Canadian Consumer Price Index, August 2010 Results
Source: Statistics Canada
Summary: Canada’s Consumer Price Index (CPI) – the most commonly quoted measure of price inflation – increased by 1.7 per cent year-over-year in August after a 1.8 per cent annual increase in July. The August result was driven largely by a five per cent rise in energy prices, but prices were higher for seven of the eight major index components. The Bank of Canada’s Core CPI, which strips out the most volatile components in the index, climbed 1.6 per cent in August. The annual rate of inflation was highest in Ontario, where a 2.9 per cent increase in prices was experienced. The annual CPI increase in Ontario was driven by higher prices for gas, electricity, passenger vehicle insurance premiums and estimated omeowner's replacement costs.
Analysis: Annual growth in both the “All Items” and “Core” Consumer Price Indices were below the Bank of Canada’s projection for the third quarter. With this in mind, the latest CPI release adds fuel to the interest rate debate in Canada. The calls for the Bank of Canada to halt interest rate hikes until we have a better idea of the economic growth trajectory in Canada will likely become louder. The argument will be that with inflation below the two per cent target we are not experiencing strong upward pressure on consumer prices, so there is no need to hike rates in order to slow spending. However, in recent statements the Bank has argued that consumer and business spending is in line with expectations. This suggests that the Bank may still be considering further rate hikes this year and/or in 2011.
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Date: September 14, 2010
New Motor Vehicle Sales, July 2010 Release
Source: Statistics Canada States Department of Housing and Urban Development
Link to Release: http://www.statcan.gc.ca/daily-quotidien/100914/dq100914b-eng.htm
Summary: Canadian new motor vehicle sales rose 2.4 per cent in July to 135,514 units. These gains were led by truck sales (SUVs included), which were up 3.1 per cent to 76,994 units, accounting for 56.8 per cent of total sales – the highest proportion ever. Car sales also rose in July, up 1.6 per cent to 58,520 units. By province, sales increased in eight of provinces last month, including Ontario which experienced a four per cent gain to 51,425 units.
Analysis: July’s new vehicle sales result continued a trend that began at the beginning of last year: gradually increasing sales with some month-to-month volatility along the way. The trend in new vehicle sales basically followed the improvement in consumer confidence that took place over the same period of time. This makes sense given that an individual would have to feel confident in their employment and income prospects over the longer term before they would make a large cash outlay or enter into a financing commitment. For many households, the willingness to purchase on a car or truck could also be associated with a willingness to make other large ticket purchases, including the purchase of a home.
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Date: September 10, 2010
Canadian Labour Force Survey, August 2010 Results
Source: Statistics Canada
Link to Release: http://www.statcan.gc.ca/daily-quotidien/100910/dq100910a-eng.htm
Summary: The Canadian economy added 36,000 positions in August following declines in July. Gains in full-time jobs (+80,000) offset a 44,000 position decline in part-time employment. Job gains were concentrated in the services sector, which added 43,900 positions. The goods producing segment of the economy shed 8,200 jobs last month. The national unemployment rate edged up to 8.1 per cent, as job growth was outstripped by growth in the labour force as a whole. The GTA labour market experienced an increase in the level of employment and a slight decrease in the unemployment rate.
Analysis: Employment in Canada has climbed back to the pre-recession peak. This is also the case in the GTA. Employment levels in both the services and goods producing sectors are well-above the levels reported in August 2009. The steady recovery experienced after July of last year was in line with the overall recovery in the economy. However, while the level of employment has recovered, we have not seen a marked recovery in the unemployment rate because the growth in the total labour force (employed and unemployed persons actively searching for work) continued to grow during the recession. In the GTA, for example, the pre-recession unemployment rate ranged between 6.5 and 7.0 per cent. In contrast, GTA unemployment rate stood at 9.1 per cent – an improvement from a high of 10 per cent during the recession, but a long way from what could be called normal. The implication is that with quite a bit of slack remaining in the labour market, income growth will likely remain at or below the rate of inflation through 2011.
