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Volume 15, Issue 28, August 6, 2015

Inside This Issue:

• Plan to Attend the 14th Annual Industry Memorial Golf Classic on September 30th
• Federal Conservatives Propose Home Renovation Tax Credit
• Sears Holdings Corp. Reports Double-Digit Sales Decline in Second Quarter
• Landlords Call on Target to Release Inter-Company Claims on Information
• Canada’s Economy Shrinks for Fifth Straight Month
• TD Warns of ‘Vulnerability’ in Toronto, Vancouver Housing Markets
• Conference Board of Canada Sees More Disappointment Ahead for Economy
• Canadian Retail Sales Moving Ahead with Mixed Fortunes
• U.S. Economy Accelerates, Boosting Case for Fed Rate Hike this Year

Association News

Plan to Attend the 14th Annual Industry Memorial Golf Classic on September 30th

The 14th Annual Industry Memorial Golf Classic is taking place on Wednesday, September 30th at the Blue Springs Golf Club in Acton, Ontario.
The event is held on behalf of the hardware and housewares industry and it honours stalwarts from the industry who have passed away. CHHMA members and non-members are welcome to attend.

This year’s honourees will be: David Fry (Shop-Vac Canada), Ted Kennedy (Rubbermaid Canada, Past CHHMA Chairman 1975-76) & Geoff Somers (Wentworth Corporation, Somerset House)

Past honourees include: Ray Ceolin, Tom Ross, Bruce Webster, Chris Hrushowy, Mike Pullen, Jim Ypma, Bill Caldwell, Brayl Copp, Ed Hardison, Stuart North, Joseph Kuchar, Shelly Lush, Jack Pountney, Christof Vanooteghem, Ian Hay, Trygve Husebye, Bernie Carpenter, Don McDonald, Les Groves, Bob Hilton, Doug Straus, Mel Boshart, George Giles and Ed Barnes.

The day allows family, friends and colleagues to honour these gentlemen while enjoying a fun day out on the golf course followed by a dinner and silent auction.

The event will start off with registration and lunch at 10:30 a.m. with a shotgun start at noon.Dinner will commence at around 6:00 p.m.  

Money raised from hole sponsorships and a silent auction will go towards the CHHMA Scholarship Program which provides support for children of CHHMA member company employees to attend university or college.

Online registration will commence in a couple of days or you can click here for a: PDF registration form as well as a PDF silent auction pledge form

Government & Legislative News

Federal Conservatives Propose Home Renovation Tax Credit

Stephen Harper is promising Canadians some cash in their pocket for home renovations if they re-elect his Conservatives in October.

The Prime Minister used a campaign stop at Toronto’s Olympia Tile on Tuesday morning to pledge that his government would deliver on a permanent tax credit for home renovations.

Taxpayers would be eligible to claim up to 15% of the cost of permanent “substantial” renovations to homes, condos and cottages.

The tax credit would apply to renovation costs between $1,000 and $5,000, allowing a taxpayer to get back up to $750 a year.

The backgrounder to the program said the tax credit would apply to “renovations and permanent alterations to a dwelling, or the land on which it sits,” suggesting that landscaping improvements might also qualify.

“The home renovation tax credit helps every homeowner regardless of income,” said Harper, who made the announcement at Olympia Tile on Lawrence Ave. W.

For most Canadians, “their family home is their biggest asset, and their most significant investment in their future financial security,” Mr. Harper said. The purpose of the credit is ”to help make it more affordable for Canadians to adapt their homes to their changing needs, and to increase those houses’ values,” he said.

The Conservative leader said the program would benefit businesses as well as homeowners, citing the tile company as one company that would reap new businesses

“This tax credit will help generate jobs, jobs for professional tradespeople . . . good quality, well-paying jobs,” Harper said.

The move is expected to cost $1.5 billion a year. Harper said the measure would be phased in starting in the 2016-2017 budget year.

The Conservatives served up a similar tax break in 2009 as a temporary measure to spur spending during to the recession.

