BC Economic Snapshot Aug 18, 2012

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VANCOUVER, BC, Aug 18, 2012/ Troy Media/ – Consumer wallets may have felt a bit thicker in July as inflationary pressure in B.C. tumbled to the lowest level in two years.

Annual growth in the consumer price index (CPI) reached only 1.1 per cent from same-month 2011, down from June’s 1.5 per cent reading. Adjusted for seasonal factors, general price levels fell 0.2 per cent from June, marking a third consecutive monthly decline.

Not including June’s rise in the consumer price inflation reading, annual CPI growth has trended lower since the beginning of the year. This has largely been a reflection of tamer gas and energy prices relative to 2011.

Annual gasoline price growth was 10 per cent to 20 per cent through most of 2011. Marking some relief at the pump, annual gains this year have declined from about 4 per cent in January to 2.3 per cent in July, helped in part by falling gasoline prices since March. Gasoline prices fell 2.9 per cent from June to July.

Weak inflationary pressure was also recorded in health and personal care products (0.6 per cent), housing replacement costs (-3.5 per cent) and natural gas (-7.6 per cent). In contrast clothing and footwear prices were significantly higher than last year by 5 per cent.

While growth in food prices was a modest 2.3 per cent relative to July 2011, and lower than growth observed over the past year, the tide may have turned. Food prices have marched higher since April, a trend that will likely continue given the impact that droughts in the U.S.
Increased prices for mid-west corn and wheat prices will likely translate into a higher related-product pricing and have knock-on effects on meat prices as animal feed costs rise.

Rising food prices and a more recent increase in oil prices observed is expected to arrest the slide in prices, lifting consumer price inflation.


Housing
Provincial home sales up in July, despite Lower Mainland decline Despite further erosion in Lower Mainland activity, B.C. managed to eke out a small increase in MLS home sales in July, marking the first monthly gain since March.


Buoyed by sharp gains in the Kootenay, Kamloops, Chilliwack and Vancouver Island (excluding Victoria) regions, provincial sales rose nearly 2 per cent from June to reach a seasonally-adjusted 5,690 units. Nonetheless, sales remained weak, having slid 10 per cent from January to trend at the lowest levels since late 2010.

The recent sales slide largely reflected weakness in the Lower Mainland as aggregate sales in interior markets trended higher and Vancouver Island and Northern regions held steady.
Rising/stable sales in the interior and Vancouver Island are a sign that housing conditions are steadying in markets hard hit by the recession and subsequent slump in recreational/retiree demand, but low sales-to-active listings ratios point to a persistent and significant excess of inventory relative to still-weak demand.

In comparison, B.C.’s northern markets remained relatively stronger, underpinned by commodity-related economic activity. July activity pushed year-to-date sales to just under 44,800 units, down 8 per cent from same-period 2011. While the decline was due in part to stronger sales in the first quarter of 2011, same-period sales were the lowest since 2001.
B.C.’s weak pace of sales is expected to persist for the remainder of 2012. Tighter mortgage insurance rules in effect since early July will dampen demand, particularly for first-time buyers in the Lower Mainland.

Automotive
Auto dealers recorded a second straight month of improved sales in June as more buyers jumped off the sidelines and slid behind the wheels of new vehicles.

The pace of sales in the B.C. and Territories region jumped for a second consecutive month to reach a seasonally-adjusted 15,650 units, up 3.6 per cent from May. A sharp climb since the beginning of the year has pushed monthly sales to the highest level since May 2008.

While truck sales led total growth in June and have trended higher since 2009, stronger passenger car sales have propelled this year’s activity. The pace of monthly car sales has jumped more than 20 per cent since the fourth quarter.

The rising pace of new vehicle sales likely reflects factors such as early-year gains in employment, ongoing dealer incentives and low financing rates. Additionally, the low sales pace observed since the recession may have led to fewer quality used-vehicles available for sale, pushing prospective buyers into the new car market.

Total vehicle sales are forecast to rise to about 175,000 units this year, up 9 per cent gain from 2011. However, year-to-date growth is forecast to narrow as the strong upswing in sales activity tempers going forward. The global growth recession is expected to generate below-average economic growth and slower employment growth in B.C., leading to a curtailment in vehicle purchases.

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