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Volume 16, Issue 5, February 3, 2016

Inside This Issue:

• Last Call to Register for Free Wealth Management Seminar – Feb 10th
• Learn More About Supporting & Servicing Today’s E-Commerce Consumer at Seminar on Feb 25th
• Join the Housewares Industry at Canada Night in Chicago
• CHHMA Spring Conference & AGM – April 12th
• Seminar Provides Key Insights into How Best to Deal with Millennials
• Lowe's to Buy RONA for $3.2B
• Lakehouse Home Store Wins gia Award
• Home Hardware Appoints New Vice-President of Marketing and Sales
• Amazon Shares Tumble Despite Record Year
• EBay Losing its ‘Identity’ as it Expects to Miss Estimates, Analysts Warn
• Canada’s Economy Grows for First Time in Three Months
• CIBC Cuts 2016 Outlook for Canadian Economy for Second Time in a Month
• Prairie Housing Markets at High Risk of Correction, CMHC Warns
• The Worst Year Since the Great Recession for Canadian Retail Sales Growth
• Latest U.S. Economic News

Association News

Last Call to Register for Free Wealth Management Seminar – Feb 10th

There is still time to register for next Wednesday’s (February 10th) Wealth Management seminar being held at the International Centre (Conference Facility) in Mississauga, ON.

The event is being sponsored by TD Wealth and offers a morning of valuable information to help you with financial peace-of-mind in today’s low interest rate world.Presentations will not only feature speakers from TD Wealth but other financial companies as well including Fidelity Investments, Scotiabank and Connor, Clark & Lunn Funds Inc.

And best of all, the event is complimentary for CHHMA members!

Registration and hot breakfast will take place from 8:00 to 9:00 a.m. followed by presentations from 9:00 to 11:30 a.m.

Here’s a full summary of the presentations:

- The Best Wealth Management Solution in Canada
       Using Corporate Class mutual funds to reduce the taxes you pay on your investment income
- Market Neutral Investing
       Reduce risk when investing in equities without giving up return potential
- Estate Planning
       Reduce taxation when passing your legacy on to your heirs
- Investing in a Low Interest Rate World
       Understanding Principal at Risk and Principal Protected Notes
- Private Banking, Estate and Trust Services
       Understanding Wills & Powers of Attorney
- Business Succession Planning
       The Three Key Things You Must Know Before You Sell Your Business

So why not take advantage of some free financial knowledge from top experts and start paying less tax, earn better returns on your investments, and ensure you are on the road to achieving financial peace-of-mind!

For more details and to register now, click here

Learn More About Supporting & Servicing Today’s E-Commerce Consumer at CHHMA Seminar on Feb 25th

The CHHMA and Canadian Office Products Association (COPA) are pleased to be offering another joint seminar this time on the topic of “Transportation Trends for E-Commerce".

It is the start of a new year, which means the forecast for Transportation Trends for E-Commerce is still yet to be predicted. This seminar is a great opportunity to learn more about creating the most optimal e-commerce shipment and delivery methods for business.

• Learn about the first customizable parcel pick up and drop off service
• Strategies for small to medium sized businesses on how to support and service today’s e-commerce customer
• Learn about the trends and transformations that impacted and increased Canpar’s e-commerce business
• Learn about consumer behaviour, and how shipping options will make or break the sale

Topics to be covered:

Notes for the retailer to take into consideration when offering to ship products to the consumer: PUDO focuses on “last mile” set to make missed parcel deliveries a thing of the past! Frank Coccia, the CEO of PUDO – Pick up Drop off will speak about the first customizable parcel pick up and drop off service, ensuring reliable and secure delivery where you want it, when you want it. Using easily accessible community locations such as convenience stores, gas stations and grocery stores with extended hours.Frank will speak to how the PUDO network helps ease the pain of e-commerce deliveries as well as how consumers and shippers alike can benefit from PUDO.

Strategies for small to medium sized businesses on how to support and service today’s E-Commerce Customer. 3 person panel, 1 Marketing Executive, 1 Operations Manager & 1 Director of Information & Technology: We will have a marketing and I.T. professional discuss the key pieces to prepare your company to easily integrate technology and tools to help get you started. We will also have an Operations Manager from “Amway” one of the largest and diverse, multi-level global marketing companies speak to the changing behaviours of today’s consumer.

Trends & Statistics: Canpar Courier’s senior management will speak to the trends and transformations that impacted and increased Canpar’s e-commerce business by 20 times since 2010. They will also discuss the strategies and partnerships they have secured to support the growth.

Consumer behaviour, how shipping options will make or break the sale: Understanding what consumers want from delivery is a pivotal step in creating a successful e-commerce strategy. The e-commerce industry is constantly changing, challenging retailers to keep pace. In this session John Clarke, Chief Revenue Officer at InPost Lockers 24/7, will share insights on how delivery can offer an incredibly effective means to differentiate from other e-commerce competitors, boost conversion rates and provide a powerful mechanism for building customer loyalty"

The seminar is taking place on Thursday, February 25, 2016 at the CHSI (Centre for Health & Safety Innovation), 5110 Creekbank Rd., Mississauga, ON L4W 0A1.

Registration (coffee & muffins will be served) from 8:30 to 9:00 a.m., followed by presentations from 9:00 to 11:00 a.m.The cost to attend is $59.99+HST per person.

Click here for further details and to register. 

Join the Housewares Industry at Canada Night in Chicago

The 67th Canada Night reception will be held on Sunday, March 6, 2016, 6:00 to 8:00 p.m. at the InterContinental Hotel, Renaissance Ballroom in Chicago.

Canadian vendors, agents and suppliers to the industry in town for the International Home+Housewares Show are invited to purchase tickets to the event while Canadian retailers are invited as complimentary guests of the sponsoring companies.

