• As COVID-19 seems increasingly contained and restrictions are lifted in Canada, people are venturing out more frequently--both mobility and restaurant reservations as of Sept. 30 are above pre-pandemic levels but down relative to August.
• But the weekly Bloomberg Nanos Canadian Confidence Index has remained in net negative territory since June 17, and consumer pessimism is now a flip of the coin--50.2% of average Canadian consumers are pessimistic about the strength of the economy as inflation and rate hikes dig bigger holes in the pockets of households.
• Small business sentiment remains subdued while manufacturing new orders, a leading indicator of economic activity, are in contraction territory.
• On prices, lumber futures prices have continued to fall, and retail gasoline prices are down 24% since topping C$8 in the week of June 14, helping to lower inflation expectations. However, gas prices remain high relative to pre-pandemic averages.

Virus and mobility

COVID-19 cases:  COVID-19 indicators ticked down meaningfully from July levels. At the end of September, daily reported new COVID-19 cases, deaths, and hospitalizations in Canada decreased 44%, 22%, and 52%, respectively, compared with the end of July. Even more impressive is that the declines are even bigger when compared with the recent peak on April 19, as the three indicators fell 88%, 50%, and 58%, respectively.

Mobility:  As COVID-19 seems increasingly contained and restrictions are lifted, people are venturing out more frequently. As of Sept. 30, mobility across Canada was, on average, 4.3% above pre-pandemic levels, a 4.0-percentage-point decline from August. This is a low point since April, when COVID-19 restrictions were relaxed more broadly within provinces. Quebec continues to lead the nation in retail and recreation mobility: Its mobility is 5.6% above pre-pandemic levels, while Ontario closed September with mobility 1% above pre-pandemic levels.

People-facing COVID-19-sensitive

OpenTable:  According to OpenTable data, restaurant reservations in Canada as of Sept. 30 are 22% above pre-pandemic levels, a 5-percentage-point increase over the prior week but 8 percentage points below the August level. Restaurants in Vancouver rebounded aggressively in September to post reservations that are 15% above pre-pandemic levels. Meanwhile, Montreal continues to operate 6% below its 2019 baseline.

Air traffic:  Air travel in Canada as of Sept. 17 was 12% above its pre-pandemic average, but down 9 percentage points from Aug. 27 as summer recreational travel eased.

Current and future activity

Bloomberg Nanos Canadian Confidence Index (BNCCI):  The weekly BNCCI has remained in net negative territory since June 17. In the week ended Sept. 30, consumer sentiment had slightly retraced to 46.47 from 47.24 the previous week. Consumer pessimism is now a flip of the coin--50.2% of average Canadian consumers are pessimistic about the strength of the economy as inflation and rate hikes dig bigger holes in the pockets of households. Only 14% of Canadians expect a stronger national economy through the year.

Local Business Conditions Index:  For the week ended Sept. 12, the Local Business Conditions Index rose compared with the previous week in six of the seven tracked cities, except Montreal. This increase pushed up the national average local business conditions index in September, from the prior month, as energy costs continued to fall.

Business Barometer Index:  The 12-month expectation of small businesses has remained subdued in the last three months after falling from 59.4% in June to within 52-53 percentage points. The business barometer remains in modest territory even as small businesses feel the squeeze of inflation and shortage of labor. Weaker confidence among small businesses in British Columbia has dragged down the national average.

Canada manufacturing new orders:  Canada manufacturing PMI (Purchasing Managers' Index) data from S&P Global Market Intelligence saw declines in Canadian new orders further below the 50-point neutral rate in August, with all regions tracked in contraction territory.

Prices

Lumber futures:  Lumber futures prices have continued to fall, reaching $422.50/1,000 board ft. on Sept. 30 (slightly higher than the prior day's level)--12.6% lower than the end of August 2022--as higher interest rates soften demand for new homes. Lumber prices are also easing as the housing market cools while mortgage rates continue rising.

Gasoline prices:  Retail gasoline prices remained around CS$6 throughout August and September. Gasoline prices are down 24% since topping C$8 in the week of June 14. Falling crude prices have kept gasoline prices below June/July levels through are still high relative to pre-pandemic averages. While inflation pressures have moderated, with August CPI (Consumer Price Index) at 7.0% over last year, that's not enough to slow the Bank of Canada's aggressive stance.

Forward inflation expectations:  Five-year break-even inflation expectations declined to 1.96% on Sept. 30 from 2.15% on Aug. 26 and its 2.93% peak on March 11, while the 10-year break-even inflation expectations stood at 1.91%, compared with a 30-day level of 2.19% on June 24 and 2.38% on April 22. Overall, long-term inflation expectations are falling.

Labor market

Indeed job postings:  Canada has posted net job losses totaling 113,500 in the past three months even though more than 60,000 people reentered the labor force in August. The unemployment rate edged up to 5.4%. Evidence from Indeed job postings shows a steady decline in average job postings of about 13 percentage points through Sept. 30, compared with a recent peak of 73.6% in May. Job postings are still 60.2% above the pre-pandemic February 2020 level. Job gains of 21,000 in September, the first increase in four months, offset only about 18% of the total jobs lost this summer.