Canadian real GDP increased by 0.3 per cent in October, following a 0.2 per cent increase in September. Service-producing industries grew by 0.1 per cent, while goods-producing industries rose by 0.9 per cent. October's growth was driven by gains in mining, quarrying, and oil and gas extraction (+2.4 per cent), construction (+0.4 per cent), wholesale trade (+0.5 per cent), and real-estate and rental and leasing (+0.5 per cent). Finally, GDP for real-estate offices and agents was up 6.3 per cent month-over-month. Overall, the Canadian economy exhibited growth in 12 out of 20 industries.  Preliminary estimates suggest that real GDP fell by 0.1 per cent in November.

After third-quarter growth that fell short of the Bank of Canada's expectations, Canada's output in October shows some positive signs of consumer activity and builds upon some encouraging trends observed in the previous month. We expect the Bank to cut by 25-basis points at their first two meetings in 2025 and then pausing to assess the need for further stimulus.

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Canadian prices, as measured by the Consumer Price Index (CPI), rose 1.9 per cent on a year-over-year basis in November, down from a 2.0 per cent increase in October. Month-over-month, on a seasonally adjusted basis, CPI increased by 0.1 points in November. Excluding gasoline, the CPI was unchanged at 2.0 per cent in November. Overall shelter price growth continues to cool, as mortgage interest costs were up 13.2 per cent, marking the fifteenth consecutive month of deceleration. Conversely, rent was up 7.7 per cent in November year-over-year, up from 7.3 per cent in October. In spite of accelerating rent price growth, total shelter costs rose 4.6 per cent in November, down from 4.8 per cent in October. In BC, consumer prices rose 2.3 per cent year-over-year, down from 2.4 per cent in October. The Bank of Canada's preferred measures of median and trimmed inflation, which strip out volatile components, remained unchanged at 2.6 and 2.7 per cent year-over-year, respectively. 
 
Canada's CPI report for November marks a stabilization around the midpoint of the Bank of Canada's inflation target range. With CPI ex-gasoline remaining relatively steady, November's headline CPI is likely driven by tailwinds from Black Friday and other related sales which partially accounted for lower prices and higher consumption across several sub-sectors. In spite of this stimulus, many of the special aggregate CPIs published by Statistics Canada remained either unchanged or slightly decelerated, indicating lingering weaknesses in consumer spending. Moving into the new year, the Bank has emphasized concerns of decelerating inflation as much as movement in the opposite direction. Given our trade uncertainties with the incoming American administration, coupled with an underperforming economy, the Bank will monitor the last monthly GDP report of 2024 to set the stage for their agenda heading into 2025, namely, the speed and depth at which they continue cutting the overnight rate. 

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Canadian retail sales rose 0.6 per cent to $67.6 billion in October from the previous month. Compared to the same time last year, retail sales are up by 1.5 per cent. Furthermore, core retail sales, which exclude gasoline and automobile items, rose by 0.2 per cent month-over-month. In volume terms, adjusted for rising prices, retail sales were unchanged in October. 

Retail sales in British Columbia were up 0.9 per cent in October month-over-month and up 1.5 per cent compared to the same time last year. In the CMA of Vancouver, retail sales were up 0.1 per cent from the prior month and 1.1 per cent higher than October 2023.

October's retail sales demonstrate a recovery in Canadian retail activity over the past few months as the Bank continues cutting toward its neutral range. The Bank of Canada will hope that Canadian retail growth serves as a proxy for next week's GDP report as it seeks guidance on whether the economy is rebounding in accordance with its 2025 forecast.

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Canadian housing starts rose 8 per cent to 262,433 units in November at a seasonally adjusted annual rate (SAAR). Starts were up 25 per cent from the same month last year. Single-detached housing starts were 3 per cent higher from last month at 60,781 units, while multi-family and other starts rose by 10 per cent to 201,661 (SAAR). 

In British Columbia, starts rose 18 per cent from last month to 50,447 units SAAR in all areas of the province. In areas of the province with 10,000 or more residents, single-detached starts were mostly unchanged at 4,586 units, while multi-family starts rose by 23 per cent to 44,002 units month-over-month. Starts in the province were 28 per cent above the levels from November 2023. Compared with last year, year-to-date starts are up by 46 per cent in Kelowna, while being down by 14 per cent in Vancouver, 16 per cent in Victoria, 8 per cent in Abbotsford, and 7 per cent in Nanaimo.