At that time, the program, which allowed homeowners to claim a 15% tax refund on renovations, up to $1,350, proved exceptionally popular. Spending on renovations, which had slowed to a crawl in 2008, soared roughly 12% after the tax credit came into effect. Nearly three million Canadians took advantage of the program, getting an average of $700 per claim and generating about $4.3-billion worth of economic activity, according to government estimates.

It was also expensive, costing Ottawa an estimate $3-billion in foregone tax revenue over little more than a year. The current campaign promise calls for a much smaller tax credit, which would be capped at $5,000 total spending, compared with $10,000 in 2009. The Conservatives estimate the tax credit will cost $1.58-billion a year, or roughly half what its 2009 program cost.

The program introduced in 2009 was temporary and later repealed, over opposition-party protests, as part of the Conservatives’ efforts to balance the budget. This time, the tax credit would be permanent.

When the tax credit was scrapped in February, 2010, renovation spending took an immediate hit, falling roughly 3% in 2010. The contraction was short-lived, however. By 2011, spending on home renovations was growing faster than spending on new home construction and on resale home transactions, a report that year by Bank of Nova Scotia found.

Therefore, this summer’s campaign pledge to revive the popular home renovation tax credit comes at a time when Canada’s renovation industry is already outperforming the broader economy and booming past the market for new homes.

Canadians spent $68-billion on home renovations last year compared with $48-billion spent building new homes, according to a recent report from real estate consultancy Altus Group Ltd. Over the past seven years, spending on renovations has grown 3.6%, versus overall economic growth of just 1.6%. Last year, home renovations accounted for 3.4% of Canada’s GDP.

“We currently spend substantially more as a nation on improving and repairing our existing homes than on constructing new ones,” the consultancy wrote.

Economists point out that the market for home renovations is closely tied to the strength of the housing market. The largest increase in spending on renovations in 2014 was in

Ontario, a market where home price growth had been particularly strong. Spending was highest on homes that had recently sold, Altus found, as sellers redid their kitchens and bathrooms in hopes of boosting the price of their homes and first-time buyers got a foothold into an expensive housing market by way of fixer-uppers.

The continued growth in home renovations, even in the absence of a tax credit, has sparked concerns over household debt.  Total consumer credit hit a record $1.83-trillion in May, according to Royal Bank of Canada.  Much of that has been driven by popularity of revolving personal lines of credit, which grew at the fastest pace in two years to $267-billion in May.  Lines of credit now account for more than half of all consumer credit, including mortgages.

Nearly 20% of borrowing on home equity lines of credit goes toward renovations, Altus said, more than the amount spent financing a new home purchase.

While a revival of the tax credit will help boost demand among first-time home buyers and seniors, it isn’t likely to give the same economic boost as the last one, said Kevin Lee, CEO of the Canadian Home Builders Association. A permanent tax credit also isn’t likely to inspire such a flurry of spending as one that is available for a limited time.

Where it should have the biggest impact is in combatting the underground economy, Mr. Lee said. The construction industry estimates that roughly half of all home renovation jobs under $5,000 are paid in cash, a huge sum of foregone tax revenue.

Back in 2009, “we saw that the underground economy and cash jobs really dried up to a large degree because all of a sudden people were asking for receipts,” he said. “That’s really important for us because it results in lost tax revenues and really creates a bad name for many people in the industry and makes it hard for good, upstanding businesses to compete.” He estimated that an increase in tax revenue from requiring contractors to report their earnings will offset the cost of the program enough to potentially make it revenue-neutral.

The pledge to revive the home renovation tax credit also comes at a time when homeowners appear to be curtailing their budgets for renovations amid a falling Canadian dollar and slower economic growth. A poll by Canadian Imperial Bank of Commerce this summer found that, while more Canadians were planning on renovating their homes, they expected to cut their renovation budgets by an average of 13% to $17,000, down from $20,000 last year.

Source: The Globe and Mail, The Toronto Star    

Industry News

Sears Holdings Corp. Reports Double-Digit Sales Decline in Second Quarter

Sears Holdings Corp., the retailer run by hedge fund manager Edward Lampert, posted a 10.6% drop in same-store sales last quarter, its second consecutive period of double-digit declines.

