Capital Economics Canada

The Toronto home sales-to-new listing ratio, a balance between demand and supply, has surged rapidly above its pandemic peak. This time its about a lack of supply rather than elevated demand, but the direction for prices is clear

@BenRabidoux Developers have shrugged off that weakness so far, but the outlook for housing starts is now very weak

Toronto new single-family home sales fall 96% y/y in September. New condo sales down 89%. Data per BILD/Altus Group.

New home sales in Toronto are now weaker than during both the global financial crisis and the pandemic, pointing to a sharp downturn in construction activity in 2023

The weakness of employment since June is largely due to a drop in public sector employment, although it still accounts for a far larger share of total employment than before the pandemic

Consumer confidence plunged to crisis-era lows last week and seems likely to drop further following the Bank of Canada's 100 bp hike yesterday

@Michaelseanpor1 @RobMcLister This month they change the weight of each item in the CPI basket based on spending patterns in 2021, previously 2020. Gasoline will have a larger weight, so the sharp rise in gasoline prices since April will have a larger upward impact on overall inflation in May and June

@RobMcLister @CapEconCanada The new cpi weights? Have they changed the calculation again or could weights have been used interchangeably with inputs/recent data ?

"The new CPI weights outlined this week mean that inflation will peak at more than 8% in June"—@CapEconCanada That's enough to give anyone indigestion.

@hank_moody12 Yes mainly that - Canadian consumption 1% higher than pre-pandemic, so down on a per capita basis. US consumption 5% higher than pre-pandemic

@CapEconCanada What are the main deviations? Consumption spending bounced back much better in U.S. relative to Canada?

While Canada's labour market recovery has been impressive, GDP per capita is still more than 1% below the pre-pandemic level, in sharp contrast to the US where it is more than 2% higher

What a difference a doubling of mortgage rates makes - sales-to-new listing ratio in Toronto now pointing to house price declines

@mikalskuterud @dima_nomad @StatCan_eng Questions for the CFIB to answer - they only cover small businesses, but their surveys have proved very informative during the pandemic

@CapEconCanada @dima_nomad @StatCan_eng I've very curious about this. Can you share more with me? What *exactly* does "stratified random sample of CFIB members" mean? Stratified how? And "random"? Was response compulsory? What is the underlying population size that the 784 observations were sampled from?

*NEW* Statistics Canada updated their job vacancy data today. For the 5th consecutive month the number of job vacancies in this country DECREASED. #cdnecon

@mikalskuterud @dima_nomad @StatCan_eng Ok, maybe some modest improvement then, although CFIB survey still suggests it might be reversed in the Mar & Apr vacancy data. The CFIB monthly survey data are all available here: cfib-fcei.ca/en/research/ec… Excel file link has the full data set

@CapEconCanada @dima_nomad BTW what's the source of the data in your chart there? Can you please share it with me? (All the data in my chart are from @StatCan_eng and publicly accessible).

@dima_nomad @mikalskuterud Problem with the vacancy data is they are not seasonally adjusted, and hard to do that given gap in collection during pandemic. Vacancies normally lower in the winter, and rebound in CFIB labour shortages in the April survey (out this morning) suggests no real improvement lately

@mikalskuterud 2021 was unusual as economy was reopening from lockdowns, I would expect numbers to decline as most staff returns to work, but so far it still looks strong

The sales-to-new listing ratio declined again in June, although still points to very strong gains in house prices #cdnecon

@francesdonald This speech was a sign the BoC is more concerned about full employment than in the past bankofcanada.ca/2021/02/canada…, although we also know that, until the latest restrictions least, the labour market recovery was running well ahead of that in the US

The Bank of Canada framework itself is far more hawkish than the Federal Reserves. 1) BoC is single-mandate (inflation) & has done little to disabuse the notion that they are only targeting inflation vs the Fed who is dual mandate & constantly emphasizes the employment side...

@francesdonald That further rise means residential investment has, for the first time, overtaken business investment as a share of GDP

This is why I say we need to evolve our concerns about the Canadian housing affordability crisis to include the damage to corporate competitiveness, long-term growth prospects and the social fabric of a country this levered to one sector. Chart via David Doyle at Macquarie.

Residential investment has, for the first time, overtaken business investment as a share of GDP #cdnecon

But is the stage already set for the next downturn? The further 43% annualised surge in residential investment means it now accounts for an extraordinarily high 10.3% of nominal GDP, making the economy vulnerable to a future correction (2/2)

A couple of interesting points to highlight from the Q1 GDP data. First, while real GDP remains 1.7% below its pre-pandemic level, nominal GDP is now 3% higher thanks to strong gains in commodity prices in particular (1/2)

A jump in energy inflation explained most of the rise in headline inflation to 3.4% in April, but inflationary pressures are emerging elsewhere as well. In fact, the m/m% rises in every category in April were consistent with annual inflation of more than 2% #cdnecon

Firms' selling price expectations jumped again in April