Canadian prices, as measured by the Consumer Price Index (CPI), rose 2.9 per cent on a year-over-year basis in March, up from a 2.8% increase in February. Month-over-month, on a seasonally adjusted basis, CPI rose by 0.3 per cent in March. The slight uptick in headline CPI was largely due to rising gasoline prices. Excluding energy costs, CPI rose 2.8 per cent year-over-year in March, down from 2.9 per cent in February. Shelter costs remain the major driver of inflation with mortgage interest costs up 25.4 per cent and rent up 8.5 per cent from the same time last year in March. Excluding shelter, consumer prices rose just 1.5 per cent, year over year. In BC, consumer prices rose 2.7 per cent year-over-year, up from 2.6 per cent in February. The Bank of Canada's preferred measures of core inflation, which strip out volatile components, fell to between 2.8 and 3.1 per cent per cent year-over-year in March. 

Inflation ticked slightly higher as expected in March due to rising gasoline prices, however the big surprise in this morning's data was the continued fall in the Bank of Canada's preferred measures of core inflation. Both CPI median and CPI trim were not only down an a 12-month basis but fell to well under 2 per cent when measured on a 3-month basis and to just over 2 per cent on a 6-month basis. Not only is core inflation falling, but it has become more and more clear that inflation in Canada is almost entirely a shelter driven phenomenon. Excluding the rising costs of rents and mortgages, not only is inflation falling, its negative when measured at a 3 and 6-month horizon. If the Bank of Canada is looking for a case to lower its policy rate in June, this report provides ample evidence in support of that move.

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The British Columbia Real Estate Association (BCREA) reports that a total of 6,460 residential unit sales were recorded in Multiple Listing Service^® (MLS^®) systems in March 2024, a decline of 9.5 per cent from March 2023. The average MLS^® residential price in BC in March 2024 was up 6.5 per cent at $1.02 million, compared to an average price of $958,051 in March 2023. The total sales dollar volume was $6.6 billion, a decrease of 3.6 per cent from the same time the previous year.

"March capped off a slow start to the first quarter of 2024," said BCREA Chief Economist, Brendon Ogmundson. "Despite a steep decline in fixed mortgage rates, buyers appear to be waiting on the Bank of Canada to lower its policy rate before jumping back into the market."
 
Year-to-date, BC residential sales dollar volume was up 13 per cent to $15.8 billion, compared with the same period in 2023. Residential unit sales were up 6.4 per cent to 15,938 units, while the average MLS^® residential price was up 6.5 per cent to $995,149.  

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Canadian employment was essentially unchanged from the prior month in March, remaining at 20.401 million. The unemployment rate rose 0.3 percentage points to 6.1 per cent. Average hourly wages rose 5.1 per cent year-over-year to $34.81 last month, while total hours worked were up 0.7 per cent from March of last year.

Employment in BC rose 0.2 per cent to 2.848 million, while employment in Metro Vancouver was essentially unchanged at 1.616 million in March. The unemployment rate rose 0.3 points in BC to 5.5 per cent while rising in Metro Vancouver by 0.6 points to 5.6 per cent last month.

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The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver* is currently $1,196,800. This represents a 1.1% increase from January 2024 and a 4.5% increase from March 2023.

Specifically:

- The benchmark price for detached homes increased 1.8% from Feb 2024 and increased 7.4% from Mar 2023.

- The benchmark price for townhouses increased 1.7% from Feb 2024 and increased 5.0% from Mar 2023.

- The benchmark price for apartment/condos increased 0.9% from Feb 2024 and increased 5.7% from Mar 2023.

*Areas covered by the Real Estate Board of Greater Vancouver include: Burnaby, Coquitlam, Maple Ridge, New Westminster, North Vancouver, Pitt Meadows, Port Coquitlam, Port Moody, Richmond, South Delta, Squamish, Sunshine Coast, Vancouver, West Vancouver, and Whistler.

