Household spending on the rise

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The Bank of Canada addressed household spending and provided an outlook for the housing market in its latest Monetary Policy Report. This is what brokers need to know

Household spending is expected to increase, according to the Bank.

“Consumption is projected to grow at a moderate pace, supported by continued employment growth in the non-resource sector and federal fiscal measures (notably, the Canada Child Benefit),” the Banks of Canada said in its latest Monetary Policy Report. “A comparison of employment and retail sales across regions illustrates divergent adjustments to low oil prices, with households in the energy-producing provinces cutting expenditures sharply.”

Real gross domestic income is expected to increase along with real GDP, according to the BoC.

“While household expenditures will continue to be restrained by the ongoing wealth and income effects of the past decline in Canada’s terms of trade, the impact is expected to gradually diminish,” the Central Bank said.

New construction and resale activity are expected to continue to drive the British Columbia and Ontario markets. That will align with strong demand which is due, in part, to strong employment factors.

All things considered, strong house price increases are expected to continue in the nation’s two hottest markets.

The Bank did, however, have a warning for those two markets.

“Sharply rising prices in these markets over the past year raise the possibility that prices are also being driven by self-reinforcing expectations, making them more sensitive to an adverse shock to housing demand,” the Bank said.

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