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Canadian real GDP rose by 0.1 per cent in September, after being largely unchanged in August. Goods-producing sectors fell 0.3 per cent, while service-producing industries were up 0.2 per cent. Mining, quarrying and the oil and gas extraction sector (-1.4 per cent) and manufacturing (-0.3 per cent) were the main drivers of downward pressure on growth, and were offset by gains in retail trade (+1 per cent), wholesale trade (+0.9 per cent), and construction (+0.4 per cent). Finally, output for the offices of real-estate agents and brokers grew by 3.0 per cent month-over-month. Preliminary estimates suggest that real GDP by industry also increased by 0.1 per cent in October.

Real GDP growth in the third quarter of 2024 registered at 1.0 per cent at an annualized rate from the prior quarter. Household spending grew by 0.9 per cent, leading to a 0.2 per cent increase in per capita household expenditures. Growth was also driven by broad-based government spending (+1.1 per cent). Conversely, business investment in machinery fell by 7.8 per cent in the third quarter, strongly attributed to lower spending on aircraft and transportation equipment. Housing investment rose by 0.8 per cent, largely due to higher ownership transfer costs (+4.9 per cent) that arise from resales. However, renovation spending and new construction declined by 0.4 per cent and 0.1 per cent, respectively. Despite higher household consumption, household savings rates reached a 3-year peak at 7.1 per cent, as disposable income grew at nearly double the rate of spending (in nominal terms). On a per capita basis, GDP was down 0.4 per cent in Q3 and marked a sixth consecutive quarterly decline.

Canada saw modest GDP growth in the third quarter, which fell short of the Bank of Canada's most recent quarterly projection of 1.5 per cent growth. The main discrepancies between this report and the Bank's projection are found in lower-than-anticipated business investment and household spending, signalling reluctance among firms and consumers due to more difficult borrowing conditions. In addition, Canadian GDP per capita continues to struggle amidst rapid population growth. This comes in the context of inflation moderating towards the midpoint of its target range, with price appreciation being largely driven by high shelter costs. The labour market remains at cooler levels, with unemployment steadying at around 6.5 per cent. Considering weaker than expected growth, a second consecutive 50-point cut from the Bank seems more likely as they hope to ignite expenditure moving into 2025. 

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Canadian retail sales rose 0.4 per cent to $66.9 billion in September from the previous month. Compared to the same time last year, retail sales are up by 0.8 per cent. Furthermore, core retail sales, which exclude gasoline and automobile items, rose by 1.4 per cent month-over-month. In volume terms, adjusted for rising prices, retail sales rose 0.8 per cent in September. For the third quarter of 2024, retail sales rose by 0.9 per cent overall and by 1.3 per cent in volume terms. 

Retail sales in British Columbia were up 0.6 per cent in September month-over-month, while down 0.5 per cent compared to the same time last year. In the CMA of Vancouver, retail sales were up 1.2 per cent from the prior month and 0.3 per cent higher than September 2023.

September's retail sales built upon the positive momentum generated in August with respect to Canadian consumption. Growth in both headline and core retail sales—which exclude volatile items—suggests a broad-based recovery in consumer spending, which we expect to strengthen into the winter with the newly announced GST holiday. Moving toward their next meeting, the Bank of Canada will monitor whether GDP growth strengthens in line with September's retail growth, as well as whether employment and CPI inflation stabilize at neutral levels. Positive trends in these areas would propel the Bank back onto its regular trajectory of 25 basis point cuts until reaching their neutral range. 

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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 October, up from a 1.6 per cent increase in September. Month-over-month, on a seasonally adjusted basis, CPI increased by 0.3 points in October. Excluding gasoline, the CPI rose 2.2 per cent in October, matching the levels of August and September. Shelter price growth continues to cool, as mortgage interest costs were up 14.7 per cent, and rent was up 7.3 per cent from last October, both decreasing from September's numbers of 16.7 and 8.2 per cent, respectively. Overall, shelter costs rose 4.8 per cent year-over-year in October, down from 5.0 per cent in September. Finally, goods costs rose 0.1 per cent, while services costs rose 3.6 per cent year-over-year. In BC, consumer prices rose 2.4 per cent year-over-year, up from 2.0 per cent in September. The Bank of Canada's preferred measures of median and trimmed inflation, which strip out volatile components, increased to 2.5 and 2.6 per cent year-over-year, respectively. 
 
Canada's CPI report for October marks a return towards the midpoint of the Bank of Canada's inflation target range. With CPI ex-gasoline remaining steady, headline growth is likely a function of increased consumer spending across various industries. This is demonstrated through monthly growth in each of the special aggregate CPIs published by Statistics Canada for October. However, current inflation remains slightly below the Bank of Canada's projection. Looking ahead to December's policy meeting, the Bank of Canada faces a delicate balancing act. Given the uncertainty surrounding economic conditions for 2025, particularly around growth prospects, the chance of a second consecutive "jumbo cut" remains on the table. A lot will depend on the upcoming GDP data, with the Bank hoping for signs of stronger economic activity in alignment with their current forecast.