The company’s sales fell 13.9% at Sears-branded stores and they decreased 6.9% at its Kmart chain, according to a statement on Monday. Sluggish demand for consumer electronics contributed to the decline, which follows an 11% drop in the first quarter. The Hoffman Estates, Illinois-based company said it’s now working to revamp that product category.

The declines are similar to the first quarter but show a marked deterioration compared with a year ago, when sales excluding newly opened or closed stores fell 0.8%, with a 0.1% increase at Sears and a 1.7% decrease at Kmart.

The results reflect Lampert’s challenges in turning around Sears, a storied department-store chain that has struggled to connect with today’s shoppers. To stem the flow of red ink, he has been shedding assets such as the Lands’ End clothing business. Lampert, Sears’s chief executive officer and largest shareholder, also generated $2.7 billion by selling 235 properties to a real estate investment trust that was spun off from the retailer.

“We intend to continue taking significant actions to alter our capital structure,” Sears said on Monday, including further reductions in debt or changes in the composition of its debt.

The numbers sent Sears shares down as much as 7.6% to $19.92 on Monday, the biggest intraday decline in almost two months.  The shares already fell 28% this year through the end of last week.

Even as sales tumble, the company is making progress in restoring profitability. Sears’s adjusted loss before interest, taxes, depreciation and amortization was $189 million to $249 million in the second quarter, which ended July 25. That would be the fourth quarter of improvement on that basis. Sears plans to report final second-quarter results on Aug. 20.

The company has focused on returning to profitability, sometimes at the expense of sales. It has said that in many merchandise categories it is logging improvements in profitability despite sales declines.

The company also extended its $3.28 billion credit line, giving it more of a cushion. That financing, combined with proceeds from the REIT, have “substantially enhanced our financial flexibility,” Sears said.

Source: Bloomberg News, The Wall Street Journal  

Landlords Call on Target to Release Inter-Company Claims on Information

Major landlords of failed retailer Target Canada have raised concerns about the U.S. parent’s role in the insolvency process – and whether it jeopardizes creditors’ collecting what could be billions of dollars they are owed.

RioCan Real Estate Investment Trust, the largest landlord of Target Canada, contends the retailer could be holding back on releasing vital information, possibly putting all creditors at a disadvantage, according to the landlord’s submission last week to Ontario Superior Court.

Of particular concern to RioCan and other creditors is more than $1.9-billion of inter-company Target claims and whether that money will stay with U.S.-based Target Corp. or be distributed among other creditors. Last Friday, those inter-company claims were to be submitted to the monitor overseeing the Target case but will not be publicly disclosed until Aug. 31.

“We just want to make sure that the creditors are not in any way prejudiced,” Richard Swan, a lawyer at Bennett Jones LLP who represents RioCan and KingSett Capital Inc., told the court last Thursday.

Target Canada, which filed for creditors’ court protection in January and closed all its 133 stores, has so far raised roughly $900-million from selling off properties and inventory. But the retailer has kept creditors in the dark about the extent of its inter-company claims and whether creditors can recoup some of that money to cover their own claims, which have been estimated to be at least $2.2-billion.

Also lurking in the background – outside of the insolvency process – is the issue of guarantees that Target’s U.S. parent company has pledged to pay many landlords for losses tied to their closed Target stores.

The landlord lease guarantees are worth hundreds of millions of dollars but Target still has to negotiate the amounts with property owners, Jay Swartz, a lawyer at Davies Ward Phillips & Vineberg LLP who represents the parent company, said in an interview with the Globe and Mail.

“They will get paid,” he said. “They might fight over how much they’re entitled to … RioCan is probably the most affected, with the biggest claims.”

Landlords of 44 leases that Target was unable to find a buyer for – and returned to their property owners – have guarantees, according to court filings.

RioCan and KingSett argued in their latest court document that creditors have “very little information” in the insolvency proceedings and “the main fact-finding litigation has yet to get under way.”

The landlords asked Justice Geoffrey Morawetz to refrain from approving a batch of monitor’s reports because their contents may eventually come back to bite creditors. The judge last Thursday delayed his decision, asking the parties for further arguments.

“Creditors with concerns and wishing to seek further information should not have to be satisfied with that information being provided to a limited and summary extent by way of monitor’s reports,” the landlords’ court document said.

