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Volume 15, Issue 1, January 7, 2015

Inside This Issue:

• Register Now for the 66th Canada Night in Chicago
• 46th CHHMA Annual General Meeting & Spring Conference
• 2015 Industry Hall of Fame Inductees
• Target Could Exit Canada This Year, After $2.1 Billion U.S. In Losses: Analyst
• Walmart Stores Busy, Target Stores, Not So Much During Holiday Shopping Period
• Loblaw in the Spotlight over Pricing Practices
• Canadian Housing Bulls Are Joining Real Estate Doubters
• Fewer Canadians Feeling Confident About their Personal Finances: Poll
• 2015 Outlook for Canadian Retail Sales is (Mostly) Good
• Canadian Economy Picks Up Pace in October
• Canada’s Retail Sales Little Changed in October
• Latest U.S. Economic News

Association News

Register Now for the 66th Canada Night in Chicago  

The 66th Canada Night reception will be held on Sunday, March 8, 2015 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 event provides an opportunity to mix and mingle with peers and customers in a convivial environment celebrating the common bond of being Canadian while enjoying the wine & beer bar and some excellent cuisine.

The advance registration fee is $165 (CDN) per person or $200 if you purchase tickets at the door.

Click here for further information and to register.  

We look forward to seeing you in Chicago!

 46th CHHMA Annual General Meeting & Spring Conference

The 46th CHHMA Annual General Meeting & Spring Conference will take place on Wednesday, April 8, 2015.  We are working on an outstanding line-up of speakers including Craig Alexander, Senior Vice President & Chief Economist, TD Bank Financial Group, who will as is tradition, kick off the day.  Also included will be the Industry Hall of Fame inductions which will occur during a luncheon prior to the afternoon program.

So mark your calendar for April 8, 2015 and watch for more updates in the coming weeks.

 2015 Industry Hall of Fame Inductees   

Vaughn Crofford, CHHMA President, is pleased to announce the 2015 Canadian Hardware & Housewares Industry Hall of Fame inductees.

The Hall of Fame was established in 1984 to recognize the achievements of our industry’s leaders and pioneers. Since that time 58 industry icons, inventors, business founders and builders from the retail and manufacturing sectors have received the honour.

In this, the 31st year, the CHHMA is honoured to serve as the custodian of the hall and is pleased to announce that two well known industry veterans Mr. Paul Straus, Home Hardware, St. Jacobs, Ontario and Mr. Bryan Gilbart, Envirogard/Rainfresh, Richmond Hill, Ontario will be inducted on April 8, 2015 at an industry luncheon sponsored by the CHHMA.

The luncheon will be held in conjunction with the annual CHHMA Spring Conference & AGM and is included in the conference package. Tickets for the Hall of Fame Lunch will also be available for purchase individually. To view the entire list of those previously inducted into the Hall of Fame, or the criteria to nominate someone for next year’s award, visit our website at

Mr. Straus has been with Home Hardware since its inception, working in the accounting department of Hollinger Hardware in 1963, prior to the emergence of the Home brand. He was responsible for designing, installing and programming the company’s first computer system.  Over the course of his career, Paul advanced through the organization and ascended to various executive level positions, until 1989 when he assumed responsibility for the day-to-day operations of the company from Walter Hachborn, as Executive Vice-President and General Manager.  In 1998, he was appointed Vice-President and CEO and in April, 2010, President and CEO and elected to the Board of Directors.

In May 2014, Paul retired as CEO but remains the company’s President, a member of the Board of Directors, and an important advisor to both the Board and Senior Management Team.

A long time veteran of the industry, Mr. Gilbart began his career with Aqualine Products in 1969 where he rose to President.Aqualine was sold to Moen Inc. in 1985 and he worked for Moen starting in Canada, later doing a stretch in the USA.  In 1991, he returned to Canada and joined Envirogard/Rainfresh as a partner.

Bryan has been actively involved with the CHHMA serving on the Board on three separate occasions totalling 16 years including Chairman in 1997/98. He is also a member of the Canadian Institute of Plumbing and Heating.  Always ready to step up as a volunteer and strong committee leader Bryan never hesitates to give his time to any cause he deems worthy. Over the years he has helped make the Pedlars & Grinders Golf Tournament, in support of Sleeping Children Around the World, a wonderfully successful event while also raising money and products for Habitat for Humanity. During his time at Aqualine, he was instrumental in starting an industry Christmas party raising cash and collecting toys for the Children’s Aid Society, United Way and Foster Parents Plan.

