Canadian housing starts rose 10 per cent to 264,506 units in May at a seasonally adjusted annual rate (SAAR). Starts were up 35 per cent from the same month last year. Single-detached housing starts were largely unchanged from last month at 54,410 units, while multi-family and others rose 13 per cent to 210,093 units (SAAR). 

In British Columbia, starts fell 15 per cent from last month to 46,507 units SAAR in all areas of the province. In areas in the province with 10,000 or more residents, single-detached starts rose 7 per cent to 4,360 units while multi-family starts dropped 18 per cent to 39,959 units. Starts in the province were 14 per cent above the levels from May 2023. Compared with last year, year-to-date starts were up by 20 per cent in Victoria, 52 per cent in Kelowna, and 41 per cent in Abbotsford. Year-to-date starts were down by 8 per cent in Vancouver and by 14 per cent in Nanaimo. 

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Canadian employment edged up by 27,000, or 0.1 per cent, to 20.518 million in May. The unemployment rate ticked up to 6.2 per cent. Average hourly wages rose 5.1 per cent year-over-year to $34.94 last month, while total hours worked were up 1.6 per cent from May of last year.

Employment in BC fell 0.3 per cent to 2.863 million, while employment in Metro Vancouver fell 1.1 per cent to 1.610 million in April. The unemployment rate rose 0.6 points in BC to 5.6 per cent while rising in Metro Vancouver by 0.8 points to 6.1 per cent last month.

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Canadian real GDP was essentially unchanged in March, following a 0.2 per cent increase in February. Both goods and services sectors were unchanged from February. Residential construction activity rose by 1.4 per cent driven by increased construction of single-detached homes, while the broader construction sector also rose (+1.1 per cent). GDP from offices of real estate agents and brokers fell 0.9 per cent last month as home sales cooled somewhat. Preliminary estimates suggest that output in the Canadian economy rose by 0.3 per cent in April. 

Real GDP rose 1.7 per cent in the first quarter on an annualized basis, following no growth in the fourth quarter of 2023 (revised down from 0.2 per cent). Household spending on services, such as telecom, rents, and air travel, rose by 1.1 per cent from the prior quarter and drove much of the increase. Employee compensation rose 1.5 per cent in the first quarter, following a 0.9 per cent increase in the previous quarter. This helped contribute to a rising household savings rate, which hit 7 per cent, the highest rate since the first quarter of 2022. Meanwhile, housing market resale activity rose, with ownership transfer costs up 7.1 per cent. New home construction was essentially flat. 

Zero real economic growth in March, and below-forecast first quarter growth, is yet another piece of evidence supporting a rate cut next week. Soft real GDP growth in Canada looks worse when one considers the very rapid rate of population growth; real GDP per capita continues to sharply decline. This comes in the context of excellent progress on inflation, which hit 2.7 per cent last month, and looks even better when one digs deeper into the CPI report. Price appreciation now boils down almost entirely to rents and mortgage costs. Employment, for its part, also continues to soften, with the unemployment rate hitting 6.1 per cent last month. Taken together, markets anticipate that the bank will begin rate cuts at its announcement next week on June 5th.

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Canadian retail sales fell 0.2 per cent to $66.4 billion in March. Excluding volatile items, sales were down 0.6 per cent on a month-over-month basis. In volume terms, adjusted for rising prices, retail sales fell 0.4 per cent in March.

After rising more than 1 per cent in February, retail sales in BC were down by 0.4 per cent in March and were down by 0.4 per cent from the same time last year. In the CMA of Vancouver, retail sales were down 0.1 per cent from the prior month and were up 1 from March 2023.

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Canadian prices, as measured by the Consumer Price Index (CPI), rose 2.7 per cent on a year-over-year basis in April, down from a 2.9 per cent increase in March. Month-over-month, on a seasonally adjusted basis, CPI rose by 0.2 per cent in April. The deceleration in headline CPI was driven by softening food, services, and durable goods prices, but was moderated by an uptick in gasoline prices (up 6.1 per cent year-over-year). Excluding energy costs, CPI rose 2.5 per cent year-over-year in April, down from 2.8 per cent in March. The shelter cost index remains the major driver of inflation with the rate of increases higher now (6.4 per cent) than they were this time last year (4.9 per cent). Mortgage interest costs were up 24.5 per cent and rent was up 8.2 per cent from the same time last year in April. Excluding shelter, consumer prices rose just 1.2 per cent, year over year. In BC, consumer prices rose 2.9 per cent year-over-year, up from 2.7 per cent in March. The Bank of Canada's preferred measures of core inflation, which strip out volatile components, fell to between 2.6 and 2.9 per cent per cent year-over-year in March.

Canada's inflation rate continued to trend in the right direction in April, hitting the slowest rate of appreciation since March 2021. The Bank of Canada's preferred measures of core inflation, CPI median and CPI trim, have now been below the 2 per cent target for two consecutive months when measured on a 3-month annualized basis. Food costs also appear to be normalizing, and the overall food price index is essentially at 2 per cent. The main problem within the CPI basket is now almost exclusively the shelter component; rent appreciation in particular is troublingly high and the rate of increase continues to rise. Excluding shelter from the CPI index and comparing prices on an annualized 3-month basis, price appreciation in Canada has been close to zero for about half a year. Overall, this report contained yet more good news on inflation and will support the Bank of Canada's case to lower its policy rate in June. The next rate announcement is on Wednesday, June 5th.

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Canadian employment rose by 90,400, or 0.4 per cent, to 20.491 million in April. The unemployment rate was unchanged at 6.1 per cent. Average hourly wages rose 4.7 per cent year-over-year to $34.95 last month, while total hours worked were up 1.2 per cent from April of last year.

Employment in BC rose 0.8 per cent to 2.871 million, while employment in Metro Vancouver rose 0.7 per cent to 1.627 million in April. The unemployment rate fell 0.5 points in BC to 5 per cent while falling in Metro Vancouver by 0.3 points to 5.3 per cent last month.

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Canadian real GDP grew 0.2 per cent in February, following a 0.5 per cent increase in January. The growth was driven by services-producing sectors (+0.2 per cent), led by growth in rail, air, and pipeline transportation. Residential construction activity fell by 0.5 per cent, declining for the fourth consecutive month following a burst of activity in the summer and fall of 2023. Cooler home sales caused GDP from offices of real estate agents and brokers to fall 1.9 per cent last month, undoing some of the growth in December and January. Preliminary estimates suggest that output in the Canadian economy was essentially unchanged in March.

Amid cooling inflation and weakening labour markets, February's rather soft GDP report provides additional support for the broadly anticipated beginning of rate cuts in June. Although growth appeared strong in January, this was largely due to the conclusion of public sector strikes in Quebec, which caused a temporary boost to growth. Meanwhile, February's growth came in cooler than expected and the preliminary estimate for March is for zero growth. Markets currently expect the Bank to make its first overnight rate cut since early 2020 at its next meeting on June 5th. 

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Canadian retail sales fell 0.1 per cent to $66.7 billion in February. Excluding volatile items, sales were flat on a month-over-month basis. In volume terms, adjusted for rising prices, retail sales fell 0.3 per cent in February.

After falling more than 2 per cent in January, retail sales in BC were up 1.2 per cent in February and were up 2.6 per cent from the same time last year. In the CMA of Vancouver, retail sales were down 0.2 per cent from the prior month and were up 4.2 from February 2023.

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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 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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