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Date: September 9, 2010
Canadian Housing Starts, August 2010 Results
Source: Canada Mortgage and Housing Corporation (CMHC)
Link to Release: http://www.marketwire.com/press-release/Toronto-Housing-Starts-Rise-in-August-1316077.htm
Summary: Canadian housing starts fell for the fourth consecutive month in August. The seasonally adjusted annual rate for starts dipped three per cent to 183,300 units from 188,900 units in July. Declines in both single detached and multiple-family starts were reported. GTA home builders bucked the national trend, as the annual rate of starts in the Toronto area increased by almost 30 per cent due to a surge in new condominium apartment construction.
Analysis: On the national scale, increased supply in the resale market has resulted in fewer buyers spilling over into pre-construction sales centres. However, in the GTA the new home construction trend has been pointing upward, driven by new unit sales in the high-rise category. Strong high-rise sales over the past year continued to convert into starts in August with multiple-family starts jumping close to 50 per cent compared to July. While high-rise starts have proven to be volatile month-over-month, the condominium apartment segment remains the driving force behind new home onstruction within the City of Toronto and many surrounding municipalities as well.
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Date: September 21, 2010
United States New Residential Construction, August 2010 Results
Source: Joint Release from the United States Census Bureau and the United States Department of Housing and Urban Development
Link to Release: http://www.census.gov/const/newresconst.pdf
Summary: U.S. Housing starts rose 10.5 per cent to a seasonally adjusted annual rate of 598,000 units in August from the downwardly revised rate of 541,000 recorded in July. The August result was the highest rate of starts since April. While the annual rate of single-family starts rose four per cent, most of the August increase came in the more volatile multi-unit category, which experienced a 43 per cent increase. Building permits, which signal future building activity, rose 1.8 per cent.
Analysis: US housing starts remain above the lows reached during the first half of 2009, but remain far below pre-recession levels. In fact, the annual rate of starts in August remained near the lowest levels reported over the past 50 years. The resale home market in the US remains very well supplied with a low level of sales relative to listings. In addition, one-third of resale transactions are distressed in nature (i.e. in foreclosure or in danger of foreclosure), which often translates into discounted selling prices relative to comparable non-distressed properties. The very well-supplied resale market coupled with the availability of distressed properties has meant that very few buyers have been spilling over into pre-construction sales centres. The residential construction sector has suffered as a result. From the perspective of the Canadian economy, the lack of recovery in US home construction is problematic for the export of Canadian-made building materials. The production of these building materials has generally been associated with well paying jobs including those in manufacturing.
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Date: July 23, 2010
Canadian Consumer Price Index, June 2010 Results
Source: Statistics Canada
Link to Release: http://www.statcan.gc.ca/daily-quotidien/100723/dq100723a-eng.htm
Summary: The Consumer Price Index (CPI) – Canada’s measure of inflation – rose one per cent annually in June, down from the 1.4 per cent growth rate reported in May. This slowdown was mostly driven by a 2.9 per cent decline in gas prices, with clothing and foot-ware also declining (down 1.9 per cent). The Bank of Canada core CPI, which removes volatile items like gasoline and some foods from its aggregation, rose 1.7 per cent. Ontario experienced the highest provincial rate of increase in the country, with prices climbing 1.6 per cent on price increases for vehicles and vehicle insurance.
Analysis: The consumer price index is the key indicator the Bank of Canada uses in determining the target for its policy interest rate (the Overnight Lending Rate). Over the long-term, the Bank would like to see the CPI grow at two per cent annually. While the rate of CPI growth has been below two per cent for the better part of the last year, the Bank of Canada has raised the Overnight Rate target twice over the past two months. The argument is that economic recovery is well at hand and as growth continues rates must rise to slow consumer spending to ensure that prices for consumer goods and services do not rise at an unsustainable pace. With this said, the Bank has downgraded its forecast for economic growth in 2010 and 2011 along with its outlook for inflation. This suggests that the frequency of interest rate hikes could be less than originally expected when the Bank began raising its rate target in June.
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