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19 April 2011

Canadian CPI & US Housing Starts

April 19 2011

Canadian inflation surged 3.3 per cent in March, the highest reading on inflation since September 2008. The increase in inflation was largely anticipated given the recent run-up in food and energy prices. Indeed, energy prices were 13 per cent higher year over year while food prices increased nearly 4 per cent, twice as fast as in February.

The Bank of Canada’s preferred measure of prices, so-called “core” inflation which excludes volatile energy and food prices, registered a 1.7 per cent increase in March, much higher than the 1.2 per cent reading that was expected by the market. This morning’s CPI report likely the marks the beginning of steadily higher inflation and solidifies the need for the Bank of Canada to begin rate tightening. However, unless next month’s CPI report contains a similar upside surprise, the still low core inflation number and by the strong loonie, should provide the Bank with enough room to put-off raising rates until July. 

In the United States, housing starts rose 7.3 per cent in March to an annualized rate of 549,000 units, following a disastrous February that saw starts decline 18.5 per cent. US housing starts remain at a depressed level and are a long way from the pre-recession peak of 2.3 million units. Building permits climbed nearly 11.2 per cent to an annualized a result of a 25.2 per cent increase in multiple unit starts. This should signal a modest increase in new home construction in the second half of 2011.

 “Copyright British Columbia Real Estate Association. Reprinted with permission.” BCREA makes no guarantees as to the accuracy or completeness of this information.

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