The intent of the evening is to give everyone an opportunity to mix and mingle with peers and customers in a convivial environment celebrating the common bond of being Canadian while enjoying wine, beer, caesars and appetizers.

New this year will be live jazz and a whiskey tasting bar!

The registration fee is $175 (Cdn) per person (at the door price $225).

For all the details and to register, click here.  

We look forward to seeing you in Chicago!

CHHMA Spring Conference & AGM - April 12th

The 47th CHHMA Annual General Meeting & Spring Conference will take place on Tuesday, April 12, 2016.

We will have an outstanding line-up of speakers including, as previously announced, Derek Burleton, Vice President & Deputy Chief Economist, TD Bank Group, who will kick off the conference.

This is the 16th year we have been able to have a senior economist from the TD Bank open the CHHMA Spring Conference and provide our members with an insightful review of the Global, U.S. and Canadian economies over the past year and the prospects moving forward.

In addition, we are pleased to announce that Sofie Andreou (Sofie Andreou & Associates) will be on hand to discuss “How to Merge Digital & Social Media with Traditional Marketing.”

Sofie is a speaker, trainer, author, coach & facilitator.  She is recognized as a digital marketing leader working with various groups including; economic development, Chambers of Commerce, small business enterprise centers, fortune 500 companies and the online business community. Her practice is focused on digital marketing training for small, large, local and international companies.She is the author of the Your Social Strategy series. She delivers her popular and sought after business seminar series to hundreds of professionals monthly.

Sofie is regularly asked to appear on regional television shows to speak as the local expert providing updates on digital marketing as it impacts business practices of all sizes. She holds her undergraduate degree in Computer Science and her Masters of Engineering in Information Systems from the University of Toronto.

Sofie's passion is working with entrepreneurs and mentoring university students. For the past decade, she has lectured to a "sold out" third year class, Online Marketing Principles, at Trent University.  She is also currently the Chair of the Bears' Lair Entrepreneurship Competition, founding member of StartUpPeterborough, active on a Humane Society Annual Walk fundraiser named Duke Trail Tours (named after her oldest pup) and on the Trent University Business Council.

So mark your calendar for April 12, 2016 and watch for further updates in the coming weeks on additional speakers and topics plus registration details.

Seminar Provides Key Insights into How Best to Deal with Millennials

Members from the CHHMA and Canadian Office Products Association (COPA) were treated to a very insightful seminar last Thursday, January 28th, entitled “Decoding the Mysteries of Managing Millennials” at the Centre for Health & Safety Innovation in Mississauga.

The event was jointly presented by COPA and the CHHMA. The speaker, Greg Schinkel of Unique Training & Development , an expert in the area of front line leadership and management, was excellent as he explained the myths and facts about the millennial generation and how as managers one can better communicate, motivate and engage them in the workplace as well as how to best deal with these individuals when selling to them (either as your customer or consumer).

By 2017, Millennials will outnumber and outspend Baby Boomers so it is an important group of consumers to understand.

You can find out more about Greg Schinket at

Industry News

Lowe’s to Buy RONA for $3.2B

Lowe's Cos. is buying RONA inc. in a friendly takeover valued at $3.2 billion Cdn.

The boards of both companies unanimously approved the transaction, they said in a news release early Wednesday.

The deal would give the U.S. chain more of a foothold in Canada's competitive home improvement and renovation retail market, especially in Quebec, where RONA dominates the market.

A previous attempt by Lowe's to purchase RONA in 2012 collapsed after coolness from RONA's management and outright hostility from the Quebec government and pension fund — as well as dozens of independent merchants who operate RONA stores.

Lowe's has agreed its Canadian headquarters will be in Boucherville, and said it will maintain RONA's multiple retail store banners.

Sylvain Prud’homme, who heads Lowe’s Canadian operation, would become president of Lowe’s Canada.

Under the deal, Lowe’s would acquire all of the issued and outstanding common shares of RONA for $24 a share in cash and all the issued and outstanding preferred shares of RONA for $20 a share in cash.

The offer represents a premium of 104% to RONA’s closing common share price on Feb. 2.

But the deal still faces numerous hurdles on the road to approval.

Regulators in Canada and the U.S., including the Competition Bureau, will have to give their OK for the deal to be finalized.

Lowe’s $1.8-billion bid for RONA in 2012 fell flat after strong resistance from the Quebec government, setting the stage for a high-stakes battle in the province as some powerful shareholders backed the $14.50-a-share offer.

In a controversial move, the Quebec finance minister at the time described RONA as a “strategic interest” and opposed the acquisition by Lowe’s in the belief it would harm RONA’s 15,000 employees in the province and its suppliers.

RONA itself had rejected Lowe’s offer.

The latest proposed deal is already taking on a political dimension, with opposition leader Pierre Karl Péladeau immediately urging the Quebec government to block it.

In a series of tweets that started at 6:22 a.m., Mr. Péladeau accused Quebec Premier Philippe Couillard of “caving in again” and called on the Caisse de dépôt et placement du Québec to intervene.

“The Caisse holds 17% [of the shares] , it can and should block the deal” the Parti Québécois leader tweeted.

He asked whether the provincial pension manager will look solely at the financial return of the deal or consider the economic development of Quebec.

He also challenged Dominique Anglade , the new Quebec Minister of the Economy, Sciences and Innovation, wondering if she would “intervene or will she lose another head office. Will she fight off her premier?”

Mr. Péladeau was skeptical about Lowe’s pledge to keep the RONA head office and turn into its Canadian headquarters.

“Rio Tinto said the same thing about Alcan,” he tweeted, alluding to the job cuts that the mining giant Rio Tinto Group made at its Montreal office after acquiring Alcan Inc.

Mr. Péladeau is expected to comment further at a party caucus meeting in Quebec City Wednesday.