The monitor countered it has conducted itself properly and provided detailed reports, rejecting the “innuendo” from the landlords, said Jay Carfagnini, a lawyer at Goodmans LLP who represents monitor Alvarez & Marsal Canada Inc.

The landlords noted that Target Canada remained in charge of the property sale process despite the urging of RioCan and other creditors that the sales be run by the monitor, “which was resisted.”

Click here to read the rest of the article.

Source: Article by Marina Strauss, The Globe and Mail  

Economic News

Canada’s Economy Shrinks for Fifth Straight Month

The Canadian economy contracted in May, the fifth consecutive monthly decrease, increasing the possibility the country slipped into a recession in the first half of the year.

Statistics Canada said last Friday that real GDP fell 0.2% in May due mostly to weakness in manufacturing, mining, quarrying and oil and gas extraction as well as wholesale trade.

Economists had expected no change for the month, according to Thomson Reuters.

“There is no sugar-coating this one,” said BMO chief economist Douglas Porter in a note to clients. “It’s a sour result.”

The drop in the economy came as goods-producing industries fell 0.6% in May, including weakness in manufacturing and the oilpatch.

Manufacturing output contracted 1.7% in May, while mining, quarrying, and oil and gas extraction fell 0.7%.

Meanwhile, the service-providing industries edged down 0.1% in May after increasing for three consecutive months.

Wholesale trade fell 1.0% in May, but retail trade rose 0.5% for the month.

Retail trade rose 0.5% in May after a 0.3% decline in April, led by increases in the activities of building material and garden equipment and supplies dealers as well as electronics and appliance stores.

The construction sector, which has swung between gains and losses, increased 1% during the month, as engineering and repair construction as well as residential and non-residential building construction advanced.

The output of real estate agents and brokers rose 2.1% in May, up for a fourth consecutive month.

The Canadian economy contracted at an annual pace of 0.6% in the first quarter.

Concerns of a possible recession, defined as two consecutive quarters with no economic growth, have grown in recent weeks.

The five-month decline marks the longest slump since the 2008-2009 recession.

But some economists have said Canada hasn’t exhibited some of the classic hallmarks of a recession, citing the country’s job growth and stable employment rate.

Bank of Canada governor Stephen Poloz, in deciding to cut his key interest rate by a quarter of a percentage point to 0.5% in an effort to boost the economy, carefully avoided saying the word “recession.”

“I’m not going to engage in a debate about what we call this,” Poloz said earlier this month after the central bank predicted the economy contracted an 0.5% annual pace in the second quarter.

Still, low oil prices and weak exports have bruised the economy this year, casting doubt on the federal government’s promise to balance the books as it heads into an election.

Estimates for economic growth this year have been slashed and now stand below the levels forecast when Ottawa tabled its budget in the spring.

But Prime Minister Stephen Harper said last week that his government was “well ahead” of its own forecast for a balanced budget despite the economic struggles.

Source: Statistics Canada, The Canadian Press 

TD Warns of ‘Vulnerability’ in Toronto, Vancouver Housing Markets

The TD Bank is flashing “cautionary yellow” warning signals about the frothy nature of the Toronto and Vancouver housing markets.

And given that yellow comes in different shades, Toronto is more worrisome than Vancouver, TD economists Derek Burleton and Diana Petramala warned in a new study of the two markets.

To be clear, Mr. Burleton, TD’s deputy chief economist, and Ms. Petramala aren’t forecasting a crash. Rather, the bottom line is to “proceed with caution” as they project a soft landing.

“When we put it all together, key housing indicators on balance continue to highlight the vulnerability of the Toronto and Vancouver housing markets to a significant correction in activity and prices,” they said.

“In light of its hotter price performance over the past three to five years and greater supply risk, this vulnerability appears to be comparatively high in the Toronto market,” they added.

“Still, even in Toronto, the same metrics would assign a ‘medium’ rather than ‘high’ risk to the kind of painful and disorderly price adjustment that was endured in the United States a half-decade ago.”

The TD economists looked at a variety of measures in their “housing market risk monitor,” noting that the run-up in prices in the greater Toronto and Vancouver areas has sparked further talk of a bubble.

