Inflation at its lowest in a year
Inflation moderated more than expected in February but remained elevated at 5.2%. Some of the moderation results from a base effect and lower gasoline prices. There are continued signs of modest moderation in underlying inflationary pressures, with most measures of core inflation easing slightly in February yet remaining elevated.
Housing activity increased in February, but prices are still falling
National house prices declined for a twelve consecutive month in February, despite an increase in activity. Since the start of the correction, prices nationally have fallen by 15.8%. However, the correction has been more significant in some markets, especially those with the most significant post-pandemic gains.
Wage growth rebounds as the labour market remains tight
Today’s Labour Force Survey data suggest the labour market in Canada remains robust and resilient. The low unemployment rate continues to signal that the labour market remains very tight, something the Bank of Canada is closely monitoring. Moreover, the report also shows that wage growth rebounded, with average wages increasing by 5.4% y-o-y, on par with its fastest pace in the current cycle.
The Bank of Canada keeps its conditional pause
The Bank of Canada kept its policy rate unchanged at 4.50%, in line with our expectations. The central bank also announced that it would continue quantitative tightening (QT). Over the past year, the BoC has increased its policy rate by 425bp, the fastest pace since the mid-1990s.
Insolvencies rebound to start 2023
Insolvencies rebounded in January on a seasonally-adjusted basis. This follows a surprising declining trend in insolvencies since the end of the summer despite continued strains on households’ finances due to a sharp rise in interest rates and continued deterioration in households’ purchasing power over the period.
Growth stalled at the end of 2022
Growth in the fourth quarter was much weaker than expected, showing that growth stalled in the last quester of 2002. However, the details show that most of the weakness was the result of a decline in inventories. After a contraction in the third quarter, a rebound in domestic demand suggests some resilience in the domestic economy despite the significant increase in interest rates and the reduction in household purchasing power over the past year.
Inflation moderates more than expected
Inflation moderated more than expected in January but remained elevated at 5.9%. Some of the moderation results from a base effect and moderation in mobile phone service costs and slower increase for motor vehicles. There are some signs of modest moderation in underlying inflationary pressures, with most measures of core inflation easing slightly in January yet remaining elevated.
The housing correction continues with no signs of relief
National house prices declined for a tenth consecutive month. Since the start of the correction, prices nationally have fallen by 15.1%. However, the correction has been more significant in some markets, especially those with the most significant post-pandemic gains. Rising interest rates since the start of 2022 have had a cooling impact on the housing market.
Continued strength in the labour market raises the odds of another rate hike
Today’s Labour Force data suggests the market in Canada remains strong with low unemployment, something the Bank of Canada is watching.