In July, the consumer price index climbed 0.5% (not seasonally adjusted), three ticks higher than the median economist forecast. The rise left the year-on-year measure unchanged at 2.0%. In seasonally adjusted terms, the CPI was up 0.4% in the month on increases in recreation (+0.9%), transportation (+0.6%), and food (+0.3%), among others. The Bank of Canada’s preferred core measures on a year-on-year basis pegged in as follows: 2.1% for the CPI-trim, 2.1% for the CPI- median, and 1.9% for the CPI-common. The average of the three measures remained in line with the BoC’s midpoint target of 2.0%. It is worth noting that the momentum has been building of late.

The national HPI has grown at a below-inflation rate of 0.4% over the last 12 months, the smallest gain since November 2009. However, the weakness is not regionally broad-based. The national HPI has been depressed by Vancouver’s index loss of 6.2% during this period, corresponding to a 12-month string without a gain. Other Western metropolitan areas (Victoria, Calgary, Edmonton, and Winnipeg) also contributed to slow the national HPI. At the opposite, annual index growth has been decent in most of the six regions located in the central and eastern part of the country.

The national HPI has grown at a below-inflation rate of 0.5% over the last 12 months, the smallest gain since November 2009. Moreover, the fact that monthly gains are reported for May and June does not mean that the market recently turned the corner. These two months typically register the strongest growth rates in a year. Indeed, the two latest rises were among the weakest in history for months of May and June. If seasonally adjusted, the national HPI would been down in both months this year. However, the weakness is not regionally broad-based. The national HPI was dragged down by 12-month home price declines in Western Canada metropolitan areas (Vancouver, Calgary, Edmonton and Winnipeg) and a tiny increase in Victoria. In Central Canada and in the East, home price growth ranges from decent to strong (left chart). This is consistent with the state of home resale markets.

• In contrast to the US, Canadian growth is accelerating sharply going into the second quarter, following a solid gain in domestic demand to start the year.
• Fast, and accelerating, population growth, and remarkably strong employment growth are providing a solid underpinning to consumer spending and the housing market.
• Positive export data suggest that the ongoing strength in domestic demand will be buttressed by net exports in the second quarter, and possibly beyond.
• Canadian inflation is at the Bank of Canada’s target, in sharp contrast to the US, where it has moved away from the Fed’s objective. This gives the BoC room to keep rates on hold if inflation remains on target.
• Downside risks remain important and are all linked to US-centric developments, with worries about US trade policy ongoing despite the pause with China.

The Bank of Canada will have the opportunity to set a course of action or, more likely, inaction for some time at least into the Fall when it delivers its latest policy communications on Wednesday July 10.

Key may be how the BoC views external risks that it warned had increased in May. Further, watch for key guidance toward Q3 GDP. Recall that the BoC only forecasts out a quarter at a time and the April MPR published quarterly GDP growth up to 2019Q2. While it has to revise up that 1.3% estimate for Q2 to something that would probably be deep in the 2s perhaps bordering upon 3%, how the BoC views the durability of this improvement relative to potentially temporary and distorted drivers is key by way of assessing 2019H2 risks.

Over 8,000 Grades 4, 5 and 6 students from across Canada shared what home means to them in the annual Meaning of Home contest in support of Habitat for Humanity Canada. Each of the three grand prize winners (one from each grade) will receive a $25,000 grant to be directed to the local Habitat build of their choice. Nine runners up have won a $5,000 grant towards a local Habitat for Humanity home build. Every student entry earned a $10 donation for that student’s local Habitat for Humanity, helping to raise an additional $82,000 that will go towards building more homes in communities across Canada.

Home sales recorded via Canadian MLS® Systems rose by 1.9% in May 2019. Together with monthly gains in March and April, activity in May reached the highest level since January 2018. While sales stood 8.9% above the six-year low reached in February 2019, this latest increase has only just returned levels to their historical average.

While May sales were only up in half of all local markets, that list included almost all large markets, led by gains in both the Greater Vancouver (GVA) and Greater Toronto (GTA) areas.

The Bank of Canada today maintained its target for the overnight rate at 1 ¾ per cent. The Bank Rate is correspondingly 2 per cent and the deposit rate is 1 ½ per cent.

Recent Canadian economic data are in line with the projections in the Bank’s April Monetary Policy Report (MPR), with accumulating evidence that the slowdown in late 2018 and early 2019 is being followed by a pickup starting in the second quarter. The oil sector is beginning to recover as production increases and prices remain above recent lows. Meanwhile, housing market indicators point to a more stable national market, albeit with continued weakness in some regions.

Four provinces reported increases in March, led by British Columbia with an increase of 12.8% (+$180 million). Meanwhile, all provinces east of Manitoba reported declines. The largest decrease was in Ontario, down 1.4% (-$43 million) due to lower construction intentions in the residential sector.

Quebec drives movement in non-residential permits. The national value of permits for non-residential buildings rose 7.9% in March, due to higher construction intentions for both institutional (+$175 million) and commercial (+$166 million) buildings. Gains in both of these components stemmed from Quebec. A high value permit for an addition to the Centre hospitalier de l'Université de Montréal drove the increase in the institutional component.