“While the metrics provide some contrasting signals both within and across the two markets, the balance of evidence places the risk of a steep and painful price adjustment in the medium-to-moderate camp,” they said.

“Put another way, indicators are generally flashing a cautionary yellow rather than green (low risk) or red (high risk).”

They expect a “moderation” in the market in the current second half of this year and into next year, but there’s a warning there:

“To the extent that the Toronto and Vancouver markets continue to gain strength in the coming months, the risk profile would rise in tandem. As such, a close monitoring of incoming data for signs of further froth accumulation will be critical.”

The “quality-adjusted” price gain in Vancouver was more than 10% in June from a year earlier, though just 2% to 3% over the last three to five years because of the 2012 correction.

Toronto prices, on the other hand, have climbed by up to 6.5% in the same period.

But the best “tell-tale” sign of a bubble is an unsustainable surge, in markets where gains are “speculative-driven, exponential in fashion and where increases occur over a sustained period.”

As an example, they cited the Toronto and Vancouver crash of the early 1990s, in the wake of price gains of up to 25% in the years running up to the collapse.

Overbuilding seems to be more of a threat in Toronto, they added, citing the fact that condo developers “appear to be holding onto a record number of newly completed but unsold units.”

But the Toronto rental market is tight, they said, which should provide some relief on that front.

Source: Article by Michael Babad, The Globe and Mail 

Conference Board of Canada Sees More Disappointment Ahead for Economy

The Canadian economy continues to deliver what Bank of Canada governor Stephen Poloz has described as “serial disappointment.”

The Conference Board of Canada last week forecast economic growth of just 1.6% this year, which the Ottawa-based think-tank said is down from its March estimate of 1.9%. The latest growth outlook is the worst since 2009 — the tail end of the previous downturn — and more disappointment could lie ahead.

Topping the board’s list of suspects dragging down economic activity are the oil-price rout and weak business investment by Canadian companies.

Adding to those worries are plunging stocks and slowing economic growth in China, the yet-to-be-completed debt rescue for Greece.

Meanwhile, many economists have been disappointed by the pace of the U.S. recovery — the main element required to lift exports from this country — even though that country’s GDP has rebounded from a collapse at the start of 2015.

“There has been much speculation on whether the Canadian economy has dipped into recession,” said Matthew Stewart, associate director, responsible for the national forecast.

“With Canada’s potential output growth slowing due to an aging population and lacklustre investment outside of the energy sector, real GDP growth is not expected to exceed 2.3% at any point over the next five years.”

Poloz has acted on his “serial disappointment” concerns by cutting interest rates twice this year. The central bank’s key lending level now sits at 0.5%.

“We expect the numbers to show economic growth tracking close to zero in the second quarter, as the economy flirts with recession,” said Stewart, at the Conference Board.

“But even if Canada slips into mild recession, we expect it to be small and short-lived, with the economy picking up through the rest of the year.”

The board notes points “positive signs of growth, as the economy added 16,000 jobs a month on average over the first half of the year, which is better than what we saw through most of 2014.”

However, the group warned that Canada’s jobless rate, now at 6.8%, will climb to 7% later this year and only inch back down by the end of 2016.

That’s similar to projections from other economists, who see unemployment sticking at just below 7% for some time yet.

Projecting a “modest” rise in employment of just 0.8% this year, the job market will in turn “keep a lid on wage pressures,” the group said, projecting average weekly wages will rise this year by “an unimpressive” 1.9%.

Real disposable income, though, will be “slightly better,” rising by 2.3%, given soft inflation, the federal government’s new child care benefits scheme and income-splitting.

Next year, however, real disposable income gains are forecast to slow to 1.5% as oil prices rise.

Still, business investment “will be the weakest part of the economy this year, held back by deep cuts in the energy sector.”

“Oil and gas firms are expected to chop their investment by almost one-third, plunging from $68.8 billion last year to $52.5 billion this year. Outside the energy sector, firms remain hesitant to invest.”

In regards to the loonie, The Conference Board did not weigh in with an actual projection for the Canadian dollar, but it did note that the lower currency should help exports “manage some decent growth.”

