In this interview with BNN, Ed Devlin talked about the Vancouver housing market, and elaborated on the overall state of the Canadian economy.
Ed began by stating that the economy is not seeing a smooth transition from consumer debt-driven growth to business investment and export driven growth, and he thinks that the Bank of Canada is coming around to agreeing with him. While he cannot make the call for Toronto, Ed said he believes that Vancouver is getting close to significant declines in the housing market. Regulations have turned Vancouver from a preferred place for Chinese capital flight to openly hostile. He continued by saying he thought oil and gas going from a slump to doing alright is potentially the main upside for the Canadian economy, and could be a bright spot in uncertain trade conditions. According to Ed, trade volume will very likely be driven by oil, but that he will have to look more closely at the data as it evolves.
Ed also said that he thought the “amazonification” of the world distribution system is likely asymptotic, as you can only eliminate so many transaction costs before you hit the cost of good sold, after which wage inflation is likely. He noted that we can’t be sure when that downward pressure on costs and prices will start to ease up, but it is something to watch for in terms of inflation forecasting. Ed stated that while the Canadian dollar seems fairly valued, it is data-dependent and we need to see how it plays out. He also noted that while we have seen strong employment growth in Canada in the US, we haven’t seen wages accelerate much, which Ed partially attributes to immigration policy in Canada’s case. He concluded that he is still cautious about the Canadian economy, and he thinks the Bank of Canada should be on hold for the rest of the year. The risks are now more balanced on both sides, relative to the bank of Canada’s forecast, the big downside is Vancouver real estate market.