Retail sales declined in July, the first monthly decline this year. The fall was mainly the result of a drop in sales at gasoline stations, as both selling prices and volumes decreased.

Inflation moderated in August, for a second consecutive month, but remains elevated at 7.0%. Most of the moderation can be linked to a decline in gasoline prices over the period.

Today’s Labour Force Survey data suggest the labour market in Canada is stalling. As such, employment declined for a third consecutive month, for a loss of a little more than 110k jobs. Moreover, the unemployment rate rose to 5.4%, after reaching record lows the previous two months.

Growth in the second quarter came in slightly weaker than expected, as net exports were a drag on economic activity due to strong imports.

Today’s Labour Force Survey data showed employment declined for a second consecutive month. However, the details show that, while the number of employed declined, there was also another sharp drop in the labour force. This exodus from the labour force explains the record unemployment rate.

Today’s release of the GDP for May confirms that growth in the second quarter of 2022 was strong, at about 4.6% q-o-q ar. However, the estimate for June suggests the growth momentum is slowing.

• The outlook for growth and interest rates heavily depends on the inflation outlook, as it will determine how aggressive the Bank of Canada will be in tightening monetary policy.

Inflation continued to accelerate in June to a level not seen since 1983 but increased less than expected thanks to a stabilization in food price inflation. The elevated level of inflation continues to be mainly due to a handful of components: gasoline prices, food prices, homeowners’ costs, utilities costs and motor vehicle prices.

National house prices declined for a fourth consecutive month. Since the start of the correction, prices nationally have fallen by slightly more than 3%. However, the correction has been bigger in some markets, especially those that saw the largest post-pandemic gains.

The Bank of Canada increased its policy rate by 100bp to 2.50%, more than expected and its highest level since October 2008. This is the biggest increase at a monetary policy meeting since August 1998 during the Asian Financial crisis.