In spite of spending his entire career in the plumbing side of the business he is well respected across the entire industry and a worthy inductee into our industry Hall of Fame.

Industry News

Target Could Exit Canada This Year, After $2.1 Billion U.S. In Losses: Analyst

(Article by Daniel Tencer, The Huffington Post Canada)

Target Corp. will likely make a decision within the next few months on whether or not to “pull completely” out of Canada, a prominent retail analyst says.

Brian Sozzi of Belus Capital Advisors, one of the first analysts to note Target Canada’s problems with empty shelves, says he expects the retailer’s new CEO to make a major decision on the company’s future in Canada no later than its earnings call on Feb. 25.

In a blog post this past weekend, Sozzi noted Target’s Canadian operations have been “dead weight” to the chain’s balance sheet, losing $2.1 billion U.S. so far.

Target could sell at least some of those stores to Walmart, which “views Canada as ripe for epic domination,” Sozzi said.

That’s speculation, but it’s not without foundation: Sozzi notes that Target’s new CEO, Brian Cornell, is an alumni of Walmart, having previously served as CEO of Walmart’s Sam’s Club chain.

Cornell and Walmart CEO Doug McMillon worked at the company at the same “which may make brokering a deal easier for Target,” Sozzi says.

Sozzi is not the only analyst eyeing Walmart for Target’s Canadian assets. The Arkansas-based retailer “is the logical buyer for Target’s Canadian stores,” wrote Nelson Smith at the Motley Fool.

“Adding some 140 Target stores isn’t such a big deal for a company with nearly 400 stores of its own” in Canada, Smith wrote.

Other analysts have suggested Target would be wise to cut its losses in Canada.

“It been a complete disaster,” Scott Mushkin, managing director of Wolfe Research, told BNN a few weeks ago. “Their sales per square foot [in Canada] are $140 and we think break even is $250.”

Mushkin estimated Target would have to raise sales by 21 per cent per year for the next three years in order to survive — a tall order, given the company has been struggling to grab market share from Walmart, Loblaws and others.

Click here to read the rest of the article.

Source: The Huffington Post Canada

 Walmart Stores Busy, Target Stores, Not So Much During Holiday Shopping Period
(Article by Francine Kopun, The Toronto Star)
Canadians seemed to choose Walmart over Target for their holiday shopping, according to the results of data collected for The Toronto Star on one of the last weekends before Christmas.

A snapshot of 76 stores across Canada, conducted the weekend of Dec. 13-14, found that 30 out of 38 Walmart stores were busy or very busy. Among 38 Target stores, 15 locations were busy or very busy.

The stock-out problems at Target stores seem to have diminished somewhat, with only three stores posting a score of five. The stock-outs were rated on a scale of 1-5, with 5 being the highest number of stock-outs.

Two of the Target stores reporting high stock outs were also among the busiest. Four Target stores scored a four on stockouts.

No Walmart stores scored higher than three on stock outs.

The information was collected using Field Agent Canada, a company that pays shoppers a fee to report retail information using their smart phones.

Shoppers were asked to visit a Target and a Walmart in the same neighbourhood, at about the same time, on the same day, to measure which store was busier and whether the shelves were well stocked or not.

They were asked to measure busy on a scale of one-to-five, with one being nearly empty and five being lots of people everywhere in the store.

Responses were collected from British Columbia to Nova Scotia.  Among the 76 stores, 40 were in Ontario, half in the GTA.

The Target stores had an average busy score of 3.2. The Walmart stores had an average busy score of 4.1.

“We understand there are many ways to measure results. At Target, we’re focused on consistently delivering a great experience to our guests. As we’ve consistently shared, our teams are working hard to deliver that experience this fourth quarter,” Target said in a statement in response to questions from The Star.

“It has been an incredibly busy season indeed, both in our stores and online,” said Andrew Pelletier, vice president of corporate affairs at Walmart Canada, in a statement sent to The Star by the media relations department.

“Our associates have done a fantastic job making sure we’re ready to help all our customers find everything they need and save money.”

“Target is getting better, but they’re not there yet,” said Maureen Atkinson, senior partner, J.C. Williams Group, a global retail consultancy.

“The problems in Canada are not just in Canada.  I think that Target just lost its mojo a bit and it’s starting to get it back, but it’s a long haul. You don’t turn around attitudes immediately, even if what you are doing is functionally better than you were formerly.

