The latest Statistics Canada inflation numbers have brought some more good news for consumers and anyone looking for interest rate relief.

The annualized rate of inflation in April dipped again, falling to a three-year low of 2.7%, down from 2.9% in March.

Two key components in the inflation calculation saw slowdowns last month: shelter costs, and food.  Shelter costs – which include mortgage costs and rents – increased by 6.4%, a 1 basis-point decline from March.  Grocery price inflation eased to 1.4%, a drop of 5 basis-points from March.  Gasoline prices, however, jumped 6.1%, which held the overall inflation rate somewhat higher.

Encouragingly, so-called, core inflation – which strips out prices for volatile items like food and fuel – also continued to decline.  This is the measure of inflation the Bank of Canada uses when making its interest rate decisions.  April’s average of the core inflation measures came in at 2.75%, down from 3.05% the month before.

Both headline and core inflation now fall inside the Bank’s 1.0% to 3.0% target range.

Many market watchers now believe the BoC will likely go ahead with an interest rate cut at its next meeting on June 5^th.

There is one significant report that will arrive between now and then.  The latest Gross Domestic Product numbers will be released on May 31st.

Published by First National Financial LP

The spring home-buying season is off to a soft start.  The latest figures from the Canadian Real Estate Association show both sales and prices dipped, while inventories rose in April.

The numbers suggest a move toward better stability in Canada’s notoriously unhinged real estate market, and a move away from seller dominance.

April sales slipped 1.7% compared to March, but sales are up 10% compared to April 2023.  The national average price of a home remained flat month-over-month, but is down 1.8% compared to a year earlier, at about $703,500.

This comes as the number of new listings rose 2.8% m/m.  CREA notes that, when the rise in new listings is combined with slower sales it amounts to a 6.5% increase in the number of properties on the market.

The national sales-to-new listings ratio eased to 53.4%. The long-term average is 55%.  A ratio between 45% and 65% is generally considered balanced.

Affordability in Canada’s real estate market remains a key concern.  Many market watchers believe anxious buyers are thinking about the longer term, and waiting for interest rates to start falling before making their purchase.

In the meantime, those who can afford to get into the market have a larger range of home choices and renewed opportunities to negotiate terms.

Published by First National Financial LP

Anyone who is eager for the Bank of Canada to start lowering interest rates will probably be happy with what Governor Tiff Macklem has been saying.  But it comes with a caveat.

Appearing in front of the Commons Finance Committee, last week, Macklem told MPs the central bank is getting closer to cutting rates as inflation is showing signs of going down and staying down.

“The message to Canadians is, we are getting closer. We are seeing what we need to see and we just need to be confident that it will be sustained,” Macklem said.

The Bank focuses on “core inflation”, which strips out items like food and fuel which can be subject to volatile price swings.  That measure is now inside the Bank’s 1.0% – 3.0% target range.  Headline inflation is also inside the target range at 2.9%.

The housing market tends to get a lot of attention during interest rate discussions and Macklem concedes that the Bank’s policy has been “restraining” demand for housing.  He expects demand will grow this year, which will likely bring price increases along with more affordability concerns.

Macklem cautions that rates are unlikely to return to the record low (and nearly zero) levels that have been in place since the global recession from 2009 to 2021 and through the COVID pandemic.  He also warned that, when the Bank does start reducing rates, “it’s likely to be a pretty gradual path.”

“Canadians should not be expecting a rapid decline in interest rates,” he said.

Published by First National Financial LP