Other currency watchers have projected further declines in the Canadian dollar, which isn’t only troublesome for travellers to the United States but for all consumers as the higher costs of imports are passed on.

Last Wednesday, the TD Bank projected the loonie will tumble to 73 cents (U.S.) by the second quarter of the next year.

The Conference Board, though, was looking at the loonie in terms of trade, and forecast that Canada’s real trade balance will see marked gains.

“However, the same cannot be said for the nominal trade balance,” it added.

“The sharp depreciation of the Canadian dollar this year will see import prices advancing at a much faster pace than exports prices, and this will lead to a deterioration in the terms of trade.”

The group also weighed in on one of our national obsessions, real estate, projecting a rise in average home prices of 4.7% this year before they “flatten out” in 2016 and score only slight increases from there.

“Price gains will then remain below 1% per year in the following few years, starting with a negligible advance in 2017,” the report said.

“By 2019, its forecast calls for a national average resale price near $432,000, up 6.3% from 2014.”

Like the Bank of Canada and several other observers, the group expects a soft landing, rather than a meltdown, in the housing market.

Source: The Financial Post, The Globe and Mail

Canadian Retail Sales Moving Ahead with Mixed Fortunes

Total Canadian retail sales appear to be softening, according to the latest Statistics Canada data. In May 2015, total retail was up a meagre 1.2% year-over-year on a not seasonally adjusted basis. The 3 month growth trend has dropped to just 1.9%, after peaking at around the 5% last fall. The underlying 12 month trend is now heading down.

The overall total is misleading however, and does not well represent what's going on in different sectors of Canadian retail.

The chief culprit is retail sales at gasoline stations, which declined 14.6% in May, while most other retailers had a good to very good month. Excluding gas stations, overall retail was up 3.5% in May and 4.8% year-to-date after 5 months of 2015.

Each of the major retail sectors however has a different story to tell.

Food & Drug Stores
After hitting 5-year highs at the start of 2015, retail sales growth in the Food & Drug sector has tapered off somewhat. Nevertheless, both the 3 month and 12 month trends remain significantly above recent historical averages. So while Food & Drug may be a little past its best before date, it's still performing well.

Sales at supermarkets & other grocery stores were up 3.5% in May 2015 versus a year ago. This is practically equal to their last 12 month gain, or, in other words, sales growth was just plain average.

Health & personal care stores' sales were up 4.9% in May. This was better than their 12 month trend of 3.6%.

Store Merchandise
Retail sales in the Store Merchandise sector continue to grow at a high rate. The underlying 12 month trend has been moving up more or less steadily for the last 2 years, which is an unusually prolonged up-cycle. The 3 month trend is at a similar growth rate of 5.0% year-over-year.

On the other hand, given the lacklustre recent performance of the Canadian economy, it's difficult to see how this pace can be sustained. Store Merchandise sales growth may now be at or near its peak.

Most store types in the sector had positive year-over-year retail sales gains in May 2015. The major exception was Electronics & Appliance stores where sales declined 4.1% in May, which is to some extent due to the closure of Future Shop. The largest sales gains were at building material & garden equipment/supplies dealers (+8.4%), furniture stores (+7.3%), and clothing stores (+6.9%).

Automotive & Related
The apparent collapse in the Automotive & Related sector is almost all due to drastically lower retail sales at gasoline stations. This however is likely to reverse itself by the end of the year. Gas prices first started falling significantly in November 2014, and the low point appears to have been this past January. Since then, gas prices have increased by around 35% depending on what part of the country you live in.

Another unfolding story is that sales at new car dealers now appear to be cooling off, which was not unexpected. Their retail sales were up just 2.0% year-over-year in May 2015, much less than the 8.2% overall gain last year. On the other hand, used car dealers had another booming month in May, with sales up 18.0%. The used car group however is small, accounting for only 6.5% of all motor vehicle dealer sales.

Click here for further info and to see the full article.

Source: Article by Ed Strapagiel, Consultant 

U.S. Economy Accelerates, Boosting Case for Fed Rate Hike this Year 

U.S. economic growth accelerated in the second quarter as a pick-up in consumer spending offset the drag from soft business spending on equipment, suggesting a steady momentum that could bring the Federal Reserve closer to hiking interest rates this year.

