Week of November 24, 2014

MARKET STATISTICS: Weekly Change

ECONOMIC STATISTICS:

WEEKLY ECONOMIC REPORT

NOVEMBER 24, 2014

Ronald Chow, Chief Economist ! ronaldchow@crescentschool.org

CANADIAN INFLATION IS STILL ACCELERATING Canadian Consumer Price Index – October Canadian consumer prices rose 0.1% in October, stronger than expected in a month where gasoline prices slide 4%. This resulted in the increase of inflation by 4 ticks, to 2.5% y/y, matching the fastest clip since February 2012. Core inflation jumped to 2.3% y/y from 2.1% in the prior month, above Bank of Canada’s target, and is even stronger on an annualized basis over the latest 3- and 6-month periods (2.6% and 2.5% respectively). Core inflation could still move higher next month since prices held steady in November, and will now also run ahead of Bank of Canada’s 2.1% y/y prediction for all of Q4.

Price gains were fairly broad based in the month, with 7 of 8 major categories posting seasonally-adjusted increases. From a year ago, food, shelter, household operations, clothing and alcohol/tobacco are all running at either 2.8% or stronger, suggesting that inflation momentum has broadened. Regionally, Alberta boasts Canada’s highest inflation rate at 3.0%, followed by Ontario at 2.8% and Saskatchewan at 2.5%. In Atlantic Canada, price trends are generally weaker with sub-2% on average.

Canadian inflation crept higher again in October and is now tracking ahead of the Bank of Canada’s forecast for all of Q4. Although this won’t change BoC’s overall view, they might need to watch the inflation rate more closely now.

U.S. EXISTING HOME SALES REACH A ONE-YEAR HIGH U.S. Existing Home Sales – October U.S. existing home sales easily beat expectations in October, rising 1.5% to 5.26 million units annualized, the highest since late summer 2013. Buying activity was spread between singles (+1.3%) as well as condos (+3.3%).

However, the share of first-timers remains disturbingly low. First-time homebuyers accounted for 29% of overall sales in the month, the 19th sub-30% month in the past 19 months. This is consistent with the lessened amount of first-timers since 2010, as first-time buyers have consistently remained below 40%-45% during “normal” times.

Overall, this is more encouraging news regarding U.S. housing.

WEEKLY ECONOMIC REPORT

NOVEMBER 24, 2014

Ronald Chow, Chief Economist ! ronaldchow@crescentschool.org

CANADIAN HOUSING REMAINS A 3-CITY SHOW Canadian Existing Home Sales – October The familiar tune in the Canadian housing market continues – very strong activity in Vancouver, Calgary and Toronto, but much more subdued conditions everywhere else. Canadian existing home sales rose 0.7% in October, lifting activity 7% above year-ago levels. Sales are now running above the 10-year average and near the best levels of the past decade. Canada-wide market balance remains quite normal, with sales-to-new listings ratio holding steady at 55.7%, right on the 10-year average. The months’ supply of homes for sale edged down to 5.8%, slightly higher than the 10-year normal.

In Vancouver, prices continued to accelerated up to 6.0% y/y. The market has tightened considerably in the past year, with the salesto-new listings ratio hitting 57.5%.

Calgary prices rose 9.5% y/y; with recent weakness in oil prices, it seems that we have seen the highs in this city for a while.

Toronto is making a bid to grab top spot, as prices rose 8.3% y/y in the month, the fastest clip since October 2011. While the condo market is up 4.5% y/y, detached homes are driving gains up more than twice as fast (9.3%) amid strong demand from young families but very little supply.

Canadian housing is still a 3-city show in Canada. While price momentum in Calgary might finally be slowing, Vancouver and Toronto continue to storm forward.

THE WEEK AHEAD Canadian Retail Sales – September - Tuesday, November 25, 2014 at 8:30am

U.S. Real GDP – Q3 - Tuesday, November 25, 2014 at 8:30am

U.S. Personal Income and Spending – October - Wednesday, November 26, 2014 at 8:30am

U.S. New Home Sales – October - Wednesday, November 26, 2014 at 10:00am

Canadian Real GDP – Q3 - Friday, November 28, 2014 at 8:30am

Ottawa’s Budget Balance – September 2014 - Friday, November 28, 2014

UPCOMING CSIT MEETINGS Tuesday, November 25, 2014 at 1:30pm - Sector Meetings WEEKLY ECONOMIC REPORT

Thursday, November 27, 2014 at 3:30pm - Team-Wide Meeting NOVEMBER 24, 2014

Ronald Chow, Chief Economist ! ronaldchow@crescentschool.org