“We believe the time is right to take the next step in the evolution of the RONA family,” said RONA chairman Robert Chevrier. “The team at Lowe’s has presented us with an excellent plan that enables our company to maintain its brand power while at the same time leveraging Lowe’s global presence to build upon and expand our reach.”

He pointed to benefits in the deal, including the commitments that Lowe’s made to RONA employees; potential new markets for Canadian manufacturers; and product offerings for RONA’s independent dealers.

“We are very excited about this transaction as it leverages the strengths of two great companies, positioning us for continued success in Canada’s over C$45 billion and growing home improvement industry. The strategic rationale of this transaction, for both companies, is very compelling," said Robert A. Niblock, Lowe’s chairman, president and CEO.

“Importantly, the transaction also provides Lowe’s with entry into Quebec, where RONA is the market leader and we have no presence."

Lowe’s said it can potentially double its operating profit in Canada in five years.

The U.S. retailer said it has identified more than $1-billion of opportunities to further increase revenue and operating profit in Canada. They include expanding customer reach and serving a new portion of the market by applying Lowe’s expertise in some product categories such as appliances. It also said it could strengthen operations by using Lowe’s strengths as a leading omni-channel home improvement company, selling both from physical stores and online.

Lowe’s said it can also increase profit in Canada by taking advantage of shared supplier relationships and better scale, as well as Lowe’s private label savvy.

Among its commitments to RONA, Lowe’s said it has agreed to continue to employ “the vast majority” of RONA’s current employees and “maintain key executives” from the Quebec-based chain’s leadership team. It said it would continue RONA’s local and ethical procurement strategy and “potentially expand relationships both Lowe’s and RONA have developed with Canadian manufacturers and suppliers.”

Bruce Winder, partner at Retail Advisors Network, said the deal looks good on the surface for both companies, noting that the Canadian do-it-yourself market is not big enough in the long term for three players – Home Depot, Lowe’s and RONA.

He said a major effort will be needed in moving the Lowe’s Canadian head office to Quebec, with the culture difference between the U.S. and Quebec companies. “Don’t underestimate time and disruption in operations before they get their A game on collectively,” he said.

However, Mr. Winder also noted that Lowe’s decision to hire Mr. Prud’homme to head its Canadian division a few years ago will help smooth the transition to some degree.

More about the companies:

• Lowe's is based in Mooresville, N.C., and has more than 1,700 stores in the U.S., Canada and Mexico.  In Canada, Lowe’s currently has 42 stores and none in Quebec
• RONA, with its headquarters in Boucherville, Que., owns approximately 800 stores and 14 hardware and construction material distribution centres across Canada.

Source: CBC News, The Globe and Mail, The Toronto Star 

Lakehouse Home Store Wins gia Award

The International Home + Housewares Show and International Housewares Association (IHA), the global sponsors and organizers of the IHA Global Innovation Awards (gia) program, announced last Friday the national gia winners of 2015-2016 – including 25 outstanding home and housewares retailers from 23 countries around the globe.

One of the winning retailers this year was Kelowna’, BC’s own Lakehouse Home Store.

Lakehouse is a family owned and operated “lifestyle store” located in downtown Kelowna, just a few blocks from the sun-drenched shores of Okanagan Lake. The store sources hundreds of suppliers and thousands of items from around the world in categories including gourmet kitchen, furniture, home décor, wine and bar, and giftware.

The center-piece of the store is a state-of-the-art demonstration kitchen where they demonstrate products, showcase guest chef appearances, host wine tastings and lead evening cooking classes.

Their objective is to reflect the beaches, vineyards and casual lake culture that attract so many people to the Okanagan region. They strive to excite and ignite design and food-minded people from all over.

The gia program was created by the IHA and International Home + Housewares Show to foster innovation and excellence in home and housewares retailing throughout the world. Since the launch of gia in 2000, there have been close to 350 gia retail award winners, from over 40 countries on six continents.

The gia competition is structured on a two-tier level, national and global, to honour independent and multiple location home and housewares retailers for excellence in several business categories:

•  Overall mission statement, vision and strategy
•  Store design and layout
•  Visual merchandising, displays and window displays
•  Marketing, advertising and promotions
•  Customer service and staff training
•  Innovation

Each national gia winner is invited to the International Home + Housewares Show in Chicago where the global gia jury, consisting of four experts representing Asia, Europe and the Americas, plus a rotating group of co-sponsoring trade publication editors from around the world, will select up to five gia Global Honorees, the winners of the Martin M. Pegler Award for Excellence in Visual Merchandising and the gia Digital Commerce Award for Excellence in Online Retailing.

Here is the full list of 2015-2016 national gia winners:

Country                              Store Name                                               Store website
Argentina                            Claudia Adorno                               
Australia                              Pigeonhole                                      
Brazil                                    Etna                                                   
Canada                                Lakehouse Home Store               
China                                   Wu Ben Liu He                                 
Colombia                             Bojanini                                            
Denmark                              Illums Bolighus                               
Eastern Europe                  Kaubamaja, Estonia                       
France                                  La Trésorerie                                    
Germany                              Homann schenken–kochen-wohnen
Ireland                                  J&B Hope Ltd                                    
Italy                                        puesme home                                  
Japan                                    La Cucina Felice                              
Malaysia                                Kitchen Shop                                    
Middle East                           Home Centre, United Arab Emirates
Netherlands                          K’OOK!                                               
Poland                                    BBHome                                           
Russia                                    Cité Marilou                                      
Spain                                       Cooking the Kitchen Company    
Turkey                                      Karaca Home                                  
UK                                             Lords                                                
Uruguay                                   Siñeriz Shopping                            
USA                                          Whisk                                               
USA – Gift Retailers               Leon & Lulu                                    
USA – Internet/Catalogue     Chef's Resource                           

During the 2016 International Home + Housewares Show in March, the winners are honored at a festive awards dinner, where the 2015-2016 gia Global Honorees, the winners of the Martin M. Pegler Award for Excellence in Visual Merchandising and the gia Digital Commerce Award for Excellence in Online Retailing will be announced.

