By Pepper Parr
October 31, 2024
BURLINGTON, ON
From Tom Parkin we learn that:
Ontario’s August retail sales still below June 2022 while the rest of Canada hits record.
Massive mortgage debt from Ontario housing crisis may be behind absent consumer.
While Canadian retail sales outside Ontario set a record in August, Ontario’s sales remained 4.5 per cent lower than the peak in June 2022, according to data released by Statistics Canada last Friday.
Ontario’s August retail sales were $24.729 billion, $1.165 billion below the June 2022 peak of $25.894 billion.
Excepting Ontario, Canadian retail sales continued to climb throughout 2022 and did not turn down until January 2023, seven months after Ontario’s peak.
People shopping – just not as many in Ontario as in the other provinces.
The retail turndown outside Ontario was also smaller and shorter. From a January 2023 peak of $41.870 billion, retail sales had tumbled $1.068 billion, or 2.6 per cent, when retail sales hit bottom five months later, in June 2023.
Housing, fuel, food prices pound consumers in mid-2022
Canadian consumers were being hit from all sides in mid-2022, but the impact on consumers and retail sales has been more painful and long-lasting in Ontario than in any other province.
Food inflation pushed the price of store-bought food up 9.7 per cent between April 2021 and April 2022 and hit an annualized 11.4 per cent in September 2022.
War pushed up fuel prices when, on May 30, 2022, the European Union announced a ban on Russian oil shipments, pushing the price of a barrel of oil above $120. In June 2022, Canada’s average pump price for a litre of fuel hit $2.07, up from $1.40 in December 2021.
The GTA housing crisis got suddenly worse. In March 2022, the Canadian Real Estate Association’s benchmark composite price of a house in the Greater Toronto Area peaked at $1,313,800, up 33.7 per cent from March 2021. Rental accommodation inflation peaked in August, 2022 with the price of a one bedroom GTA apartment 21.6 per cent above August 2021, according to Rentals.ca.
Interest rates ignite the GTA debt bomb built by the housing crisis
The more powerful and lasting effect on Ontario retail sales may be due to the mountain of household debt amassed due to the housing crisis.
The March 2022 housing GTA housing price peak was the same month the Bank of Canada first raised interest rates. On March 2, 2022 the Bank first hiked the policy interest rate, raising it 0.25 percentage points to 0.50 per cent.
After near-monthly increases, when rates reached 4.5 per cent in January, 2023, the benchmark price of a GTA house hit bottom, crashing to $1,064,100, according to CREA data.
During the massive GTA housing price run up, Canadians’ residential mortgage debt rose dramatically, adding over $400 billion from $1.324 trillion in Q1 2019 to $1.749 trillion in Q3 2023. In Q2 2024 Canadian mortgage debt stood at $1.853 trillion, according to Canada Mortgage and Housing data.
Not surprisingly, the centre of the housing crisis was also the centre of that debt pile. Mortgage debt against Toronto residential properties increased from $298.1 billion in Q1 2019 to $407.2 billion in Q3 2022, then plateaued, according to CMHC.
In Q1 2019, 22.5 per cent of mortgage debt was secured against Toronto property; in Q3 2022 it was 23.3 per cent. The share of mortgage debt in Vancouver, Calgary, Edmonton, Ottawa and Montreal were all declining.
Ontario housing starts: Politicians who let the housing crisis run wild have put all Canada in a jackpot.
The failure of the Ontario government to spur housing starts has had national economic implications, including the decision last week to start shrinking the Canadian population, which will in turn shrink economic growth.
Politicians who let the housing crisis run wild have put all Canada in a jackpot. Housing isn’t just a right. It’s a fundamental part of economic infrastructure and there are deep consequences for failing to build it.
And so there you have it – but not to worry, Premier Ford is going to send you a cheque for $200; supposedly in January and that will boost retail sales. Ford is hoping it will boost his chances of being returned to office when he calls an election
Tom Parkin is a political commentator with a social democratic perspective who has worked in politics in Ontario and Saskatchewan and in the Canadian labour movement.
