Consumer Prices Fall Slightly
The Consumer Price Index (CPI) rose 7.6% in July after hitting an almost-record high of 8.1% year over year in June, according to Statistics Canada. On a monthly basis, the CPI rose just 0.1%, the smallest decline in many months. Much of the decline in prices was due to dropping fuel costs; other prices are still rising. Statistics Canada said that there are tentative signs that consumer price growth is close to topping out.
GDP Edges Up in June
Real GDP edged up 0.1% in June, after being essentially unchanged May. Both services-producing (+0.2%) and goods-producing (+0.1%) industries were up, as 14 of 20 industrial sectors expanded in June. Advance information would indicate GDP declined slightly in July.
The construction sector decreased 0.4% in June, down for the third month in a row, as almost all subsectors decreased, with residential and non-residential building construction contributing the most to the decline.
Residential building construction dropped 0.5%, the third consecutive monthly decline, driven primarily by a contraction in the construction of new single detached homes as well as by fewer home alterations and improvements. The level of activity in this industry is still about 8% above the February 2020 pre-pandemic level.
Non-residential building construction contracted for the second month in a row, dropping 1.0%
Repair construction dropped 0.4%, the third consecutive monthly decline for this sector, as both the residential and non-residential repair activities contracted.
Q2 GDP Rises 1.0%
Real GDP expanded 1.0% in the second quarter. It was the fourth consecutive quarterly increase in GDP. Services-producing industries increased 1.0% and were by far the largest contributors to growth. After showing significant declines or limited growth in the first quarter of 2022 due to the CV-19 Omicron variant, many services-producing industries, particularly client-facing ones, rebounded in the second quarter. Overall, goods-producing industries also rose 1.0% in the second quarter, marking the third consecutive quarterly increase for this category.
Wholesale trade fell 2.0%, putting a big damper on growth in the second quarter. Wholesalers of building materials and supplies were among the largest contributors to the decline, partly due to slowing new home construction and renovation activity.
Housing and Construction News
Housing starts edged up in July, rising to 275,329 units from 273,841 units in June. The pace of single-detached urban starts dropped 2.3% to 58,384 units. The six-month moving average of the monthly seasonally adjusted annual rates was 264,426 units in July, up from 257,862 in June, according to Canada Mortgage and Housing Corporation (CMHC). The level of starts remains historically high and has been well above 200,000 units since 2020.
Home sales continued to fall in July, dropping 5.3% from June, to 37,975 homes, down 29% compared with July last year. New listings also fell. The Canadian Real Estate Association (CREA) noted that the monthly decline was the smallest in five months. New listings in July totaled 73,436, down 6% from last July and 5% from June. CREA says that sales are falling due to high prices and climbing interest rates.
The average sales price fell 3% from June and 5% from last July, according to CREA. Excluding the typically heated Greater Vancouver and Toronto Areas from the calculation cuts $104,000 from the national average price. CREA commented that prospective buyers are moving to the sidelines because of rising interest rates and high home prices. In typically heated markets like the Greater Toronto and Greater Vancouver Areas, homes are staying on the market much longer than they normally would.
A Desjardins Group forecast predicts that home prices will fall as much as 25% by the end of this year. However, the mortgage interest cost index was up 1.7%, increasing for the first time since September 2020. Inflation has exceeded the Bank of Canada’s (BoC) target range of 1% to 3% for fourteen consecutive months.
Retail Sales Rise 1.1%
Retail sales increased 1.1% in June to $63.1 billion after rising 2.2% in May, the sixth consecutive monthly increase. Sales were up in 8 of 11 subsectors, representing 76.8% of retail trade. Sales were led by higher sales at gasoline stations and motor vehicle and parts dealers. Core retail sales, which exclude gasoline stations and motor vehicle and parts dealers, increased 0.2% in June. In volume terms, retail sales were up 0.2% in June. Sales at building material and garden equipment and supplies dealers fell 1.7%, declining for the second consecutive month.
Retail Ecommerce Sales Fall 2.9%
On a seasonally adjusted basis, retail ecommerce sales were up 4.5% in June to $3.8 billion after falling 5.3% in May. Ecommerce sales accounted for 5.4% of total retail trade. The
share of ecommerce sales out of total retail sales fell 1.0% compared with June 2021.
Canadian Tire’s consolidated retail sales were up 9.9% and consolidated comparable sales (excluding Petroleum) were up 5.0%, with growth benefiting from a higher mix of in-store shopping compared to the second quarter of 2021 when CV-19 restrictions remained in place. Canadian Tire Retail (CTR) comparable sales grew 3.9%. Revenue grew by 12.4% compared with last year, to $4.4 billion in the quarter. Comp sales grew 3.9% at Canadian Tire stores. Profits fell 30% due to the costs of extricating the company from Russia and other supply chain issues.
Canadian Tire noted that the company is seeing growth in products priced above $250, an unusual trend considering that with high inflation, shoppers frequently trade down to lower priced items to keep their budgets under control. In some cases, Canadian Tire is seeing customers trade up.
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