Time for your cheat sheet on this week’s top stories.
Canadian Real Estate
Canadian Banks See Mortgage Arrears Surge 89% From Record Lows
Canada’s banks are seeing mortgage arrears climb at an unusual pace. The arrears rate reached 0.28% in February, up 5 basis points from last year and driven by the volume of past due loans. Mortgage arrear volumes have climbed 89% since the August 2022 record low, and now sit at an 11-year high. A dramatic surge, but mortgage market changes mean this volume is likely understated.
Canadian Household Debt Outpacing Wages (Again), Structural Trap Deepens
Canadian wages have once again fallen behind household debt. The balance of household debt hit $3.23 trillion in February, up 4.5% from last year. Wages have grown just 3.4% over the same period, once again falling behind as low rates returned. Household debt has nearly doubled annual worker compensation, creating structural concerns.
Canadian Real Estate Crash Overstated, Nova Scotia Up $13k In A Month
Canadian real estate prices have crashed 21% from their March 2022 peak. However, a provincial breakdown shows the correction is mostly in BC and Ontario. Other provinces have barely corrected, with some at record highs and the rest less than 5% lower. With provinces like Nova Scotia soaring 3.2% (+$13,500) just last month, more record highs may be hit this year. This is an odd move considering that weaker sales and higher inventory are a national story.
Canadian Businesses Brace For 5 Years of High Inflation: BoC Survey
Just as trade war and recession fears pass, inflation concerns have returned. The latest Bank of Canada (BoC) survey shows businesses expect inflation to hit 3.0% by next year. That forecast has since climbed to 3.8% after the Iran War kicked off, nearly double the BoC’s target rate. It’s not a short-lived fear either—businesses see elevated inflation for the next 5 years. The fears will dampen investment, while serving as an indirect sign of fading confidence in the BoC.
Canadian Housing Starts Fall As Vancouver Slumps, Toronto Still Lags
Canadian housing starts are falling as the country’s biggest cities see a pullback. The CMHC reported a 6% drop to 235,852 housing starts at the seasonally adjusted annual rate (SAAR). The monthly SAAR showed a surge in Montreal (+128%) and Toronto (+33%), while Vancouver saw a 23% drop over the same period. Toronto’s jump is less impressive when you realize it’s a much larger region with fewer new builds than the other two.
Canadian Inflation Soars on Record Gas Price Surge. April Will Be Worse.
Canada’s Consumer Price Index (CPI) annual growth jumped to 2.4% in March, up from 1.8% in February. The surge is attributed to gas prices, which spiked globally and made a record climb in Canada. Unfortunately, this is only the beginning of energy prices driving CPI higher. A base effect that helped energy prices suppress CPI was set to expire in April (to be reported in May). The BoC estimates this will add 0.7 points back into inflation, stacking on top of the geopolitically-driven surge.