Other gia highlights at the International Home + Housewares Show include a gia showcase in the Hall of Global Innovation, in Lakeside Center Lobby, where visuals of the national gia winners’ award-winning store design and branding ideas, examples of exquisite visual merchandising and innovative displays are on display. Banners for the honored retailers can be seen in the walkway that connects the Grand Concourse and the Lakeside Center.

gia is more than an awards program.  Representing retailing excellence around the world, it is part of a larger education initiative that includes seminars by retail experts, columns in international housewares publications and educational sessions at events in sponsors’ home countries. Part of gia’s educational offering, on March 7, the four gia Expert Jurors, Martin M. Pegler, Wolfgang Gruschwitz, Scott Kohno and Henrik Peter Reisby Nielsen, will conduct a special session in the Innovation Theater of the 2016 International Home + Housewares Show, with topic Top Ten Retail Trends for 2016.

For more information about the IHA Global Innovation Awards (gia) program, the co-sponsors, or participating in 2016-2017, contact Piritta Törrö at Additional information on the gia program is also available online at

For more information on the 2016 International Home + Housewares Show, taking place in Chicago on 5-8 of March, and to pre-register for an entrance badge, visit

Home Hardware Appoints New Vice-President of Marketing and Sales

Home Hardware announced last Thursday that Rick McNabb has been named Vice-President, Marketing and Sales, effective March 7, 2016. Most recently Mr. McNabb was Chief Operating Officer for Swiss Chalet and Harveys at Cara Operations Limited.He has also been a successful entrepreneur, a senior agency executive and his family has been in the home improvement business for 38 years, most recently with their Home Building Centre in Parry Sound.

"As we strengthen our company for the future and ensure that we are well positioned to continue serving our Dealer-Owners, we welcome Rick's extensive marketing and operations expertise and proven leadership to our team," said Terry Davis, CEO, Home Hardware Stores Limited, in a press release.

Directly reporting to Mr. McNabb will be Dunc Wilson, Executive Director, Retail Sales and Support and Rob Wallace, Director, Marketing.

"We thank Dunc Wilson for his dedication and leadership over the past year as the Acting Vice-President, Operations." said Davis.  "We look forward to Dunc's ongoing support in his new role as, Executive Director, Retail Sales and Support."

Source: Home Hardware Store Limited, Hardlines  

Amazon Shares Tumble Despite Record Year Inc.’s holiday quarter profit missed estimates on stepped up spending for new technology and delivery services, taking the shine off a year marked by record earnings and an aggressive expansion.

The Web retailer’s shares fell as much as 15%.

Fourth-quarter net income was $482 million, or $1 a share, Amazon reported last Thursday, short of analysts’ average projection for $742.9 million, or $1.55. While revenue rose 22% to $35.7 billion in the fourth quarter, the stronger dollar subtracted $1.2 billion, pushing it below analysts’ prediction for $35.9 billion.

The result was a surprise for investors who have become accustomed to Amazon’s ability to boost sales by spending heavily on delivery infrastructure and new products. The key question is whether the Seattle-based company can readjust its investments in the face of weaker-than-anticipated sales. Still, Chief Executive Officer Jeff Bezos appears determined to show that Amazon can keep bringing in more money -- he pulled back on spending last year to deliver a surprise jump in earnings and will be showing Amazon’s first Super Bowl commercial this weekend.

“When revenue goes up by more than $6 billion how are earnings only going up by 55 cents?” said Michael Pachter, an analyst at Wedbush Securities Inc. “That’s what investors are wondering right now.”

Amazon’s shares, which more than doubled last year, fell as much as 15% in extended trading. The share slide erased more than $5 billion from Bezos’s net worth, to $50.3 billion.

This was the first shopping season following Amazon’s Prime Day promotion in July, an effort to boost the company’s $99-a-year subscriptions that include delivery discounts and convert occasional shoppers into devotees. It was also the first season that Amazon offered same-day deliveries in most big cities around the country to cater to last-minute shoppers. E-commerce is on track to make up 9.8% of all U.S. retail sales in 2019, up from 7.1% in 2015, according to EMarketer.

At the end of 2015, there were more than 54 million Prime members, who get two-day deliveries and access to online movies and music, according to Consumer Intelligence Research Partners. That’s an increase of 35 percent, the researcher said, adding that the average Prime shopper spends $1,100 annually with Amazon, compared with $600 for non-members.

For the first quarter, Amazon forecast revenue of $26.5 billion to $29 billion, compared with analysts’ average estimates of $27.6 billion.

One bright spot was Amazon Web Services, the company’s cloud-computing division, which had fourth-quarter sales of $2.4 billion, up 69% from a year earlier. The unit, built on Amazon’s expertise in running its Web store and handing massive amounts of data and analysis, represents a fast-growing and profitable part of Amazon’s business, even though it makes up only about 7% of revenue, the company said.

On the spending side, operating expenses increased 21% to $34.6 billion, Amazon said. Bezos’ biggest challenge is balancing Wall Street’s thirst for profits against his own ambitions of using new technology -- such as unmanned drones and intelligent household gadgets. Bezos is also eager to replicate his U.S. success abroad, including challenging Flipkart Online Services Pvt. for India’s fast-growing e-commerce industry. Spending on delivery fulfillment and technology jumped, according to Kerry Rice, an analyst at Needham & Co.

“They were well below what people were expecting on earnings because they spent more than what people were expecting,” Rice said.

“Amazon reached this new level of profitability in 2015 that we hadn’t seen previously. If they don’t keep that trend going in the right direction, the stock goes down.”