Canadian real GDP grew 0.6 per cent in January, following a 0.1 per cent contraction in December. The growth was driven by services-producing sectors, which rose by 0.7 per cent. The resolution of public sector strikes in Quebec led to a jump in educational and social services GDP, reversing declines in the prior two months. Residential construction activity fell by 1.5 per cent, declining for the third consecutive month following a burst of activity in the summer and fall. Offices of real estate agents and brokers increased for the second consecutive month, rising 4 per cent as higher home sales in the greater Toronto region contributed to growth. Preliminary estimates suggest that output in the Canadian economy rose 0.4 per cent in February.

As striking teachers and social workers in Quebec returned to work and buoyed economic growth, the Canadian economy began 2024 with solid GDP momentum. Growth stalled in the latter half of 2023, but the January number and the February preliminary estimate suggest that the economy is regaining some strength to start the year. Decent economic growth could also reduce pressure on the Bank of Canada to cut rates, although financial markets continue to expect a first cut to occur in June. With inflation below 3 per cent for the previous two months, the Canadian economy is now experiencing disinflation and growth, putting the Bank of Canada in a more comfortable position as it decides when and how much to cut. Markets continue to expect the Bank to hold rates at its next announcement on April 10th.

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Canadian retail sales fell 0.3 per cent to $67 billion in January. Excluding volatile items, sales were up 0.4 per cent month-over-month. In volume terms, retail sales rose 0.2 per cent in January. Retail e-commerce trade rose by 3.5 per cent to $3.8 billion in January, amounting to 5.7 per cent of total retail sales. 

Sales in BC fell 2.2 per cent in January. BC retail sales were down 2 per cent from the same time last year. In the CMA of Vancouver, retail sales were down 1.6 per cent from the prior month and were unchanged from January of 2022.

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Canadian prices, as measured by the Consumer Price Index (CPI), rose 2.8 per cent on a year-over-year basis in February, down from a 2.9% increase in January. Month-over-month, on a seasonally adjusted basis, CPI rose by 0.1 per cent in February. Excluding energy costs, CPI rose 2.9 per cent year-over-year in February, down from 3.2 per cent in January. Decelerating food costs also contributed to the slowing in the CPI, with prices of food purchased from stores rising by 2.4 per cent in February compared to 3.4 per cent in January. Shelter costs, however, continue to be a major driver of inflation, with mortgage interest costs up 26.3 per cent and rent up 8.2 per cent from the same time last year in February. Excluding shelter, consumer prices rose just 1.3 per cent, year over year. In BC, consumer prices rose 2.6 per cent year-over-year. The Bank of Canada's preferred measures of core inflation, which strip out volatile components, fell to between 3.1 and 3.2 per cent per cent year-over-year in February. 

January's CPI report contained a second month unexpectedly good news. Canada's annual change in prices has now remained for two consecutive months within the Bank of Canada's 1 to 3 per cent target range. The last time this occurred was in early 2021. Despite a 4 per cent jump in gas prices, the CPI eased due to slowing price appreciation in other areas of the economy. Food price appreciation has been easing over the past 12 months and is now not far above historical norms, while other CPI components including cellular services have declined in price from last year. The category that remains the most challenging is shelter. Although the appreciation in mortgage costs looks to have peaked, rents in particular so far showing little sign of slowing. Overall, February was another encouraging report, and markets shifted their expectations of rate cuts forward slightly, with the odds of a cut in June increasing. However, the change in CPI will need to continue demonstrating a sustained trend towards 2 per cent over the spring before the Bank of Canada is comfortable cutting rates.

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The British Columbia Real Estate Association (BCREA) reports that a total of 5,497 residential unit sales were recorded in Multiple Listing Service^® (MLS^®) systems in February 2024, an increase of 15.3 per cent from February 2023. The average MLS^® residential price in BC in February 2024 was up 4.7 per cent at $987,798 compared to an average price of $943,574 in February 2023. The total sales dollar volume was $5.4 billion, an increase of 20.7 per cent from the same time in the previous year.

"The BC housing market is in a period of relative calm entering the spring," said BCREA Chief Economist Brendon Ogmundson. "While activity is picking up, home sales remain below normal, and home prices have been essentially flat since last summer."

