Retail sales increased more than expected in September, and the preliminary estimate suggests that sales were also robust in October.
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Inflation moderates with momentum in BoC’s core measures narrowly below 3%
Inflation decelerated to 3.1% in October, in line with expectations. The lower inflation rate is mainly the result of lower gasoline prices and slower price increases for food. However, service prices accelerated in October.
Will it be a hard landing or a soft landing? The labour market will decide
The Bank of Canada has tightened monetary policy meaningfully in its fight against inflation, raising the policy rate to 5.00%, well into restrictive territory. However, history has shown that it takes between 5 to 7 quarters on average between the moment monetary policy moves into restrictive territory and the start of a downturn, suggesting that the next six months may be the window to observe a more meaningful deterioration in the economy.
The housing market weakens further in October
Housing activity weakened in October for a fourth consecutive month, while national house prices fell for a second month. The decline in housing activity comes after the Bank of Canada increased its policy rate in June and July.
Insolvencies took a pause in September, but the upward trend remains intact
Insolvencies declined in September on a seasonally-adjusted basis, likely taking a temporary pause in their gradual rising trend, and remained close to their highest level since the start of the pandemic. As such, proposals (a renegotiation of terms) are above their pre-pandemic levels at the national level and in almost every province.
A softening of the labour market
Today’s Labour Force Survey data points to some softening in Canada’s labour market, with weaker than expected job gains and a rise in the unemployment rate to 5.7%. Moroever, unchanged hours worked suggest that economic activity remained modest in October.