She believes that given enough time, Target could become a go-to store for Canadians.

Retail expert Wendy Evans, founder of Evans and Company, believes leaving Canada at this point would be too costly for Target, especially given the huge investment it made coming here – it spent $1.8-billion on store leases alone.  It built three distribution centres.

Click here to read the rest of the article.

Source: The Toronto Star

Loblaw in the Spotlight over Pricing Practices
(Article by Marina Strauss, The Globe and Mail)

In a memo issued to some of its suppliers [in 2013], Loblaw Cos. Ltd. set out an extensive set of rules concerning pricing and competitive practices.

The document provided guidelines regarding “ad matching” with other stores’ prices, “collisions” with competitors’ promotions, and it warned of a “three strikes policy” to suppliers that broke the retailer’s policies three times.

The five-page supplier memo, obtained by The Globe and Mail, was issued in 2013 and titled “Loblaw 2014 policies.”

Among the many policies in the memo, the retailer said that if a rival retailer touted the vendors’ products at a lower price, Loblaw would offer its customers the same price markdown and expect the vendor to pay the cost difference.

In its most recent memo last June, also obtained by The Globe, it said it would not accept price increases from Loblaw suppliers across the board for the rest of 2014 and 2015, with some exceptions.

“Cost changes will be conditional on [Loblaw] being able to remain profitable and competitive in the marketplace,” it said. “After four weeks, if Loblaw is not able to remain profitable and competitive, we will return to the pre-increase cost level and bill back an amount equal to the price increases.”

The policies underscore the intensifying battle in the fast-consolidating Canadian grocery sector in which Loblaw and other large players are pressing their suppliers for rock-bottom prices and ensuring they don’t lose competitive ground against their rivals.

Some practices have raised red flags at the Competition Bureau, which late last year stepped up its investigation into Loblaw’s dealings with its vendors.

The bureau has issued court orders for pricing information and strategies from a host of Loblaw’s suppliers.

In court filings, the bureau said Loblaw “may have engaged in or be engaging in restrictive trade practices that have had, are having or are likely to have the effect of preventing or lessening competition substantially in one or more markets’’ related to the supply and sale of grocery products.

The bureau added that Loblaw’s terms with suppliers “may raise rivals’ costs and ultimately increase the prices Canadian consumers pay for grocery products in Canada.”

Loblaw spokesman Kevin Groh said in an e-mail that “ultimately, our arrangements with suppliers are about providing great prices to our customers and competing in a very competitive environment. We don’t believe any of our policies are contrary to a healthy and competitive marketplace.”

He said Loblaw issued an updated version of its policies last June which applies “categorically to all suppliers” (excluding those of Shoppers Drug Mart, which Loblaw acquired in March) for the balance of 2014 and 2015. The latest document dropped the “three strikes policy” reference, he noted.

The newest memo also removed certain other language, and softened pricing terms for suppliers. The earlier 2014 policies were directed only at its drugstore and health and wellness vendors.

Loblaw is far from alone in pushing suppliers for more favourable prices and terms. Merchants expect their suppliers to pay fees for everything from flyer promotions to prominent shelf space and late product deliveries.

After its $5.8-billion takeover of Safeway Canada in 2013, the country’s second-largest grocer, Sobeys Inc., demanded suppliers provide it with a retroactive “synergy” price cut of 1% and no increases in 2014, with some exceptions. Last summer, Target Canada told suppliers to give it a 2% cost break starting in March, 2015.

Some industry watchers say the Competition Bureau investigation could have ripple effects in the sector as the Canadian grocery chains consolidate and take on giant U.S. retailers such as Wal-Mart Stores Inc., Costco Wholesale Corp. and Target Corp.

“The bigger you are, the more power you have and the more you can demand,” said Tom Barlow, president of the Canadian Federation of Independent Grocers (CFIG) and a former president of Coca-Cola Enterprises Canada. “But there are really no clear rules and there’s no enforcement.”

“We don’t think this is a Loblaw issue,” Mr. Barlow added.  “This is a bigger issue.”

The financial implications of grocers’ demands on suppliers can be considerable. Food manufacturers pay Canadian retailers “well over” $3-billion annually in fees for such things as shelf-stocking, volume rebates, late-delivery fines and flyer promotions, estimates Perry Caicco, managing director and retail analyst at CIBC World Markets.

