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Are We Tired of Rate Hikes Yet?

Research Weekly Insights Rate Hike Hero

10th rate hike and no end in sight?


I know – you’re tired of reading these emails every month or two. Enough already, haven’t these rate hikes had the desired effect? Well, here are some highlights from the past few weeks:

  • Job vacancies remain almost 50% above pre-COVID levels.
  • Wage growth in April was +2.9% vs a predicted +1.3%, with 90% of sectors reporting increases in weekly wages.
  • Large SUV sales grew +37% year over year, while luxury cars grew +27%
  • Retail sales grew 3% year-over-year beating a predicted +2%.
  • The national average home prices is now +$116,000 since January (!) ”owing in large part to outsized sales rebounds in the GTA and B.C. Lower Mainland.”
I could go on but I think you get the point. We have been discussing an impending recession for over a year, and yet households, employers, and homebuyers don’t seem to have received the memo from the Bank of Canada. On a personal note, I returned from vacation this morning, and cities in Europe literally have ”Stay Away” ad campaigns because they are so drowned in tourists. The goal of crushing spending through higher rates doesn’t seem to be working.

So... more of the same? Where does this end? Is it crazy to say rates could reach 6%? Even (gulp) 8%? As painful as that would be for CRE, I’m starting to wonder how long Canada can pursue rate hikes as the only solution. As a prominent economist recently put it: ”We’re dealing with a form of medicine that might kill the patient rather than cure the disease.”

If we were truly in a recession, we’d see unemployment rising. Instead unemployment recipients are near all-time record lows, and for every category of employee: young, old, men, women, Eastern and Western Canada. Does the Bank really want a weak labour market, and job losses? I don’t think so, but at this point everyone is feeling pretty confused.

Research Weekly Insights Rate Hike

Summary
Rate hikes continue but the economy appears largely unaffected by higher rates, with housing, jobs and retail spending still very strong.

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Pour plus d’informations, veuillez contacter:

Adam Jacobs

Head of Research | Canada

Toronto Downtown

Colliers Canada's head of research, leading a cross-country team of 20 mapping, analytics and research professionals. Formerly head of Canada research at Cushman Wakefield and Director of Analytics at Oxford Properties. Featured in mainstream publications such as the Toronto Star, industry publications and podcasts. Specializing in the big picture and the fundamentals driving real estate - demographics, the macro environment and the global economy. 

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