Residential Market Commentary - Week of August 14, 2017
2017-08-21 | 08:32:05
Encouraging figures for Canada but there is still room for growth
Canada’s economic numbers are, by and large, deemed to be good. The Bank of Canada seems to have decided that persistently low inflation is going to go away. It points to GDP growth and the improving job market for its reasoning.
Canada’s GDP was up 0.6% in May for a 12 month increase of 4.6%. Last month the International Monetary Fund boosted its forecast for Canada’s economic growth to 2.5% from 1.9%, putting it first among G7 countries.
Canada’s jobless rate is at a level that has come to be seen as full employment. Unemployment currently stands at 6.3%, which is the lowest level since October 2008.
Despite these encouraging figures, there is an indicator that is a persistent laggard. One that, when combined with the cooling housing market, could dampen consumer confidence.
Wage growth in Canada is stubbornly weak. The economy added 11,000 jobs in July for a 12 month total of more than 387,000. But wage growth eked out a mere 1.3% increase over the same 12 month period.
Generally, this is seen as a sign there is still room for growth in the economy and more job creation. It is also seen as giving the BoC more latitude to raise interest rates again, before the end of the year. But, as wages stagnate, interest rates climb and home prices slip, the warm and fuzzy “wealth effect” many Canadians have been feeling may turn cold.