Posthaste: Our most affordable housing market — and what’s wrong with the Canadian consumer?
Closely watch U.S. non-farm payrolls came in slightly lower than expected but it was enough to persuade markets that the world’s biggest economy remains on solid footing. The jobless rate unexpectedly dropped to 3.5% from 3.7%, the lowest since December 1969. After a week of dismal data, traders had expected worse and future rose and Treasuries fell after the release. Expectations for an October cut that were 80% going in were also trimmed. “Overall, these data are constructive enough to allow the Fed to skip October in our view, and cut in December,” wrote CIBC’s Katherine Judge in a note.
Speaking of data, what’s wrong with the Canadian consumer? In a report this week Deutsche Bank Research points out that with earnings growth at a 11-year high (up 6.4% in August yoy), Canadian consumers should be great shape. Yet retail sales (ex-autos), up 0.5% in July yoy, are lagging “substantially.” The last time the gap between earnings and retail sales was this big was December 2008. Deutsche argues that Canadians’ higher (and rising) debt load is the reason for the gap. While Americans have been reducing debt, Canadians have seen their debt service ratio hit 14.93% this year, a new high. With consumption 56% of Canadian GDP, Deutsche calculates that if retail sales’ weak pace continues consumption’s contribution to 2019 GDP growth will come in under the Bank of Canada’s projection of 1.2%. That disappointment could be a push in the easing direction.
And finally, the most affordable housing market in Canada is … Saint John, New Brunswick. A Posthaste reader pointed out that Atlantic Canada was left off yesterday’s housing affordability chart so here’s what we missed. RBC calls Saint John “one of the most under-appreciated markets in Canada.” While owning an average home at current prices in Vancouver takes up 79.5% of a typical household’s income, Saint John’s share is 26.4%, the lowest of the 14 markets RBC’s housing affordability measure tracks. In Halifax, home ownership costs take up 31.8% of income and in St. John’s, Nfld, 27.1%.
Here’s what’s you need to know this morning:
Alberta Public Interest Commissioner Marianne Ryan and Alberta auditor general Doug Wylie to hold news conference on findings of investigations into activities related to the International Centre of Regulatory Excellence at the Alberta Energy Regulator
Selina Robinson, Minister of Municipal Affairs and Housing, makes an affordable housing announcement in Oliver, B.C.
Notable data: Canadian trade balance, U.S. non-farm payrolls, U.S. trade balance
Immigration can be a hot topic politically, but economists generally agree that it helps growth. A study this year for the Conference Board of Canada found that real GDP growth over the next 20 years would drop to 1.1% without immigration. Allowing immigration to rise to 1%, and giving businesses the workers they need to grow, would raise the GDP to between 1.7% and 2%. For more read this from the Financial Post’s Gabriel Friedman