Canadian real GDP grew 0.2 percent in July, following a marginal increase in June. Service-producing industries grew by 0.2 per cent, slightly outpacing goods-producing industries (0.1 per cent). Retail trade (1.0 per cent) contributed the most to overall growth in July. The public sector saw its seventh consecutive month of growth (0.3 per cent), while utilities rose for a third consecutive month by 1.3 per cent. Manufacturing growth (0.3 per cent) was driven by gains in non-durable goods production (1.3 per cent), while wildfires drove contraction in multiple industries, including transportation and warehousing (-0.4 per cent) and accommodation services (-2.0 per cent). GDP for real-estate offices and agents was down 0.17 points month-over-month. Lastly, the construction sector contracted by 0.4 points, representing the largest drag to growth in July. Preliminary estimates suggest that real GDP in the Canadian economy was largely unchanged in August.

Canada's economy expanded at a reasonable rate that surpassed analyst expectations in July, following the anticipated 25 basis point cut from the Bank of Canada earlier this month. As the Bank's next meeting draws closer, markets will closely follow Canadian employment and inflation reports. Continually weakening labour markets coupled with further decreases in inflation may suggest that a 50-basis point cut is required in October to stimulate the economy.

Copyright British Columbia Real Estate Association. Reprinted with permission.

Canadian housing starts fell 22 per cent to 217,405 units in August at a seasonally adjusted annual rate (SAAR). Starts were down 12.1 per cent from the same month last year. Single-detached housing starts were 3 per cent higher from last month at 55,851 units, while multi-family and other starts fell 28 per cent to 161,555 units (SAAR). 

In British Columbia, starts fell 30 per cent from last month to 33,820 units SAAR in all areas of the province. In areas in the province with 10,000 or more residents, single-detached starts rose 6 per cent to 4,678 units while multi-family starts fell 35 per cent to 26,823 units compared to July. Starts in the province were 30 per cent below the levels from August 2023. Compared with last year, year-to-date starts are up by 63 per cent in Kelowna and 26 per cent in Abbotsford. Year-to-date starts are down by 20 per cent in Vancouver, 15 per cent in Nanaimo, and by 8 per cent in Victoria. 

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Canadian prices, as measured by the Consumer Price Index (CPI), rose 2.0 per cent on a year-over-year basis in August, down from a 2.5 per cent increase in July. This marks the slowest year-over-year increase since February 2021. Month-over-month, on a seasonally adjusted basis, CPI rose by 0.1 per cent in August. The deceleration in headline CPI was driven by a 5.1 per cent decrease in gasoline prices in August. This drop is largely attributed to base-year effects as well as lower crude oil prices due to lower demand in China and concerns regarding the American economy. Excluding gasoline, the CPI rose 2.2 per cent in August, a fall from 2.5 per cent in July. Mortgage interest costs were up 18.8 per cent, and rent was up 8.9 per cent from last August. Despite steadily decreasing year-over-year growth rates, mortgage interest costs have been the largest contributor to headline CPI since December 2022. Overall, shelter costs rose 5.3 per cent year-over-year in August, down from 5.7 per cent in July. Finally, goods costs fell 0.7 per cent while services costs rose 4.3 per cent year-over-year. In BC, consumer prices rose 2.4 per cent year-over-year, down from 2.8 per cent in July. The Bank of Canada's preferred measures of median and trimmed inflation,which strip out volatile components, fell to 2.3 and 2.4 per cent year-over-year in August, respectively. 
 
Canada's August inflation report marks a significant milestone for the national economy, with headline CPI reaching the midpoint of the Bank of Canada's target range. Despite some downward pressure from base-year effects on gasoline, the prices for several major components of inflation ticked downward nationwide. Moreover, CPI-median and CPI-trim continue declining towards the midpoint of their target ranges. Taken together, August's inflation report bolsters the likelihood of a fourth consecutive rate cut from the Bank of Canada in October. Barring weaker-than-expected monthly GDP and employment, we can expect this cut to be 25 basis points. 

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Canadian employment was largely unchanged from the previous month, growing by 22,000 jobs to 20.536 million in August. The unemployment rate rose 0.2 points to 6.6 per cent, while the employment rate fell 0.1 percentage points to 60.8 per cent. This was the fourth consecutive month of declining employment rates with minimal changes to overall employment. Average hourly wages rose 5 per cent year-over-year to $35.16 last month, while total hours worked were up 1.4 per cent from August of the previous year.

Employment in B.C. fell 0.2 per cent to 2.839 million with a loss of 4,300 jobs in August, marking the fourth consecutive month of provincial job losses. Employment in Metro Vancouver fell 1.7 per cent to 1.584 million in August. The unemployment rate in both B.C. and Vancouver rose by 0.5 points year-over-year to 5.8 per cent and 6.3 per cent, respectively. 

Overall, these employment statistics for August are indicative of a continuing cooling of the labour market. Relatively flat employment and steadily rising unemployment support the notion of another 25-basis point cut from the Bank of Canada in October.

Copyright British Columbia Real Estate Association. Reprinted with permission.

Canadian real GDP was largely unchanged in June, following a 0.1% increase in May. Goods-producing sectors fell 0.4 per cent, the largest decrease since December 2023. Meanwhile, services-producing industries were up 0.1 per cent, marking a third consecutive monthly increase. Manufacturing (-1.5 per cent), wholesale trade (-0.7 per cent), and construction (-0.6 per cent) were the main drivers of downward pressure on real GDP growth. These decreases were offset by growth in the public sector, finance and insurance, utilities, and real-estate sectors. Preliminary estimates suggest that real GDP by industry was also largely unchanged in July.

Real GDP growth in the second quarter of 2024 registered 2.1 per cent at an annualized rate from the prior quarter, rising for the third consecutive quarter. Growth was driven by increased government spending (+1.5 per cent) and business investment in machinery (+6.5 per cent), while household spending was essentially flat (+0.2 per cent) in spite of strong wage growth. As a result, the household savings rate rose to 7.2 per cent. Rapid population growth outpaced modest gains in household spending, leading to a 0.4 per cent decline in per capita household expenditures. Resulting GDP per capita growth was down 0.1 per cent in Q2 and marked a fifth consecutive quarterly decline. Housing investment fell 1.9 per cent in the second quarter, primarily due to lower investment in new construction (-1.6 per cent). Overall, residential construction has fallen for eight of the last nine quarters.

Fairly strong GDP growth in the second quarter, which surpassed the Bank of Canada's expectations, is largely driven by public sector expenditure. However, Canadian GDP per capita continues to struggle amidst rapid population growth. This comes in the context of continually improving inflation, which hit 2.5 per cent last month, with price appreciation being largely driven by high shelter costs. Employment has continued to soften from the previous quarter, with the unemployment rate hitting 6.4 per cent last month. Considering these components, markets expect the Bank of Canada to continue cutting rates during its announcement next week. 

Copyright British Columbia Real Estate Association. Reprinted with permission.