Source: The Associated Press

EBay Losing its ‘Identity’ as it Expects to Miss Estimates, Analysts Warn

EBay Inc. projected earnings may miss analysts’ estimates as growth on its marketplace stalled, revealing that shoppers went elsewhere during a holiday season that saw online spending reach new heights. Shares fell as much as 11% in extended trading.

Profit, excluding certain items, will be 43 cents to 45 cents (U.S.) a share in the current quarter, eBay said last week in a statement, compared with analysts’ estimates of 48 cents. Sales in the fourth quarter were $2.32 billion, unchanged from a year earlier, excluding PayPal Holdings Inc., which became a stand-alone company in July, eBay said.

EBay is struggling to remain relevant as Inc. gobbles up market share by offering speedy delivery and brick-and-mortar retailers ramp up their online shopping options. The company also is working to improve traffic from Google Inc.’s search engine, a key entry point for many online shoppers.

“EBay has kind of lost its identity,” said Steven Weinstein, an analyst at ITG Inc. in San Francisco. “Their pricing isn’t special.  Their service isn’t special. They’ve lost their competitiveness.”

U.S. e-commerce sales grew 13.6% to reach $106 billion last quarter, according to EMarketer. eBay’s merchandise value — the total value of goods sold on the marketplace — of $21.9 billion was unchanged in the quarter compared with 2% growth a year earlier.

The San Jose, Calif.-based company forecast annual earnings of $1.82 to $1.87 a share, essentially the same as 2015.  Considering the company bought $550 million of its stock, “they are guiding to declining profits this year,” said Gil Luria, an analyst at Webush Securities Inc.

Chief executive officer Devin Wenig needs to entice shoppers and merchants back to eBay at a time when they have more alternatives for buying and selling goods online and consumers expect fast, free delivery offered by Amazon. A goal of eBay’s split in July from payments business PayPal was to make sure each company could focus on its primary businesses.

The company has been trying to change how it displays its abundant inventory from millions of sellers to remain relevant on search engines for prospective shoppers. EBay last year altered the way merchants list items so search engines reward the company for its total web traffic.

EBay, which attracted 162 million active buyers in the fourth quarter, has been taking steps to attract new customers.The company experimented with free listings of hot-selling holiday gifts this year, including some Star Wars toys, waiving the fees normally associated with selling an item in hopes of adding must-have inventory to the site.

The company reported its StubHub ticket exchange generated $232 million in the fourth quarter, a 33% increase from a year earlier.

Source: Bloomberg News  

Economic News

Canada’s Economy Grows for First Time in Three Months

Canada’s economy awoke from its fall slumber to post modest growth in November, thanks to rebounds in manufacturing, energy production, and wholesale and retail trade.

Statistics Canada reported last Friday that Canadian real GDP rose 0.3% month over month, the economy’s first growth in three months. GDP was flat in October and sank 0.5% in September.

The November result matched the consensus estimate among economists. Still, most believe that the economy achieved little or no growth in the sluggish fourth quarter, weighed down by a slowdown in the pace of the U.S. recovery and persistent weakness in commodity prices.

“We needed a rebound in Canada just to keep Q4 from being the third negative quarter for the year,” said Avery Shenfeld, chief economist at CIBC, in a research note. “With the softness in September/October data, the November bounce leaves Q4 headed for a growth rate only marginally above zero.”

Canada’s November growth was led by the goods-producing side of the economy, up 0.4% month over month, which included a 0.4% rebound in manufacturing after two straight months of declines. Durable-goods manufacturing gained 0.8%, reversing a three-month slump.

Oil and gas production rose 2.1% in the month, as it continued to recover from a sharp decline in September due to a fire-related shutdown at the huge Syncrude oil sands facility in Alberta – a slump that was a major contributor to September’s GDP decline.

The services-producing side rose 0.2% in November. Wholesale trade rose 1.3%, reversing a four-month losing streak.  Retail trade gained 1.2%, after falling 0.2% in October.

Construction was unchanged in November. Declines in non-residential and residential building construction offset gains in engineering and repair construction.

Following a 2.6% increase in October, the output of real estate agents and brokers rose 2.1% in November.

Transportation and warehousing services increased 0.8% in November, mainly because of growth in rail transportation services and support activities for transportation.

The public sector (education, health and public administration combined) edged down 0.1% in November. Public administration and health care services declined, while educational services edged up.

Despite the November turnaround in GDP, economists noted that year-over-year growth was a slim 0.2%, underlining just how difficult a year it was for the Canadian economy. And the generally sluggish end to 2015 hasn’t generated much optimism about growth prospects for the early part of 2016, either.

“Unfortunately, one month does not make a trend, and this only partly offsets the weak outcome in the two previous months. The underlying story remains an economy that is struggling to post sustainable growth,” said Douglas Porter, chief economist at Bank of Montreal, in a research note. “We suspect December was just a so-so month for growth, and Q1 faces a tough uphill battle amid the deep sag in oil and other commodity prices, as well as the stumbling start to the year for financial markets generally and falling business and consumer confidence.”

Source: Statistics Canada, The Globe and Mail   

CIBC Cuts 2016 Outlook for Canadian Economy for Second Time in a Month

One of Canada’s big banks is cutting its economic forecast for the country for a second time in a matter of weeks.

CIBC World Markets is now estimating the country’s GDP will grow by only 1.3% this year, after adjusting for inflation.

That’s down from its previous forecast last month of 1.7% growth in GDP.

CIBC chief economist Avery Shenfeld says a major concern is global investor sentiment, which has resulted in lower stock prices, changes on the bond market and a buildup of cash in Canadian households.

But Shenfeld warns against an “overdose on pessimism.”

A report by other economists in the same CIBC report said they expect a modest increase on commodity prices next year, following a “bit better” economic growth in 2016 and 2017 and reduced supplies of some commodities.