U.S. GDP expanded at a 2.3% annual rate, the Commerce Department reported last Thursday. First-quarter GDP, previously reported to have shrunk at a 0.2% pace, was revised up to show it rising at a 0.6% rate.

The revision to first-quarter growth reflected steps taken by the government to refine the seasonal adjustment for some components of GDP, which economists said left residual seasonality in the data, as well as new source data.

The Fed last week described the U.S. economy as expanding “moderately” while upgrading its view of the labour market and saying housing had shown “additional” improvement.The Fed’s assessment left the door open for a possible hike in interest rates in September, which would be the first rise since 2006.

While second-quarter GDP growth was a bit below economists’ expectations for a 2.6% rate, the growth composition pointed to firming fundamentals.

A measure of private domestic demand, which excludes trade, inventories and government expenditures, increased at a 2.5% rate after rising at a 2.0% pace at the start of the year.

Growth in the second quarter was boosted by consumer spending as households used some of the windfall from cheaper gasoline in late 2014 and early this year to go shopping. The strengthening labour market also encouraged consumers to loosen their purse strings.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, grew at a 2.9% rate from a downwardly revised 1.8% pace in the first quarter. Consumer spending was previously reported to have increased at a 2.1% rate at the start of the year.

The saving rate fell to 4.8% from 5.2%.

A firming housing market also supported the U.S. economy in the second quarter, as did exports, and state and local government spending.

However, the energy sector continued to weigh on growth as it struggles with the lingering effects of deep spending cuts by oil-field companies like Schlumberger and Halliburton in the aftermath of a more than 60% plunge in crude oil prices last year.

Business spending on structures fell at a 1.6% rate after stumbling 7.4% at the start of the year. Equipment spending fell at a 4.1% rate.

Spending on mining exploration, wells and shafts plunged at a 68.2% rate, the largest decline since the second quarter of 1986.

This category dropped at a 44.5% pace in the first quarter.

But there are signs that the energy spending rout might be nearing an end. Data from the week before showed U.S. energy firms added 21 oil rigs last week, marking the third increase over the past 33 weeks.

Schlumberger said last week it believed the North American rig count may be bottoming and that a slow rise in both land drilling and completion activity could occur in the second half of the year.

Exports rebounded in the second quarter, despite a strong dollar, while imports rose moderately. That left a smaller trade deficit that added 0.13 percentage point to GDP growth.

Inventory investment slowed after the first quarter’s brisk pace. Businesses accumulated $110.0-billion worth of merchandise, down from $112.8-billion in the first quarter. While inventories did not add to second-quarter GDP growth, that is good news for the remainder of the year.

With oil prices having risen during the second quarter and consumer spending having picked up, inflation pressures accelerated sharply.

The personal consumption expenditures price index rebounded at a 2.2% rate, the fastest since the first quarter of 2012, after falling at a 1.9% rate at the start of the year. Excluding food and energy, prices increased at a 1.8% pace.

Source: Reuters


 Upcoming CHHMA Events 

Industry Memorial Golf Classic
Wednesday, September 30, 2015
Blue Springs Golf Club, Acton, Ontario

Industry Cocktail
Date TBA, December, 2015
Location TBA, Montreal, Quebec

Canada Night
Held in Conjunction with the International Home+Housewares Show
Sunday, March 6, 2016
InterContinental Hotel, Chicago, Illinois

CHHMA Spring Conference & AGM
Date TBA, April, 2016
International Centre (Conference Facility), Mississauga, Ontario

CHHMA Maple Leaf Night
Held in Conjunction with the National Hardware Show
Tuesday, May 3, 2016
The Mirage Hotel & Casino, Las Vegas, Nevada

CHHMA Quebec Golf Classic
Thursday, May 26, 2016
Club de golf Le Fontainebleau, Blainville, Quebec

CHHMA Ontario Golf Tournament
Tuesday, May 31, 2016
Angus Glen Golf Club, Markham, Ontario

CHHMA Industry Calendar

To register for all events visit our website at or call Pam Winter at (416) 282-0022 ext.21.


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