The Trudeau Liberals, holders of a horn of plenty when it comes to negative vibes, can also take an unwelcomed credit for the economy taking a decided step back.
The 0.2% decline in the second quarter came as housing investment fell 2.15% to post its fifth consecutive quarterly decrease. New construction dropped 8.2% in the quarter, while renovation spending fell 4.3%.
The drop in consumer spending came as Canadians face higher borrowing costs fuelled by five consecutive interest rate hikes by the Bank of Canada, which is trying to bring inflation back to its desired target of 2%.
Housing, said the Liberals following their last cabinet shuffle, would be this term’s primary focus.
Well, so much for that.
This economic stall will be some good news on the interest rate front, however, as analysts expect the BoC not to rise the rates a sixth consecutive time and keep it at 5% on Sept. 6, warding off some doom among stretched-to-the-limit mortgage holders, of which there are also plenty.
The monetary squeeze by the BoC this year has been felt largely in the construction sector at a time when low housing supply continues to be at the forefront as major cities like Vancouver and Toronto are seeing punishing rent prices and near virtually zero new rentals.
“Residential building construction (-2.0%) was the largest contributor to the decrease, down for the 14th time in 15 months,” Statistics Canada wrote, “reflecting continued declines in home alterations and improvement, and lower construction of new single-detached homes in the month.
“These declines coincided with higher borrowing costs and lower demand for mortgage funds, as the Bank of Canada continued their monetary tightening, raising the policy interest rate to 4.75% in the second quarter,” the report reads.
It now sits at a tenuous 5%, the highest rate in 20 years.
Some — as in most — speculate the hikes could finally be cooling, and the bank will hold the rate steady this week, while others — as in fewer — warn that it could be raised again.
While many who are hoping to buy a home will see fewer options on the market, the real estate sector nonetheless continues to see a lot of demand.
“Offices of real estate agents and brokers rose for the second consecutive month, up 3%, led by higher home reselling activity in BC and Alberta,” Statistics Canada said.
When the prime minister and his cabinet went into a huddle at this year’s retreat in Charlottetown, it was clear that housing was top of mind. When Trudeau re-appeared last week, he told reporters some of the measures Canada most needs.
Among those was the need for ‘densification,’ a growing topic dominating conversations at the municipal, provincial and federal levels.
“We have been working closely with provinces and municipalities on the issue of housing,” Trudeau said. “Whether it’s the Rapid Housing Initiative or the Housing Accelerator Fund, that’s $4 billion for municipalities to accelerate zoning changes, increase densification, create more affordable housing.
“These are the kinds of things that we’ve been doing,” said Trudeau. “But yes, it is clear, there is a need for much more coordination.”
When asked about the Ontario Premier Doug Ford government’s controversial and imploding plan to build housing in Ontario’s Greenbelt, Trudeau said he saw “densification” as a better solution than building on protected lands.
But both will need help.
A spokesperson for federal Housing Minister Sean Fraser’s office told Global News, for example, that support from municipalities is crucial, and a key reason why the federal government is tying incentives from its $4-billion Housing Accelerator Fund to promoting the densification of Canadian cities.
It seems to have forever been thus, however, when it comes to the balking of municipalities.
The Liberals should have known this when the best accelerator they could come up with was $4 billion, which is not bad for Vancouver and Toronto but peanuts per province and territory.