“Retailers lever more of these payments out of suppliers every year simply due [to] the sheer clout of a highly consolidated industry,” Mr. Caicco said recently in industry publication Grocery Business.

“Suppliers are starting to get fed up,” said Marion Chan, principal of TrendSpotter Consulting, which advises vendors on new products.  “Something has to give.” She said some suppliers have told her they can’t afford to launch new items at big chains any more because of high fees just to get on major retailers’ store shelves.

But with the current wave of grocery consolidation, including Loblaw’s $12.4-billion takeover of Shoppers lasts year that triggered the bureau’s initial probe, suppliers will probably be forced to pay even more fees, Mr. Caicco predicted.

Click here to read the rest of the article.

Source: The Globe and Mail

Economic News

Canadian Housing Bulls Are Joining Real Estate Doubters

Canadians who last year brushed off predictions of a real estate slowdown and kept buying houses are increasingly joining the doubters.

The nation’s households are the least optimistic since May 2013 that home prices will keep rising, according to weekly polling data compiled by Nanos Research for Bloomberg. The share of survey respondents predicting higher prices fell to 31.1% last week, from as high as 47% in July.

The survey results suggest policy-maker warnings about overvalued home prices are starting to sink in, amplified by plunging prices for crude oil, the nation’s biggest export. The gloom may spell the end of a housing rally that helped pull the world’s 11th largest economy out of a 2009 recession.

“Any negative changes in real estate values coupled with low oil prices could be a one-two punch for Canadian consumer sentiment,” said Nik Nanos, Ottawa-based chairman of Nanos Research Group.

The Bank of Canada estimates that house prices are 10% to 30% overvalued. That didn’t stop sales and prices from rising through most of 2014, fuelled by low mortgage rates and a shortage of single-family housing in some markets such as Vancouver, where the average price of a detached home reached a record $1.36 million in February.

Through November, the average residential sales price in Canada rose 6.8% on an annual basis, putting 2014 on pace to be even stronger than 2013, when average prices rose 5.2%.

The survey of real estate expectations is part of polling for the Bloomberg Nanos Canadian Confidence Index and based on phone interviews with 1,000 people, using a four-week rolling average of 250 respondents.

Respondents are also asked about their expectations for the economy, their job security and changes in the state of their personal finances.

The broad confidence index climbed to 55.8 in the week ended Jan. 2, the first increase in five readings, from 55.1 measured during the final reading of 2014.

The 55.1 reading was the lowest since May 2013, as expectations for the economy tumbled amid a plunge in the price of crude oil and with a currency at the weakest in more than five years.

“As we closed out 2014, the forward view on the economy from a consumer standpoint is trending negatively,” said Nik Nanos, Ottawa-based chairman of Nanos Research Group. “Roll up a drop in the price of oil, a lower Canadian dollar and softening view on the value of real estate, and an environment is emerging which could lead to a tumultuous 2015.”

Source: Bloomberg News

Fewer Canadians Feeling Confident About their Personal Finances: Poll

Canadians’ confidence in being able to meet current financial goals is slipping, says a new poll.

Two-thirds of Canadians (65%) said they are entering the new year feeling positive about being able to reach their financial goals, according to an annual poll conducted for CIBC.

That’s down from 76% who said the same thing last year, the lowest percentage in 5 years.

And among the least confident this year are Canadians in the 45-to-54 age bracket, says the Neilsen poll. Only 58% of them expressed confidence about reaching their financial goals, down from 77% last year.

In comparison, 75% of Canadians aged 25 to 44 were optimistic about reaching their financial goals, relatively unchanged from 76% a year ago.

A second question asked those polled if they feel positive about their current financial situation and – again – the 45-to-54-year-olds were among the least optimistic: 58% voiced confidence, down from 73% a year earlier.

That compares with 69% in the 25-to-34 age group, up from 68%.

The single biggest concern for Canadian consumers is paying down debt, according to a separate recent CIBC poll.

“The decline in confidence among boomers is the most significant we’ve seen in five years,” Christina Kramer, CIBC executive vice-president of retail and business banking, said.

“As each year goes by and boomers increasingly focus on debt reduction as an immediate priority, they also get closer to retirement without a long term plan in place that will deliver the retirement they are looking for.”

“We are seeing a real conflict among Canadians close to retirement, who are trying to balance their short term need to reduce debt with the longer term goal to save for the retirement they want,” Ms. Kramer said.