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Canadian employment rose by 0.1 percent from the previous month, growing by 15,000 jobs to 20.597 million in October. The employment rate fell by 0.1 points to 60.6 per cent, while the unemployment rate was unchanged at 6.5 per cent. Average hourly wages rose 4.9 per cent year-over-year to $35.76 last month, while total hours worked were up 1.6  per cent from October of the previous year.

Employment in B.C. fell by 0.3 per cent to 2.829 million with a gain of 8,000 jobs in October, marking the first month of provincial job gain since April 2024. Employment in Metro Vancouver rose 1.2 per cent to 1.606 million in October. The unemployment rate in B.C. fell by 0.2 points to 5.8 per cent in October. On a similar trend, Vancouver's unemployment rate fell by 0.5 points from last month to 6.2 per cent.

October's employment statistics, while modestly positive, reflect a slow and steady economic recovery as interest rates continue to fall. Both public and private sector job growth remained relatively unchanged. Only three of sixteen major Canadian industries had a statistically significant change in employment from the previous month, suggesting that firms may continue waiting for friendlier financing/investment conditions before expanding their workforces.  A steady unemployment rate amid weak but still positive hiring activity doesn't necessarily point to another jumbo cut by the Bank of Canada, though the Bank's outlook likely got a little more volatile given the results of the US election.  How the Bank interprets the potential ramifications of a new Trump administration on the Canadian economy, along with incoming data on October inflation, may push the Bank toward more aggressive rate cuts. Current odds in financial markets are slightly tilted toward a 50-basis point cut in December. 

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The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver* is $1,172,200. This represents a 1.9 per cent decrease over October 2023 and a 0.6 per cent decrease compared to September 2024.

Specifically:

- The benchmark price for detached homes increased 0.3% from Oct 2023 and decreased 1.0% from Sep 2024.

- The benchmark price for townhouses/attached decreased 1.6% from Oct 2023 and decreased 0.6% from Sep 2024.

- The benchmark price for apartment/condos decreased 0.3% from Oct 2023 and decreased 0.7% from Sep2024.

*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 was essentially unchanged in August, following a 0.1 per cent increase in July. Service-producing industries grew by 0.1 per cent, while goods-producing industries fell by 0.4 per cent, reaching their lowest level since December 2021. Manufacturing was the largest detractor from growth for August, driven by both durable (-1.0 per cent) and non-durable goods (-1.4 per cent). The public sector saw its eighth consecutive month of growth (0.2 per cent), while utilities contracted by 1.9 per cent after three consecutive months of growth. Retail trade rose for the second month in a row by 0.6 per cent, while mining, quarrying, and oil and gas extraction (+0.6 per cent), and finance and insurance (+0.5 per cent) also contributed to growth. Rail lockouts resulted in a 7.7 per cent decline in rail transportation, causing a 0.3 per cent decline in the overall transportation and warehousing sector for August. Finally, GDP for real-estate offices and agents was up 0.7 points month-over-month. Preliminary estimates suggest that real GDP grew by 0.3 per cent in September, contributing to a 0.2 per cent estimate for GDP growth in the third quarter of 2024.

Despite exhibiting growth in 12 of 20 overall industries, the Canadian economy remained at virtually the same level of output compared to July. These findings further justify the Bank of Canada's decision to cut the overnight rate by 50 basis points earlier this month. However, a strong preliminary estimate for September suggests a potentially stronger economy in the final quarter of 2024 amidst the Bank's cutting cycle. Steady, positive monthly growth, accompanied by headline CPI settling around its 2% target range, would suggest a return to a more gradual pace of rate cuts by the Bank of Canada, though the door remains open to more aggressive moves if October inflation and jobs data show continued weakness.

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Canadian retail sales rose 0.4 per cent to $66.6 billion in August from the previous month. Compared to the same time last year, retail sales are also up by 1.4 per cent. However, core retail sales, which exclude gasoline and automobile items, were down 0.4 per cent month-over-month. In volume terms, adjusted for rising prices, retail sales rose 0.7 per cent in August.

Retail sales in British Columbia were down 1.0 per cent in August month-over-month, while down 0.6 per cent compared to the same time last year. In the CMA of Vancouver, retail sales were down 1.4 per cent from the prior month and unchanged from August 2023.

August's retail sales show some positive signs in Canadian consumption while highlighting underlying weaknesses that have remained a challenge throughout 2024. On one hand, headline sales rose for a second consecutive month, and we saw the largest year-over-year gain since April. However, contracting core retail sales—which exclude volatile items—demonstrate an unsatisfactory level of consumer spending across goods and services, supporting the Bank of Canada's decision to cut rates by 50 basis points earlier this week. Moving toward their next meeting, the Bank will monitor whether retail activity (headline and core), GDP growth, and employment strengthen. Positive trends in these areas, coupled with CPI inflation returning to its midpoint, would propel the Bank back onto its regular trajectory of 25 basis point cuts until reaching their neutral range. 

