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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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.

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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.

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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. 

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Canadian retail sales fell 0.3 per cent to $65.7 billion in June. Excluding volatile items, sales were up 0.4 per cent on a month-over-month basis. In volume terms, adjusted for rising prices, retail sales rose 0.1 per cent in June, while quarterly sales fell by 0.3 per cent. Overall, retail sales were down 0.5 per cent in the second quarter of 2024.

Retail sales in British Columbia were nearly unchanged (+0.0043 per cent) in June and fractionally lower (-0.0015 per cent) compared to the same time last year. In the CMA of Vancouver, retail sales were up 0.4 per cent from the prior month and rose 2.6 percent from June 2023.

These statistics from June contribute to an overall weakening national trend in retail sales over the past several months, as characterized by decreased quarterly volume. Overall, this pattern supports the argument for a third rate cut by the Bank of Canada in September to promote more economic activity.

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Canadian prices, as measured by the Consumer Price Index (CPI), rose 2.5 per cent on a year-over-year basis in July, down from a 2.7 per cent increase in June. Month-over-month, on a seasonally adjusted basis, CPI rose by 0.3 per cent in July. The deceleration in headline CPI was widespread across sectors, primarily driven by declining prices on electricity, passenger vehicles, and travel tours. Excluding gasoline, the CPI rose 2.5 per cent in July. Gasoline placed further upward pressure on inflation in July, with a year-over-year growth rate of 1.9 per cent compared to 0.4 per cent in June. Downward pressure from electricity and other factors drove shelter costs down from 6.2 per cent in June to 5.7 per cent in July year-over-year. Mortgage interest costs were up 21 per cent and rent was up 8.5 per cent from last July. Finally, durable goods costs fell 1.7 per cent while services costs rose 4.4 per cent year-over-year. In BC, consumer prices rose 2.8 per cent year-over-year, up from 2.6 per cent in June. The Bank of Canada's preferred measures of core inflation, which strip out volatile components, fell to between 2.4 and 2.7 per cent year-over-year in July. 

 Canada's inflation report for July continued the positive overall trends in June, with headline CPI reaching its lowest level since March 2021. This was achieved in part due to declines in nearly all travel-related services in July year-over-year. However, this is largely a base-year effect, as July 2023 experienced soaring travel-related prices due to it being the first summer without restrictions related to the COVID-19 pandemic.  Moreover, CPI-median and CPI-trim continue declining towards the mid-point of the Bank of Canada's target range. Taken together, July's inflation report bolsters the likelihood of a third consecutive rate cut from the Bank of Canada in September. 

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The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver* is currently $1,197,700. This represents a 0.8% decrease from June 2023 and a 0.8% decrease from June 2024.

Specifically:

- The benchmark price for detached homes increased 2.1% from Jul 2023 and decreased 0.6% from Jun 2024.

- The benchmark price for townhouses/attached increased 1.4% from Jul 2023 and decreased 1.2% from Jun 2024.

- The benchmark price for apartment/condos decreased 0.3% from Jul 2023 and decreased 0.7% from Jun 2024.

*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 retail sales fell 0.8 per cent to $66.1 billion in May. Excluding volatile items, sales were down 1.4 per cent on a month-over-month basis. In volume terms, adjusted for rising prices, retail sales rose 0.7 per cent in May.

Retail sales in BC were down by 1.3 per cent in May and fell by 1.6 per cent from the same time last year. In the CMA of Vancouver, retail sales were down 1.2 per cent from the prior month and were up 0.9 percent from May 2023.

These figures are indicative of an overall weakening trend in Canadian goods consumption, with retail sales falling during 4 of the last 5 months. Overall, this pattern supports the argument for a second rate cut by the Bank of Canada in July to promote more economic activity.

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Canadian housing starts fell 9 per cent to 241,672 units in June at a seasonally adjusted annual rate (SAAR). Starts were down 14 per cent from the same month last year. Single-detached housing starts were up 1 per cent from last month at 52,762 units, while multi-family and others fell 11 per cent to 188,911 units (SAAR). 

In British Columbia, starts fell 12 per cent from last month to 40,808 units SAAR in all areas of the province. In areas in the province with 10,000 or more residents, single-detached starts rose 11 per cent to 4,876 units while multi-family starts dropped 15 per cent to 34,085 units. Starts in the province were 38 per cent below the levels from June 2023. Compared with last year, year-to-date starts were up by 5 per cent in Victoria, 54 per cent in Kelowna, and 27 per cent in Abbotsford. Year-to-date starts were down by 18 per cent in Vancouver and by 20 per cent in Nanaimo.

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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 June, down from a 2.9 per cent increase in May. Month-over-month, on a seasonally adjusted basis, CPI rose by 0.1 per cent in June. The deceleration in headline CPI was largely driven by declining gasoline prices. Excluding gasoline, the CPI rose 2.8 per cent in June. The shelter cost index remains the major driver of inflation with the rate of increases higher now (6.2 per cent) than they were this time last year (4.8 per cent). Mortgage interest costs were up 22.3 per cent and rent was up 8.8 per cent from last June. Excluding shelter, consumer prices rose just 1.3 per cent, year over year. Driven by furniture and used cars, durable goods costs fell 1.8 per cent year-over-year in June as supply chains continue to recover. In BC, consumer prices rose 2.6 per cent year-over-year, down from 2.9 per cent in May. The Bank of Canada's preferred measures of core inflation, which strip out volatile components, fell to between 2.3 and 2.9 per cent per cent year-over-year in June. 

Canada's inflation report contained some good news mixed in with familiar challenges. The headline year-over-year price change declined in June, reversing May's uptick, and came close to the lowest rate since early 2021. This was achieved in part due to 3.1 per cent month-over-month decline in gasoline prices following an announcement from the Organization of the Petroleum Exporting Countries (OPEC) that it plans to increase production. On the other hand, the year-over-year change in food costs rose for a second consecutive month, halting an optimistic downward trend. CPI-median and CPI-trim are back above the 2 per cent target when measured on a 3-month annualized basis for the second consecutive month. Finally, shelter costs and especially rents remain the most persistent challenge in the CPI and show few clear signs of improvement. Taken together, however, markets considered the report positive news and raised the probability that the Bank of Canada would cut rates next Wednesday to 90 per cent. 

Copyright British Columbia Real Estate Association. Reprinted with permission.