Active listings are up 20.3 per cent over last year as a result of slower sales but also a recovery in new listings in January and February following a very slow year for listings activity in 2023. Last year was the slowest pace of new listing activity since 2005.

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The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver* is currently $1,183,300. This represents a 1.9% increase from January 2024 and a 4.5% increase from February 2023.

Specifically:

- The benchmark price for detached homes increased  1.5% from Jan 2024 and increased 7.2% from Feb 2023.

- The benchmark price for townhouses increased 2.6% from Jan 2024 and increased 4.2% from Feb 2023.

- The benchmark price for apartment/condos increased 2.5% from Jan 2024 and increased 5.6% from Feb 2023.

*Areas covered by the Real Estate Board of Greater Vancouver include: Burnaby, Coquitlam, Maple Ridge, New Westminster, North Vancouver, Pitt Meadows, Port Coquitlam, Port Moody, Richmond, South Delta, Squamish, Sunshine Coast, Vancouver, West Vancouver, and Whistler.

Canadian employment rose by 41,000, or 0.2 per cent, to 20.403 million in February. The unemployment rate rose 0.1 percentage points to 5.8 per cent. Average hourly wages rose 5 per cent year-over-year to $34.82 last month, while total hours worked were up 1.3 per cent from February of last year.

Employment in BC rose 0.2 per cent to 2.841 million, while employment in Metro Vancouver rose 0.2 per cent to 1.615 million in February. The unemployment rate fell 0.2 points in BC to 5.2 per cent while falling in Metro Vancouver by 0.5 points to 5 per cent last month.

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Canadian real GDP was largely unchanged in December, declining by 0.02 per cent, following two months of growth. Goods-producing sectors contracted by 0.2 per cent, while services were essentially unchanged. Construction activity fell 0.6 per cent in December, with residential building declining by 1.6 per cent. Offices of real estate agents and brokers rose 9 per cent, following five consecutive monthly declines amid soft home sales. Preliminary estimates suggest that output in the Canadian economy rose 0.4 per cent in January, helped by the conclusion of strikes in Quebec. 

Real GDP rose 0.2 per cent in the fourth quarter, close to 1 per cent on an annualized basis, erasing a 0.1 per cent decline in the third quarter. Improved net exports, driven by the strong US economy and Albertan crude oil, pushed GDP upwards. However, business investment declined for the sixth time over the most recent seven quarters. Household spending rose 0.2 per cent in the fourth quarter, driven by vehicle imports, but strong population growth meant that per capita consumption declined for the third consecutive quarter. At 6.2 per cent, the household savings rate was down slightly from the third quarter, but remains higher than pre-pandemic levels. Housing investment was down for the year, with residential construction down 10.2 per cent and ownership transfer costs down 7.7 per cent. At 1.2 per cent growth, 2023 was the slowest year for real GDP growth since 2016, excluding 2020. 

Economic growth in Canada was soft in 2023, and although it flirted with recession it has so far managed to avoid one. The central bank has raised rates by 475 basis points over two years and, as of the most recent data, managed to bring inflation down to 2.9 per cent without causing a major increase in unemployment or a contraction in GDP. The "soft landing" that seemed unlikely two years ago is now visible. However, while aggregate real GDP has not contracted, per capita GDP has contracted for six consecutive quarters as economic growth has failed to keep pace with rapid population growth. Per capita, real GDP is comparable to the level of 2017. Financial markets continue to expect that rate cuts will begin in the late spring and accumulate into the summer. The next rate announcement is on next Wednesday, March 6th.

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Canadian retail sales rose 0.9 per cent in December to $67.3 billion. Excluding volatile items, sales were up 0.5 per cent month-over-month. In volume terms, retail sales rose 0.8 per cent in December. Retail e-commerce trade fell by 3.6 per cent to $3.7 billion in December, amounting to 5.5 per cent of total retail sales. 

Sales in BC rose 1.5 per cent in December. BC retail sales are up 2.8 per cent from the same time last year. In the CMA of Vancouver, retail sales were up 1.5 per cent from last month and 5.4 per cent from December of 2022.