The decline in global prices for oil and other commodities produced by Canada was a major reason for CIBC’s previous economic downgrade for the economy, released in December.

“It’s unusual for us to want to reconsider a full-year outlook that we published only a month ago, but then again, these are unusual times,” Shenfeld said in the forecast released last Thursday.

Shenfeld said even his 1.3% growth call might be optimistic, as it factors in the federal government spending $10 billion more on stimulus this year than originally envisioned, a $30-billion federal deficit and the Canadian dollar going even lower.

The forecast weighs the positive effects of a lower loonie for exporters versus the negative effects of the oil price crash.  Shenfeld notes that the latter is still filtering into the economy, adding to the downside pressure.

“While the country’s GDP is less heavily weighted to resource sector spending than it was a year ago, we’re only in the early stages of the negative spillover effects on other sectors.”

With that shock still hurting business confidence and leading to layoffs, Canada’s one economic bright spot will also be under assault this year: job creation. The Canadian economy managed to produce 158,000 new jobs last year despite the layoffs in the energy sector, a growth rate of 0.9%. Stronger than the growth rate of 0.7% in both 2013 and 2014.

But it will be hard to repeat that feat this year, said Shenfeld.

“It’s only because employment grew that we didn’t record an official recession, since real GDP fell slightly in the year to October 2015,” he said. “That employment trend looks vulnerable in the affected provinces given signs of accelerating layoffs in the resource sector, and the fact that job creation has been leaning so heavily on self-employment rather than business hiring.”

Source: The Canadian Press, The Financial Post  

Prairie Housing Markets at High Risk of Correction, CMHC Warns

Housing markets across the Prairies are at high risk of a correction as job losses mount in the energy sector, Canada’s federal housing agency warned.

“Low oil prices are impacting Alberta and Saskatchewan, weakening demographic and economic fundamentals such as migration, employment, and income, which are in turn affecting housing markets,” Canada Mortgage and Housing Corporation (CMHC) said in its latest quarterly assessment report of the country’s housing market released last week.

Overall, Canada’s housing market faces little risk of a steep correction, CMHC said, although it raised concerns with nine of the country’s 15 major housing markets.

“The evidence of overbuilding has increased since the previous assessment in Calgary, Saskatoon, Regina, and Ottawa due to either higher vacancy rates, high inventory of new and unsold units, or a combination of both. As more centres are now showing problematic overbuilding conditions, inventory management is becoming more important,” said Bob Dugan, CMHC’s chief economist.

Job losses in the oil industry and rising vacancy rates have left Calgary’s housing market with what CMHC called “strong evidence of problematic conditions.” The city has already seen average resale home prices drop by 2.6%.  Calgary’s real estate board predicts prices would fall another 3.4% this year. CMHC had said it considered Calgary at a low risk of correction when it issued its last housing market assessment in October.

Edmonton faces a “moderate” evidence of problems in its housing market, CMHC said, thanks to record levels of condo and apartment starts last year. “This has resulted in rising concerns of overbuilding in Edmonton as inventory is expected to trend higher as units under construction reach completion,” the agency said.

Regina and Saskatoon also continue to give off strong warning signals, with high levels of newly built units continuing to hit the market despite falling prices.

The federal agency also reiterated its warnings about Toronto.  Soaring home prices for detached homes have outstripped income and population growth, leaving the market with strong evidence of problem, CMHC said. At the same time, the level of unsold condos remains above his long-term norms.  Average resale home prices jumped nearly 10% in the Greater Toronto Area last year.

Despite average resale prices surging nearly 20% on the resale market last year, Vancouver’s housing market remains at low risk of a correction, CMHC said. While the agency said it saw “moderate evidence” that the city’s home prices were overvalued, the market is being driven by wealthy, repeat buyers. Meanwhile, new home construction is being driven by city’s extraordinarily tight rental market – the vacancy rate was less than 1% in October.

Ottawa, Montreal and Quebec City all faced a moderate risk of a price correction, CMHC said, with prices and new home construction running high compared to soft income growth.

Winnipeg was the only market that has improved since CMHC released its last report in October. CMHC pointed to job growth and rising numbers of first-time buyers in the market, although it warned levels of new condo construction were running above long-term levels.

Source: CMHC, The Globe and Mail  

The Worst Year Since the Great Recession for Canadian Retail Sales Growth

Despite an uptick in November, data from Statistics Canada last week indicates that total Canadian retail sales will be up only about 2.3% for 2015. This is half of the 4.6% gain recorded in 2014, and the lowest annual growth since 2009, the year of the Great Recession.

The underlying 12 month trend in total Canadian retail sales has been sliding all year. The 3 month trend however has steadied, so things may be at the bottom of the current cycle. At least this might be cause for modest optimism going forward into 2016.

Store Retail
Much of 2015's poor performance is due to declining gas prices and sinking sales at gasoline stations. On the other hand, automobile dealers continue to enjoy record sales growth, 3 to 4 times higher than the overall retail average. Taking these unusual sales out leaves the Store Retail group, consisting of food plus drugs plus merchandise.

This provides a somewhat stronger picture.  The underlying 12 month trend rose steadily for most of 2013 and 2014, but peaked in Q1 2015 and has been weakening since. The 3 month trend is underperforming, indicating further softness ahead. Nevertheless, Store Retail should end 2015 with an annual gain of about 3.7%, which would be about the same as 2014's growth.

Outlook For 2016
(Nothing has changed from last month's report so here's a repeat.)

As gas prices stabilize, retail sales growth should be higher in 2016, in the 3.5% to 4.0% range. But the pattern is likely to be the reverse of 2015 and more like 2014, namely, a slow start with growth modestly accelerating as 2016 plays out.

