dealers, increased 0.1%. In volume terms, retail sales decreased 0.7% in February. Retail sales fell in six provinces.
Retail Ecommerce Sales Fall 0.1%
On a seasonally adjusted basis, retail ecommerce sales were up 7.8% to $3.7 billion in February, accounting for 5.5% of total retail trade, compared with 5.1% in January.
About 53,000 DeWalt, Stanley and Craftsman fiberglass sledgehammers sold in Canada were recalled. The recall involves several different sizes, lengths and model numbers. The heads can detach while in use and pose an injury risk. Stanley Black and Decker said it has received 192 reports of the sledgehammer detaching. There have been two reports of faulty sledgehammers causing injuries to the head and face. Twenty-five various models are impacted by the recall. The recalled sledgehammers weigh between 2 pounds and 12 pounds and range between 14 inches and 36 inches in length. About 2.2 million sledgehammers sold in the US were also recalled. SB&D provided a toll-free number and is issuing full refunds.
THD EVP Merchandising Jeffrey Kinnaird, who left the company suddenly in April, is Canadian, spent nearly three decades with Home Depot, including nearly five years as president of the Canadian division. He became executive vice president of merchandising in October 2020.
GDP Rises 0.4%
Real GDP rose 0.4% in February after rising 0.5% in January. Both goods-producing and services-producing industries edged up 0.1% after rising in January. Overall, 12 of 20 industrial sectors posted increases. The construction sector expanded 0.3% in February, as all subsectors were up for a second month in a row. Residential building construction (+0.3%) posted a second consecutive increase after declining in the last five months of 2022. Home alterations and improvement, which was a big reason residential building construction fell in 2022, drove gains in both January and February. Engineering and other construction activities continued to expand, rising 0.3% in February. Non-residential building construction (+0.4%) posted a third consecutive monthly increase, driven by gains in both new building construction and alterations and improvement. Retail trade fell 0.5%, the first decline for this sector in three months, driven by falling sales at gasoline stations.
Consumer Prices Rise 4.3%
The Consumer Price Index (CPI) rose 4.3% year over year in March after rising 5.2% in February. It was the smallest increase since August 2021 (+4.1%). On a year-over-year basis, Canadians paid more in mortgage interest costs, which was offset by a decline in energy prices. Excluding food and energy, prices were up 4.5% year over year in March, following a 4.8% gain in February; excluding mortgage costs, the CPI rose 3.6%, after increasing 4.7% in February. On a monthly basis, the CPI was up 0.5% in March, following a 0.4% gain in February. On a seasonally adjusted monthly basis, the CPI rose 0.1%.
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