Unemployment Falls to 5.5%
Consumer Confidence Rises to 53.02 Consumer Confidence in Canada increased to 53.02 in October from 53.00 in September of 2019. Consumer Confidence in Canada averaged 53.49 from 2010 until 2019, reaching an all-time high of 57.05 in November of 2018 and a record low of 46.80 in February of 2016. The monthly Index of Consumer Confidence is constructed from responses to four attitudinal questions posed to a random sample of Canadian households. Consumer Prices Rise 1.9% The Consumer Price Index (CPI) rose 1.9% year over year in September after rising 1.9% in August, according to Statistics Canada. Excluding gasoline, the index was up 2.4% year over year for the third consecutive month. On a seasonally adjusted annual basis the index edged down 0.1% in September, matching the decline in August. Gas prices fell as refineries switched to winter blends and consumer demand slowed. The upward pressure on consumer prices is not great enough to spur the BoC to consider an increase in interest rates, although the BoC did not cut rates at the end of October as many had predicted. The eight components of the CPI were mixed in September, with some rising and some falling. GDP Rises 0.1% Canadian GDP rose 0.1% in August to a seasonally adjusted 1.973 trillion Canadian dollars after being unchanged in July, according to Statistics Canada. On a three-month rolling average basis, real GDP rose 0.5% in August, compared with a 0.8% increase in July. On an annual basis, the economy grew 1.3% in August. Factory production and the professional services sector, which includes software development, engineering and accounting, helped fuel growth. Fourteen of twenty components tracked showed monthly gains. The retail trade sector was up 0.3%, growing for the third consecutive month after showing little upward movement since the end of 2018. The construction sector was up 0.3% in August, the third increase in four months. Residential construction rose 0.6%, offsetting July's decline, as growth in single-unit and multi-unit dwellings more than offset a decline in home alterations and improvements. Non-residential construction (+0.2%) was up for the eighth time in nine months as activity in the commercial, industrial and public sectors increased. Engineering and other construction increased 0.2%, while repair construction edged down 0.1%. GDP Forecast S&P Global Ratings raised Canada’s real GDP growth forecast for 2019 to 1.5% from 1.2% previously forecast. S&P noted that expansion could ease off in 2020, when they expect Canada’s economy to grow 1.4%. An unsustainable surge in net exports helped mask an underlying weakness in domestic demand, according to S&P. Housing and Construction News Housing starts fell 2.5% in September to 221,202 units after rising 12% in August. Economists had expected an even sharper decline. The overall decrease came as urban starts fell 2.4%. The value of building permits issued by Canadian municipalities rose 6.1% to nearly $90 billion in September. Ontario, the Prairies and Atlantic Canada are on the rebound and the trend in B.C. and Quebec remains strong despite slower starts in the past few months, according to the Royal Bank of Canada. Canada’s home sales jumped 15.5% to 41,819 annual units in September, according to the Canadian Real Estate Association (CREA), with much of the increase coming from 21% growth in the Toronto region and 45% in Vancouver. High housing prices were one of the issues in Canada’s federal election in October. Canada Mortgage and Housing Corp (CMHC) upwardly revised their annual forecast and now expects housing starts to increase 4% to 204,300 in 2020. They do not expect the rebound in starts to make housing more affordable in the most expensive cities of Toronto and Vancouver. CMHC expects average selling price overall to increase 7% next year to $531,000. Average selling price in Ontario is more than $100,000 higher and more than $200,000 higher in even pricier British Columbia. CMHC also expects that existing home sales will increase from between 453,000 and 467,800 this year to between 480,6000 and 497,700 in 2020. They also believe that Bank of Canada will increase the key lending interest rate of 1.75% gradually across the second half of 2020 and forecast a five-year fixed mortgage rate between 5.4% and 5.5%, compared to 5.2% and 5.3% this year. Retail Sales Retail sales edged down 0.1% in August but remained at $51.5 billion. Lower sales were reported in 6 of 11 subsectors representing 51% of retail trade. Adjusted for the effects of price changes, retail sales were up 0.2%. After increasing 5.0% in June, sales dropped 0.5% at building materials and garden equipment and supplies dealers for the second consecutive month. Provincially, retail sales were down in four provinces and all census metropolitan areas but rebounded in British Columbia. On an unadjusted basis, retail ecommerce sales were $1.8 billion in August, accounting for 3.2% of total retail trade. On a year-over-year basis, retail ecommerce increased 25.0%, while total unadjusted retail sales were up 1.5%. Retail Notes Canadians expect to spend an average of $1,706 this holiday season, according to Deloitte’s 2019 Holiday outlook. While 52% of survey respondents said they preferred to shop in a physical store, 60% noted their online research would start with Amazon and a full 58% plan to shop on Amazon. Lowe’s CEO in Canada, Sylvain Prud’homme, is retiring. Prud’homme shepherded Lowe’s through the acquisition and integration of Rona. He was appointed head of the Canadian division in 2013 and has overseen Lowe’s operations in Mexico since 2017. Lowe’s is staging a comeback in the US, but the situation in Canada is different. Prud’homme has blamed the integration with Rona for the decline in comp store sales. Lowe’s acquired Rona in 2016 for $3.2 billion. However, Lowe’s took a $1.2-billion impairment charge earlier this year and has incurred restructuring costs after announcing the closure of 31 operations in Canada, including 24 Rona stores, two Lowe’s locations and one Reno-Depot. Prud’homme has been in the retail industry for more than 35 years, and said he is retiring with mixed emotions. © Robert Bosch Tool Corporation. All rights reserved, no copying or reproducing is permitted without prior written approval.
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