Overall, 2015 appears the year of the economic recovery that wasn't. As the US economy picks up however, some of this is likely to improve Canada's situation in 2016, although this could be a slow process. In the meantime, Canadian retailers will be challenged to deal with higher costs of imported goods due to the low Canadian dollar, and how to pass these on to consumers in the current competitive environment. There is however a bit of a silver lining on the Canadian dollar black cloud, by reducing crossborder shopping in the US (via both bricks and clicks) and maybe by encouraging more Americans to come north to shop.

Food & Drug
The Food & Drug sector should finish 2015 with about a 3.2% annual gain, roughly the same as it was in 2014. The trendlines are similar to the general case, peaking in Q1 2015 and then softening for the rest of the year. The 3 month trend is now at a low point however, which suggests a slow start going into 2016.

Supermarkets & other grocery stores had a particularly poor November, with retail sales down 4.5% year-over-year. On the other hand, convenience stores and specialty food stores had above average retail sales gains.

Health & personal care stores' retail sales were up 7.4% in November versus a year ago. This was the best single month gain in 5 years.

Store Merchandise
While the underlying 12 month trend has been moderating for much of 2015, the 3 month trend appears to be staging somewhat of a recovery. The sector should finish with about a 4.2% annual gain for 2015, which would be a 5 year high.

Clothing & clothing accessories stores appear to be leading the way and could be up 6.8% for the year, a result which would be about triple the overall retail average. Sales at furniture stores and at building material & garden equipment/supplies dealers are also growing at an above average pace.

Electronics & appliance stores remain the laggards in the sector. They are likely to record a close to zero retail sales gain for 2015.

Automotive & Related
In November 2015, automobile dealers' sales were up a whopping 13.7%, while gasoline stations were down an equally whopping 12.1%. This has been the story all year. The two trends offset each other, so that the overall Automotive & Related sector ends up looking flat. Cheap gas should help people pay for their new car loans.

Used car dealers, although a small group, are worth mentioning. Their retail sales are running 21% ahead of 2014 on a year to date basis. Perhaps there are a lot of trade-ins that need to be moved.

Click here to read the full report.  

Source: Ed Strapagiel, Consultant      

Latest U.S. Economic News

U.S. Consumer Spending Flat; Savings at Three-Year High
U.S. consumer spending was unchanged in December, but a jump in savings to a three-year high suggested consumption could rebound in the months ahead.

The Commerce Department said on Monday the unchanged reading in consumer spending followed an upwardly revised 0.5% increase in November.  Spending on long-lasting manufactured goods such as autos dropped 0.9%. Purchases of nondurable goods also declined 0.9%.

Economists polled by Reuters had forecast consumer spending, which accounts for more than two-thirds of U.S. economic activity, edging up 0.1% in December after a previously reported 0.3% gain in November.

When adjusted for inflation, consumer spending edged up 0.1% after a 0.4% gain in November.

Consumer spending increased 3.4% in 2015 after advancing 4.2% in 2014.

That data was included in last Friday’s fourth-quarter GDP report, which showed consumer spending growth slowed to a 2.2% annual rate from the third quarter’s brisk 3% pace.

Moderate consumer spending, weak export growth and ongoing efforts by businesses to reduce unsold merchandise piled up in warehouses helped restrict economic growth to a 0.7% pace in the fourth quarter. More cutbacks in investment by energy firms struggling with lower oil prices also hurt GDP growth.

In December, income rose 0.3% after a similar gain in November. Wages and salaries increased 0.2% after shooting up 0.5% in November. Income in 2015 was up 4.5%, the largest increase since 2012, after rising 4.4% in 2014.

Income at the disposal of households after accounting for inflation in 2015 recorded its biggest increase since 2006.

With income outpacing spending in December, savings surged to $753.3-billion, the highest level since December 2012, from $717.8-billion in November.

Higher savings and rising house prices should help to soften the blow to household wealth from a recent stock market sell-off and drive spending in early 2016.

With consumption soft, inflation retreated in December.

A price index for consumer spending slipped 0.1% after ticking up 0.1% in November. In the 12 months through December, the personal consumption expenditures (PCE) price index, however, rose 0.6% after increasing 0.4% in November.

That was the largest increase since December 2014. Year-over-year inflation rates are rising as the weak readings during the year drop out of the calculation.

Excluding food and energy, prices were unchanged after rising 0.2% in November. The so-called core PCE price index increased 1.4% in the 12 months through December after a similar gain in November.

Core PCE is the Federal Reserve’s preferred inflation measure and remains well below the U.S. central bank’s 2% target.

Source: Reuters

U.S. Economy Brakes Sharply in the Fourth Quarter
U.S. economic growth braked sharply in the fourth quarter as businesses stepped up efforts to reduce an inventory glut and a strong dollar and tepid global demand weighed on exports.

U.S. GDP increased at a 0.7% annual rate, the Commerce Department said last Friday in a report that showed a further cutback in investment by energy firms grappling with lower oil prices. Growth in consumer spending also slowed as unseasonably mild weather cut into spending on utilities.

The fourth-quarter growth pace was in line with economists’ expectations and followed a 2% rate in the third quarter. The U.S. economy grew 2.4% in 2015 after a similar expansion in 2014. Excluding inventories and trade, the economy grew at a 1.6% pace in the fourth quarter.

The Federal Reserve last Wednesday acknowledged that growth “slowed late last year,” but also noted that “labour market conditions improved further.”

“To the extent that much of this slowdown could be attributed to the drag coming from the adverse global headwinds, strong dollar and the prolonged inventory correction, the Fed is likely to take some solace in the encouraging signs of continued strength in the domestic-facing side of the economy,” said Millan Mulraine, deputy chief economist at TD Securities in New York.

The U.S. central bank raised interest rates in December for the first time since June 2006. Though the Fed has not ruled out another hike in March, financial markets volatility could see that delayed until June.

