Weekly Digest

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December 22nd, 2023

Canada’s Inflation Numbers

Inflation data held the course this week, coming in at 3.10%. The consensus was for a 2.90% reading. The uptick appears to be due to a surge in travel costs, see graph below.  

Mortgage interest costs remain the largest upside contributor to the consumer price index. With mortgage interest removed, the inflation rate is estimated to sit at 2.2%. Excluding shelter costs entirely, that figure is under 2%.

Without any drops to the numbers this month, Inflation is still tracking below the BoC’s 3.3% Q4 forecast, pending December reading to be released in 2024.

Trigger for Rate Cuts

How will we know the the first rate cut is here? The easing cycle will be recognizable when;

• Inflation starts with a “2”

• Unemployment starts with a “6”

• BoC communications and language will turn less hawkish

• The following meeting’s rate cut probabilities will exceed a 60% chance

Traders are currently pricing in 45% chance of cut in March, and a 100% chance in April.

Population Boom

Supply vs Demand will continue to get worse over the coming years, especially in Ontario. Just look at the troubling stats below;

In the last 24 months of available data:

• 2,076,942 new Canadians were added to the population

• 954,241 new households were added

• 399,000 new housing units were completed

The data is telling us that 5.2 newcomers are arriving per home built. This includes permanent and temporary residents.

In 2023, Canada’s population grew by more than 1 million over the first nine months of the year. Of this, more than 430,000 newcomers have arrived in Canada since July 1, with nearly 200,000 settling in Ontario.

Canada’s population is growing at the fastest pace since 1957. Unlike then, Canada’s population growth isn’t tied to new permanent residents, with temporary workers and international students making up the bulk of newcomers.

Of those who arrived since July 1, 63% came on temporary work or international student permits, bringing the non-permanent resident population to over 2.5 million.

Canada’s business community is arguing that the influx of workers is needed to fill labour market gaps, but others have raised concerns about the outsized share of non-permanent residents making up the population boom.

Lender Market Share

Current Interest Rates

CONVENTIONAL

• 5 year fixed, 30 yr amortization – 5.69%

• 3 year fixed, 30 yr amortization – 5.79%

• 2 year fixed, 30 yr amortization – 6.29%

• 5 year variable, 30 yr amortization – Prime – 0.50% = 6.70%

• 5 year fixed, 25 yr amortization – 5.59%

• 3 year fixed, 25 yr amortization – 5.69%

• 2 year fixed, 25 yr amortization – 6.19%

• 5 year variable, 25 yr amortization – Prime – 0.55% = 6.65%

INSURED

• 5 year fixed, 25 yr amortization – 5.44%

• 4 year fixed, 25 yr amortization – 5.64%

• 3 year fixed, 25 yr amortization – 5.69%

• 5 year variable, 25 yr amortization – Prime – .90% = 6.30%

Fast Facts

• 103 – The number of container ships that have been rerouted to avoid the Suez Canal due to the threat of Iranian-aligned Houthi rebels, who have been attacking ships in support of Hamas.

• $1.2 billion. The proposed 2024 budget of the Toronto Police Service, a plan that includes hiring 307 officers and more resources for tackling a recent spike in hate crimes.

• 185 – CRA employees that have been fired for claiming a $2,000 monthly pandemic-era benefit that they weren’t eligible for. The agency says the money will have to be paid back.