Time for your cheat sheet on this week’s top stories.
Canadian Real Estate
Canadian Inflation To Surge, BoC Braces For Post-Carbon Tax Normalization
Canada’s headline consumer price index (CPI) fell to 1.8% in February, well below the Bank of Canada’s (BoC) 2% target rate. Looking at how this sausage was made reveals the weak CPI is almost entirely due to temporary factors that begin fading with this report. Statistics Canada did mention a skew due to the GST/HST holiday for February data, but did not address the larger factor—the carbon tax. A previous report by the BoC confirmed its removal will lead to a temporary suppression for a year, before the anniversary of the cut reintroduces 0.7 percentage points to the CPI. That should occur in April.
The BoC Rate Hold: Brought to You By the Letter ‘U’ for Uncertain
The Bank of Canada kept its key overnight rate at 2.25%, a widely expected decision. While the decision didn’t surprise the market, the central bank’s tone did. Most policy holds are a sign of stability, but this one wasn’t—it marked inaction. The Bank used the term “uncertain” six times in its opening remarks and spent much of its time during the announcement reinforcing that it isn’t sure what comes next.
Canadian Household Borrowing Is Slowing—And It’s A Warning Sign
Growth of Canadian household debt is slowing, and that is a clear warning sign for the economy. Total household debt fell 0.1% in January to $3.23 trillion, just 4.5% higher than last year. Stalling mortgage debt suggests structural issues are forming over the medium run. However, the bigger concern is the deceleration in consumer credit, up just 3.7% from last year. The slowdown in this segment is seen as one of the clearest signs of fading economic confidence. Regardless of what households say in consumer surveys, they aren’t putting their (borrowed) money where their mouth is.
Canada Sees Record Population Drop, Immigration Policies Already Easing
Canada’s population just recorded the first back-to-back quarterly decline on record, shrinking 0.2% to 41.47 million. The decline is entirely attributed to a 6% drop in non-permanent residents, though Statistics Canada warns the drop is likely to be smaller once revised. The agency specifically cites recent changes to immigration policy that would ease the limits policymakers had put in place just last year. While the size of the population contraction may shrink, at least one bank said it won’t be enough to change the overall trend.
Canadian Real Estate Prices See First Increase In 8 Months, Sales Fall
Canadian real estate prices rose 0.5% to $661,300 in February, marking the first increase in eight months. Demand wasn’t behind the bump, with sales falling 6.1% y/y, while the sales-to-new-listings ratio hit a decade low for the month. Prices climbed in the face of eroding market conditions, potentially indicating the move was more noise than a turning point. However, it’s worth paying attention—a trend of rising prices despite falling sales can quickly turn pent-up demand into panic buying.
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