In the fourth quarter, businesses accumulated $68.6-billion (U.S.) worth of inventory. While that was down from $85.5-billion in the third quarter, it was a bit more than economists had expected, suggesting inventories could remain a drag on growth in the first quarter.

The small inventory build subtracted 0.45 percentage point from the first estimate of fourth-quarter GDP growth.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased at a 2.2% rate. Though that was a step-down from the 3.0% pace notched in the third quarter, the gain was above economists’ expectations.

Unusually mild weather hurt sales of winter apparel in December and undermined demand for heating through the quarter.

With gasoline prices around $2 per gallon, a tightening labour market gradually lifting wages and house prices boosting household wealth, economists believe the slowdown in consumer spending will be short-lived.

Income at the disposal of households after accounting for taxes and inflation increased 3.2% in the fourth quarter after rising 3.8% in the prior period. Savings rose to a lofty $739.3-billion from $700.6-billion in the third quarter.

The U.S. dollar, which has gained 11% against the currencies of the United States’ trading partners since last January, remained a drag on exports, leading to a trade deficit that subtracted 0.47 percentage point from GDP growth in the fourth quarter.

The downturn in energy sector investment put more pressure on business spending on non-residential structures. Spending on mining exploration, wells and shafts dropped at a 38.7% rate after plunging at a 47.0% pace in the third quarter.

Investment in mining exploration, wells and shafts fell 35% in 2015, the largest drop since 1986.

Oil prices have dropped more than 60% since mid-2014, forcing oil field companies such as Schlumberger and Halliburton to slash their capital spending budgets.

Business spending on equipment contracted at a 2.5% rate last quarter after rising at a 9.9% pace in the third quarter. Investment in residential construction remained a bright spot, rising at an 8.1% rate.

With consumer spending softening, inflation retreated in the fourth quarter. A price index in the GDP report that strips out food and energy costs increased at a 1.2% rate, slowing from a 1.4% pace in the third quarter.

Source: Reuters

U.S. Pending Home Sales Inch Up in December
The number of people signing contracts to purchase homes managed to inch up last month, thanks to unseasonably warm weather in the Northeast.

The National Association of Realtors (NAR) said last Thursday that its seasonally adjusted pending home sales index crept up 0.1% to 106.8. Signed contracts jumped 6.1% in the Northeast, while they declined in the other three major U.S. regions.

The tiny bump suggests U.S. home sales may plateau this year after a solid increase in 2015. Rising home prices and a lack of available homes for sale are frustrating many would-be buyers.

December was one of the warmest on record on the East Coast. Pending sales are a barometer of future purchases. A lag of a month or two usually exists between a contract and a completed sale.

Solid job gains and low mortgage rates have encouraged more Americans to take the plunge and buy houses. Sales of existing homes rose 6.5% last year to 5.26 million. That was the highest level since 2006.

New home sales also surged last year, up 14.5% to 501,000. Still, that is below the long-run historical average of 655,000.

Yet the inventory of available homes remains low. The number of existing homes for sale fell 3.8% in December from a year ago, the Realtors said last week.

The tight supply is pushing up prices faster than average incomes, which is making it harder for many Americans to afford a home.

Home prices rose 5.8% in November from a year earlier, according to the Standard & Poor’s/Case-Shiller 20-city index.  Nationwide, the index is nearing its pre-recession peak, and prices have fully recovered in four metro areas.

As a result, the Realtors predict that sales will rise just 1.5% this year to 5.34 million.

Source: The Associated Press

New U.S. Single-Family Home Sales Race to 10-Month High
New U.S. single-family home sales surged in December to their highest level in 10 months, the latest indication that the housing sector remains on a firmer footing despite a massive stock market sell-off and slowing economic growth.

The Commerce Department reported last week that sales rose 10.8% to a seasonally adjusted annual rate of 544,000 units, the highest level since February. Sales last month were likely buoyed by unseasonably mild weather and a rise in the supply of homes on the market, which increased choices for buyers.

“Don’t count the economy out yet with the darkening skies seen in January as world stock markets fell on worries over China and crude oil and world growth. Worries don’t become reality,” said Chris Rupkey, chief economist at MUFG Union Bank in New York.

New U.S. home sales soared 14.5% to 501,000 units in 2015, the highest level since 2007. Economists had forecast new home sales, which account for about 9.1% of the U.S. housing market, edging up to a 500,000 unit-rate last month.

Housing is being supported by tightening labour market conditions, which are spurring a rise in household formation. The data came on the heels of a recent report showing a record increase in U.S. home resales in December from a 19-month low in November.

A separate report from the Mortgage Bankers Association showed applications for home purchase loans increased 8.8% from the week earlier. Mortgage rates remain low by historical standards, even after the Fed’s interest rate hike.

“This is a promising sign for the housing market as we move into 2016,” said Tian Liu, chief economist at Genworth Mortgage Insurance in Raleigh, North Carolina. “We expect the strong increase in new home sales to continue as the fundamentals in the housing market remain strong and newer vintage homes are in short supply.”

A firmer housing sector should put a floor under the U.S. economy, which has been battered by the headwinds of a strong dollar, spending cuts by energy firms stung by lower oil prices and sluggish global demand.  Efforts by businesses to whittle down an inventory bloat have also been a drag on growth.

January’s stock market sell-off, which has seen a more than 7% plunge in the Standard & Poor’s 500 index, is also adding to the pain. But with housing boosting household wealth, the drag on consumer spending from falling stock market values could be minimal.

In December, U.S. new home sales jumped 20.8% in the Northeast and gained 0.4% in the populous South. They advanced 31.6% in the Midwest and shot up 21.0% in the West.

The inventory of new homes on the market rose 2.6% to a six-year high of 237,000 units last month. At December’s sales pace it would take 5.2 months to clear the supply of houses on the market, down from 5.6 months in November.

The median price of a new home fell 4.3% from a year ago to $288,900.       

Source:  Reuters  


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