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The British Columbia Real Estate Association (BCREA) reports that 5,579 residential unit sales were recorded in Multiple Listing Service® (MLS®) systems in September 2024, up a little under 1 per cent from September 2023. The average MLS® residential price in BC in September 2024 was down 2.8 per cent at $942,969 compared to an average price of $969,907 in September 2023.

The total sales dollar volume was $5.3 billion, a 2.1 per cent decline from the same time the previous year. BC MLS® unit sales were 25 per cent lower than the ten-year average for September.

“Thus far, falling mortgage rates have not had the expected impact on home sales,” said BCREA Chief Economist Brendon Ogmundson. “That said, there has been interesting regional variation with markets on Vancouver Island and in the North recording more historically normal activity while the Lower Mainland and parts of the Interior lag behind.”

Year-to-date, BC residential sales dollar volume is down 3.2 per cent to $56 billion, compared with the same period in 2023. Residential unit sales are down by 4.1 per cent year-over-year at 57,069 units, while the average MLS® residential price is up 1 per cent to $981,393.

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Canadian prices, as measured by the Consumer Price Index (CPI), rose 1.6 per cent on a year-over-year basis in September, down from a 2.0 per cent increase in August. This marks the slowest year-over-year increase since February 2021. Month-over-month, on a seasonally adjusted basis, CPI was unchanged in September. The deceleration in headline CPI was driven by a 10.7 per cent decrease in gasoline prices in September. This drop is largely attributed to lower crude oil prices due to pessimistic outlooks on economic growth, coupled with lower costs associated with switching to winter blends. Excluding gasoline, the CPI rose 2.2 per cent in September, matching August's increase. Mortgage interest costs were up 16.7 per cent, and rent was up 8.2 per cent from last September, both decreasing from August's numbers of 18.8 and 8.9 per cent, respectively. Overall, shelter costs rose 5.0 per cent year-over-year in September, down from 5.3 per cent in August. Finally, goods costs fell 1.0 per cent, while services costs rose 4.0 per cent year-over-year. In BC, consumer prices rose 2.0 per cent year-over-year, down from 2.4 per cent in August. The Bank of Canada's preferred measures of median and trimmed inflation, which strip out volatile components, remained unchanged from August at 2.3 and 2.4 per cent year-over-year, respectively. 
 
Canada's inflation report for September strongly resembles the patterns of August's report, with different takeaways. Similar to August, the stark dropoff in September's headline CPI is driven by sharp decreases in gasoline prices, with CPI ex-gasoline remaining at 2.2 per cent. Nonetheless, this downward pressure is a function of concerns regarding future economic conditions, thus serving as a proxy for investor/consumer expectations. Moreover, 9 out of 11 special aggregate CPIs published by Statistics Canada fell from August's levels, suggesting that consumption levels are weaker than expected by the Bank of Canada. Despite median and trimmed CPI remaining at 2.3 and 2.4 per cent, the strong dip in headline CPI will raise concerns that inflation is decelerating too quickly due to a weakening economy. Taken together, September's inflation report significantly increases the probability of a 50 basis point cut next week, in hopes of reigniting the economy for our final quarter. 

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Canadian employment rose by 0.2 percent from the previous month, growing by 47,000 jobs to 20.582 million in September. Both unemployment and employment rates fell by 0.1 points to 6.5 per cent and 60.7 per cent, respectively. Average hourly wages rose 4.6 per cent year-over-year to $35.59 last month, while total hours worked were up 1.2 per cent from September of the previous year.

Employment in B.C. fell 0.6 per cent to 2.821 million with a loss of 18,000 jobs in September, marking the fifth consecutive month of provincial job losses. Employment in Metro Vancouver rose 0.2 per cent to 1.587 million in September. The unemployment rate in B.C. rose by 0.2 points to 6 per cent. On a similar trend, Vancouver's unemployment rate rose by 0.4 points year-over-year to 6.7 per cent.

September's employment statistics are a beginning sign of a rebounding labour market, with the unemployment rate ticking downward for the first time since January. Moreover, headline job growth is driven by strong private sector expansion (+61,000 jobs), suggesting that firms are willing to incur greater costs amidst continually improving borrowing conditions from the Bank's cutting cycle. Overall, these numbers indicate a slight economic bounceback, which may reduce the odds of a 50 basis point cut later this month. However, September's CPI report will provide more clarity on the economy's expectations of the Bank of Canada's announcements moving forward.

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