B.C. Economic Snapshot Oct. 20, 2012

VANCOUVER, BC, Oct. 20,2012/ Troy Media/ – Consumer price inflation in B.C. decelerated again in September as annual growth in the consumer price index (CPI) fell to just shy of 0.7 per cent, down from 1 per cent in August. This was the weakest gain since early 2010, led by year-over-year declines in prices related to natural gas, home prices and fresh produce.
Declining inflation trends have also reflected a deceleration in price growth for general food products and gasoline relative to 2011. Offsetting this softness was persistent strength in clothing and footwear price growth.

While consumer wallets have benefitted from a flat to declining general price environment since mid-year, reflected in an easing of the CPI trend, low inflation is a symptom of slow-growth economic conditions generated from both from international and local factors.

Housing

The recent tightening of federal mortgage insurance rules, lending criteria, and a soft economic backdrop continue to weigh on provincial home sales.

Total MLS residential home sales reached a seasonally-adjusted 5,200 units in September. While this was about 1.5 per cent higher than the previous month, the gain was not enough to reverse August’s 9 per cent slide.

Sales activity advanced in most B.C. real estate board areas during September with the exception of the Okanagan-Mainline, Kootenay and the North. Monthly sales (unadjusted) were down 25 per cent from the same month in 2011, but fewer working days this September, and the month-end falling on a weekend may have pushed processing of some transactions into October.

Despite this technical consideration, sales activity remained low with year-to-date activity down 10 per cent from last year and provincial sales are on track to reach only 69,000 units this year, similar to levels last observed in 2001 and 2008.

Recent data suggests that July’s tightening of mortgage insurance rules eroded sales in a number of regions, including those already struggling to recover following the recession.
While sales are expected to be stable for the remainder of the year market conditions will remain weak. Low sales-to-active listing ratios outside northeast B.C. reflect the persistence of excess of inventory relative to the current sales pace and point to a continuation of flat to declining prices.

B.C.’s average MLS price rose to a seasonally-adjusted $515,600 in September, up 1.7 per cent from August, but down about 5.5 per cent from same-month 2011. A second consecutive month of price gains belies recent market conditions, but underscores the dangers of drawing conclusion from changes in the average MLS price.

Just as the early year price declines reflected a shift from 2011 in the composition of sales at both the geographic and product level, the tightening of mortgage insurance rules may have led to a compression in the sales of entry-level (lower priced) product, skewing activity to higher-priced homes.

Tourism


The pace of international tourist entries to B.C. reverted back to trend in August following a sharp drop in July. Total tourist visits rose 5.5 per cent from July to a seasonally-adjusted 353,800 persons, rising to a level consistent with those observed during the first half of the year.
Despite August’s bounce, tourism industry weakness is expected to persist through 2013 with limited upside. The global growth recession and continued challenges in the U.S. labour market are expected to remain a damper on overall travel demand to B.C.

For overseas and American visitors alike, Canada is no longer the value proposition it once was. A relatively stronger Canadian economy, compared to its southern and transatlantic neighbours, has kept prices and the Canadian dollar higher, translating into more affordable alternative locales for both pleasure and business travellers.

Year-to-date total international tourist entries through August surpassed 3.12 million visitors, up 1.4 per cent from same-period 2011. This was still more than 10 per cent below mid-decade norms.

| Central 1 Credit Union