Chad Moore Calgary Mortgage Broker

I think this economic data summary matters to you IF you’re in the Calgary housing market OR considering entering the market …

Here’s a summary of:

• Stats Canada Inflation Update. 
  
• Stats Canada Labour Force Survey (jobs report).
  
• Bank of Canada (BoC) Interest Rate Announcement. 

Based on this data, and the recent happenings of the Mortgage Market, I have a plan to invite many of my past clients to opportunities to save money, where your Bank would make less.  

For my past clients reading, look for special emails describing these opportunities. 

More to come. 

For now, let’s walk through some economic data, with a focus on Alberta and Calgary’s housing market. 

Stats Canada Inflation Release:

Stats Canada tracks the Consumer Price Index (CPI).  The CPI is a measurement of the change in prices of goods sold in Canada.

Over time, the cost of goods increase, which is also known as inflation.  Canada’s central Bankers are KEENLY interested in keeping inflation low and stable.  The Bank of Canada’s mandate is to keep inflation between 1-3%.

Monetary Policy, which is the management of Canada’s central interest rate to influence economic ebbs and flows, keep Canada’s inflation rate between this comfort zone (1-3%). 

Fairly recently, several departments of the Government of Canada have brought on macro-prudential Real Estate policies to improve the quality of housing debt Canadians are taking on.  Also referred to as the “stress test“. 

Fiscal Policy is politically driven decisions to spend money that move the needle of the Canadian economy, trickling into changes in Canada’s inflation numbers.  

Kind of a juggling act!

Stats Canada tracks several measures of inflation to increase our Central Bankers understanding of what is happening with price changes in Canada. 

The almighty “they” track:

Consumer price index (CPI Total): 2.0%

CPI Trim: 2.0%

CPI Common: 1.8%

CPI Median: 1.9%

The total CPI measurement, and all minor measurements of CPI, are at or below the 2% target range. 

Stats Canada Labour Force Survey (Jobs Report):

Canada’s Central Bankers also look at employment numbers as a factor in the direction of our Central Interest Rate.  

Employment numbers help forecast wage growth as one of the leading indicators of consumer spending.  Consumer spending is a LARGE portion of Canada’s Gross Domestic Product (GDP which is Canada’s economic output).  

Wage growth is also a leading indicator of consumers purchasing homes.    

Many of the National jobs report headlines are positive:

• Unemployment rate drops 0.3% down to 5.40%.
• Year over year (May 2018 – May 2019) employment growth increased by 453,000 or up 2.4%.
• Hours worked over the same period were up 1.0%. 

Other highlights to consider:

• Canada’s participation rate decreased month-over-month.  This means less people, able to work, were actively seeking employment. 
• Public sector employment is up 0.7% year over year.
• Private sector employment is up 2.8% year over year. 
• Self employed workers are up 3.3% year over year. 
• Construction and Manufacturing employment is up 2.4% and 1.9% respectively.  This employment type is responsible for a large amount of Canadian workers and has trickle down effects throughout the economy. 

Alberta Treasury Branches (ATB) released some income related statistics for Alberta:

• Average AB household after-tax income was down 4.1% (2014 compared with 2017).
• Average household income is up 6.1% in 10 years, without factoring inflationary effects. 

Incomes, wage growth and stability of income are big factors when deciding to enter the housing market.  

In an era of flat or net negative wage growth, with additional Mortgage qualifying stress tests, it’s not a surprise the results that are being experienced in Calgary’s Real Estate market. 

Bank Of Canada Interest Rate Announcement. 

I am finding the Bank of Canada (BoC) to be relatively positive in their messaging and future interest rate outlook.  The Canadian Bond market is responding much more negatively.

What I am reading and finding ironic, is the Bond market has a more accurate track record of predicting the direction of future interest rate movements than the Bank of Canada does.  

Let’s look at some verbiage rom the Bank of Canada and how the Bond market might be responding differently …

***Job Growth & Spending***

Bank of Canada, “Continued strong job growth suggests that businesses see the weakness in the past two quarters as temporary.  Recent data support a pickup in both consumer spending and exports in the second quarter, and it appears that overall growth in business investment has firmed.  That said, inventories rose sharply in the first quarter, which may dampen production growth in coming months.”

The bond market might be viewing an increase in consumer spending offset by a lower Canadian savings rate.  Business investment might still be shaky with the ratification of CUSMA still in limbo.  Trump’s pressure on the Mexican Government to stop the in-flow of illegal immigrants into the US is a viable reason for the agreement to fall apart. 

***Global Economy***

The Bank of Canada, “The global economy is also evolving largely as expected since April, Although the recent escalation of trade conflicts is heightening uncertainty about economic prospects.”

The bond market might be watching China block imports of Canadian farm commodities (soybeans, peas, pork) as political retaliation for detaining Huawei’s chief financial officer Meng Wanzhou.  There is a looming U.S extradition hearing and China might be leveraging political pressure on Canada for a favourable outcome?

***Canadian Oil Sector***

The Bank of Canada, “The oil sector is beginning to recover as production increases and prices remain above recent lows.”  

The bond market might be seeing the price of oil recover, but also factoring the offset of service industry layoffs, poorer rail shipping economics and unprecedented investment uncertainty?

The Canadian bond market might also be noting U.S futures markets are pricing in a 55% chance of an interest rate cut at its July 31st meeting and a 78% chance they cut interest rates by their September 18th meeting. 

A cut by the U.S Federal Reserve wouldn’t leave much room for the Bank of Canada to NOT follow suit because the Loonie would appreciate and negatively effect Canadian exports. 

***

6 Month Look Back At Canada’s Bond Market:

Conclusion:

Earlier in June, I wrote you about context.  

Yes, there is A LOT happening in the economy right now.  However, I can’t help but think if we were to be alive at any point in history, there would be a lot happening. 

Here’s a philosophy I picked up on and often keep top of mind …The economy is going to be about the same as it’s always been.  Opportunity mixed with difficulty.  It isn’t going to change.  The only thing I can change is myself.  

I’m curious to hear about philosophies or frames of thought you have?  Let me know.

Share this email with others (no spamming) who might find it valuable. 

Can you think of anyone buying or selling a home?  If so, please refer my service. 

Thank you for reading,

Chad Moore

P.S

Happy Father’s Day!!

Special Father’s day message to many of my clients who are having their 1st Father’s Day!!