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Canadian prices, as measured by the Consumer Price Index (CPI), rose 2.9 per cent on a year-over-year basis in January, down from a 3.4% increase in December. Month-over-month, on a seasonally adjusted basis, CPI declined by 0.1 per cent in January, the first decline since May of 2020. Gasoline base-year effects contributed to the decline. Excluding energy costs, CPI rose 3.3 per cent year-over-year in January, down from 3.7 per cent in December. Decelerating food costs also contributed to the slowing in the CPI, with food prices rising by 3.4 per cent in January compared to 4.7 per cent in December. Shelter costs, however, continue to be a major driver of inflation, with mortgage interest costs up 27.4 per cent and rent up 7.9 per cent from last year in January. Excluding shelter, consumer prices rose 1.5 per cent, year over year. In BC, consumer prices rose 3 per cent year-over-year. The Bank of Canada's preferred measures of core inflation, which strip out volatile components, fell to between 3.3 and 3.4 per cent per cent year-over-year in January. 

January's CPI report contained unexpectedly good news, with the annual change in prices technically falling within the Bank of Canada's 1 to 3 per cent target range and declining month-over-month on a seasonally adjusted basis for the first time since the start of the pandemic. While volatile gas prices contributed to the decline, easing price pressures in other areas also reduced pressure on the CPI. Food price appreciation has been easing over the past 12 months and is now not far above historical norms. The category that remains the most challenging is shelter, with rents in particular so far showing no sign of slowing. Overall, January was an encouraging report, and markets shifted their expectations of rate cuts forward slightly, with cuts expected to begin in Q2. However, the Bank of Canada will be looking to see a sustained trend in inflation in the coming months before they will be comfortable initiating rate cuts.

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Canadian housing starts fell 10 per cent to 223,589 units in January at a seasonally adjusted annual rate (SAAR). Starts were up 7 per cent from the same month last year. Single-detached housing starts rose 4 per cent from last month to 54,248 units, while multi-family and others fell 14 per cent to 169,341 units (SAAR).

In British Columbia, starts fell 50 per cent from last month to 31,088 units SAAR in all areas of the province. In areas in the province with 10,000 or more residents, single-detached starts rose 3 per cent to 4,742 units while multi-family starts shrank 56 per cent to 24,206 units. Starts in the province were 39 per cent below the levels from January 2023. Starts fell from last month by 22.3k units in Vancouver, 5.5k in Victoria, and 2.8k in Kelowna while rising by 1.0k in Abbotsford. The 6-month moving average trend in BC fell by 5.8 per cent from last month to 46,902 SAAR.

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The British Columbia Real Estate Association (BCREA) reports that a total of 3,979 residential unit sales were recorded in Multiple Listing Service^® (MLS^®) systems in January 2024, an increase of 29.4 per cent from January 2023. The average MLS^® residential price in BC in January 2024 was up 10.5 per cent at $957,909 compared to an average price of $866,922, the low-point for average prices over the past two years. The total sales dollar volume was $3.8 billion, an increase of 42.9 per cent from the same time in the previous year.

"Home sales are on a clear uptrend to start 2024," said BCREA Chief Economist Brendon Ogmundson. "A sharp decline in fixed mortgage rates and expectations for future Bank of Canada rate cuts is driving sentiment in the market and bringing pent-up demand off the sidelines."
 
The total number of active listings, though up year-over-year, remains relatively low by historical standards. New listings activity has shown signs of normalizing following a down year in 2023. A steady pace of new inventory will be crucial in keeping markets balanced as sales accelerate.

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Canadian employment rose by 0.2 per cent in January to 20.362 million. The unemployment rate fell 0.1 percentage points to 5.7 per cent. Average hourly wages rose 5.3 per cent year-over-year to $34.75 last month, while total hours worked were up 1.1 per cent from January of last year.

Employment in BC fell 0.1 per cent to 2.84 million, while employment in Metro Vancouver fell 0.4 per cent to 1.61 million in January. The unemployment rate fell 0.1 points in BC to 5.4 per cent while falling in Metro Vancouver at 5.5 per cent.

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