Canada’s inflation rate accelerates

Author: Portfolio Specialist Group

July 23, 2018

AGF Weekly Perspectives

A recap of last week’s top economic news and what’s to come.

Canada inflation & retail sales

  • Consumer prices were up 2.5% year-on-year in Canada in June, up from 2.2% in May and above the consensus forecast for 2.3%.
  • Energy prices climbed 12.4% (from 11.6%) during the months and the only category to see inflation slow was household operations, down 0.1% (y/y) from +0.3% in May.
  • Canadian retail sales climbed 2% in May led by motor vehicles and parts sales (+3.7%) and gasoline stations (+4.3%). E-commerce sales, reported on a year-on-year basis, were up 16.9%, more than tripling the 5.5% yearly pace marked by overall sales.

U.S. housing starts disappoint

  • U.S. housing starts suffered the largest monthly decline since 2011, falling 12.3% in June. Multi-family starts fared worst, declining nearly 20%, while single-family starts also contracted.
  • Some pullback was expected following a spike in the prior month, however June’s result was significantly worse than forecasted.
  • Also reported, building permits slide 2.2% in June to record a third-straight month of losses, suggesting the effects of higher interest rates and input costs may be appearing within the U.S. housing market.

Canadian existing home sales move higher

  • Canadian existing home sales rose 4.1% in June to record the strongest monthly gain thus far in 2018. While sales are still down 10.7% from a year ago, the results are much improved from the 22% decline set in March.
  • Regionally, Toronto sales jumped nearly 17% in June, the strongest monthly increase in over 14 years, while Vancouver continued to slump with sales down 1.3%, as tighter provincial rules impacted activity.
  • Montreal and Ottawa are currently the strongest markets in Canada, up 5.1% and 2.7% year to date, respectively.

Other economic news

  • China’s economy decelerated slightly in the second quarter, as GDP growth measured 6.7% annualized, down from 6.8% in the prior period. While still elevated as compared to other global markets, this marks China’s slowest pace of growth since September 2016.
  • U.K. inflation held at 2.4% annualized for a third-straight month in June. Core inflation, however, fell to a 15-month low of 1.9%, which may hinder expectations of a Bank of England rate hike in August. Positively, the U.K. unemployment rate held at 4.2% and a record number of people were employed in the three-months to May period.

What’s to come

U.S. home sales

New and existing U.S. home sales for June will be announced during the first half of next week with GDP figures delivered on Friday. In Canada, a quiet week will be highlighted by wholesale trade data for May.

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