DATE

The Cost of Living Crisis

Steve Saretsky -

Statistics Canada has revised the latest reading on GDP, highlighting a contraction of 1.1% at an annualized rate in the second quarter, well below the 2.5% expansion forecasted in a Bloomberg survey of economists. It’s a big miss, and one that does not bode well for the Trudeau Government as we head to the polls in less than three weeks. The Canadian economy is currently suffering a bout of stagflation, with CPI inflation currently running at a 10 year high as the economy contracts.

This is one of those nightmare scenarios not only for the Trudeau Government but the Bank of Canada as well. Pretty hard to pare back stimulus with a big miss on GDP. The official narrative on inflation is that it remains nothing to be worried about, “transitory” as they like to say. However, with covid lingering around it appears supply chain impairments are going to persist, and inflationary pressures will remain. As my good friend Ben Rabidoux just pointed out, the Canada Farm Product Price Index, which measures the change in prices that farmers receive for the agriculture commodities they produce and sell, has surged 24.4% y/y in June, tied for highest reading since late 1970s. In other words, food inflation, which the government suggests is currently running at 1.8%, is going much higher. If you think people are upset about the cost of living now, Bon Appetit.

Speaking of inflationary pressures and the cost of living, there’s not much good news there either. August housing data for Toronto & Vancouver released this past week shows a chronic lack of new listings coming to market, providing little relief for prospective home buyers. In Toronto, new listings crashed 43% year-over-year, falling to their lowest total in over a decade. Here in Greater Vancouver, new listings fell 31%. This shortage continues to impact the single family housing market the most, as total inventory for sale is now at 20 year lows in both markets.

Ironically, coming back full circle, the big miss in GDP was largely due to a pull-back in housing activity, where investment in residential structures fell by an annualized 12%. Keep this in mind as we head to the polls. Governments are trying to grapple a cost of living crisis while also maintaining the economic engine that is housing investment. Speaking of investment, did you know 27% of federal MP’s are property investors? I imagine the other 73% own at least their primary residence. Something to chew on.

Three Things I’m Watching:

1. Single family housing inventory at record lows in Toronto & Vancouver. (Source: Ben Rabidoux)
81ae3cd7-a639-181f-cb48-8cf0c8ecb04a-9120781

2. Canada Farm Product Price Index up 24% y/y in June. Highest reading since the 1970’s.
b79cc5a2-7ef7-c3d7-8b58-d7731c5a8a91-1661915

3. Canada’s GDP suddenly turns down in Q2. (Source: Bloomberg)
bf85e2ff-31e5-d1d2-6e9a-a2a99448a7ca-1680507

Join the Monday Newsletter

Every Monday morning you'll receive a short and entertaining round-up of news on the Vancouver & Canadian Real Estate markets.

"*" indicates required fields

The Canadian Economy

Steve Saretsky -

Happy Monday Morning! Central banks finally broke something. After leaving rates hovering near zero for over a decade and engaging in trillions of dollars worth of QE (Quantitative Easing) you can’t simply raise interest rates by 400bps in less than a year without something going boom in the night. It...

Steve Saretsky -

Happy Monday Morning! Canadian banks reported first quarter earnings this past week. Those earnings provided an important glimpse into what’s shaping the nations housing market. Deep in the footnotes, CIBC reported that $52-billion worth of mortgages – the equivalent of 20% of the bank’s $263-billion residential loan portfolio were in a position...

Steve Saretsky -

Happy Monday Morning! Some good news on the inflation front in Canada this past week. Headline inflation ticked in at 5.9% year-over-year, below market expectations of 6.1%. Inflation in services, which is one of the key figures policymakers are watching, eased to 5.3%, from 5.6% in December. The Bank of...

Steve Saretsky -

Happy Monday Morning! National housing figures dropped this past week, and it wasn’t pretty. January home sales fell 37% year-over-year, a sharp decline from the blistering hot bull market of January 2022. When you zoom out further, this January was the slowest since 2009. However, balancing this out was a...

Steve Saretsky -

Happy Monday Morning! Those holding their breath for an easing in mortgage rates were delivered some tough news last week. The Canadian labour market added 150,000 jobs in January, more than TEN times economist estimates. Let’s not forget that December jobs numbers were TWENTY times estimates. Just what the hell...

Get the Saretsky Report to your email every month

The Saretsky Report. December 2022