The Week Ahead (Canada Housing Starts and US Retail Sales in Focus)

There aren't any significant earnings reports on the horizon for this week, so everyone's going to be watching some key economic progress instead.

The economic stats coming up are likely to show that Canadians were tightening their belts even more when it came to household spending per person, right before the Bank of Canada is expected to cut interest rates in June.

Early numbers from local real estate authorities hint that the housing market pretty much hit pause in May. Fewer homes were sold in major areas like Toronto, Vancouver, and Montreal, and with more homes hitting the market, it looks like we're heading towards a more balanced situation between buyers and sellers. This could mean more downward pressure on house prices, which haven't really moved much all year.

The ongoing cool-off in the housing market might also be because potential buyers are playing the waiting game, hoping for more certainty on where interest rates are headed. And it's not just the housing market that's feeling the chill. Retail sales data, set to drop next Friday, will probably show that Canadian families kept on trimming their spending into the spring. A preliminary estimate from Statistics Canada last month pegged the overall retail spend in April up by 0.7%, but that bump was mostly due to a 7% jump in gas prices. Car sales are also expected to have nudged up a bit, thanks to a backlog of demand after a couple of years with not enough cars to go around. But if you take out the up-and-down swings of gas and car sales, the core retail sales in April likely flatlined, keeping up with the downward trend after a 1.1% annualized dip in the first quarter. Plus, when you adjust for price changes, overall sales probably dipped a bit more on a per-person basis.

Lower interest rates from the Bank of Canada should help take some of the pressure off households, and our tracking shows that people have been spending more on services this spring, even with inflation cooling off. Still, the big picture for monetary policy is going to stay pretty tight for a while, and we're not banking on a major jump in consumer spending per head in Canada until sometime next year.

Over in the U.S., retail sales for May are expected to have gone up by 0.3%, with a slight uptick in auto sales by 0.8%, which might help make up for the drop in gas sales (gas prices, when you adjust for the season, were down by 3% in May).

Source: Trading Economics, RBC Economics