“As Canadians approach traditional retirement age it can be a challenge to keep focused on both, and that can impact their overall confidence in their future finances.”

The poll results also indicate a wide spread across the country.

In Alberta for example, 77% said they are optimistic about reaching their financial goals, down from 84%, while only 50% of Quebec respondents expressed confidence, a big decline from 68% a year earlier.

The results are based on a sample of 1,014 Canadians interviewed between Nov. 13 and Nov. 17, 2014.

Source: The Globe and Mail

 2015 Outlook for Canadian Retail Sales is (Mostly) Good
(Article by Ed Strapagiel, Consultant)

According to the latest numbers from Statistics Canada, total retail sales increased 5.4% year-over-year in October 2014 on a not seasonally adjusted basis. The 3 month trend is sticking at around the 5% growth level, and the underlying 12 month trend is continuing to move up. Somewhat remarkably, this performance is being maintained despite collapsing gasoline station sales as pump prices decline. The slack is being taken up by improving sales in the Store Merchandise sector.

On the basis of current trends, total retail should be up about 4.8% for 2014 overall, a notable improvement on the modest 3.2% annual gain in 2013. For 2015, retail sales growth is projected at 4.9%, which at first blush seems like hardly any progress over 2014. But there's a twist. The Automotive & Related sector is likely to slow down while Store Retail should pick up. The two effects would offset each other so that total growth in 2015 would be about the same as 2014, but the balance among the major retail sectors will be better. Those not selling cars or gasoline stand to benefit more.

The numbers estimated for 2014 and projected for 2015 are as follows.

The Food & Drug sector is continuing its "two steps forward, one step back" pattern. The underlying trend however does seem to be crawling upward compared to its 2014 levels.

The big laggard in this sector is supermarkets & grocery stores. Although their retail sales increased 2.2% year-over-year in October, they are up only a rather miserable 0.6% year-to-date after 10 months in 2014. This reflects the heavy competition in the food business, and things are likely to get even tighter as retailers try to pass on higher imported food prices due to the weakened Canadian dollar.

On the other hand, health & personal care (drug) stores are enjoying above average growth. Retail sales were up 5.4% in October 2014 year-over-year, and have gained 7.4% year-to-date. It's likely this trend will continue into 2015.

One more note is that specialty food stores' sales appear to be falling off. After increasing 8.0% in the first half of 2014, retail sales gained only 0.8% for the 3 months ending October 2014.

Store Merchandise is earning the title of "most improved major retail sector of 2014". The 3 month trend continues to lead the underlying 12 month trend, which itself has been rising steadily since the first half of 2013.

All store types in this sector had positive year-over-year sales gains in October 2014. Even electronics & appliance stores posted a whopping 10.7% gain, their best single month in over 6 years. Another strong performance was in the other general merchandise group (mostly large combination stores) whose sales were up 8.0% in October, although this was on pace with their year-to-date results.

It's difficult to see that these trends in Store Merchandise will change much going into 2015. The economy is improving, and the many new retailers entering this sector are poised for a "honeymoon year" (albeit after some awkward courtships). If nothing else, sales will apparently increase as the cost of imported goods rises.

Canadians are continuing to buy vehicles at a high rate. New car dealer sales were up 9.7% year-over-year in October 2014, and up 8.1% year-to-date. In large part, this is due to low interest rates, as cars (like houses) are mostly financed rather than purchased outright. Nevertheless, the boom in vehicle sales will cool down eventually, possibly in the second half of 2015.

Gasoline station sales however are slowing significantly. Their sales are about 13% of total retail, and gas prices are now down roughly 25%. This frees up about 2% to 3% of total retail sales for spending at other stores, which is a lot when total retail is rising at just under 5%. Note however that most gas stations double as convenience stores which shores up the business. Nevertheless, going into 2015 actual declines in gasoline station retail sales are likely.

To see further information, click here.  

Source: Ed Strapagiel, Consultant

Canadian Economy Picks Up Pace in October

Canada’s economy picked up more than expected in October, led by gains in the mining and energy sectors, as well as stronger manufacturing activity, Statistics Canada reported on Dec. 23.

Real GDP grew 0.3% during the month, beating economists’ forecasts for a 0.1% advance, while the year-over-year increase came in at 2.3% — nearly matching the 2.4% annual pace in September, which the federal agency revised upward from 2.3%.

The October GDP reading followed a 0.4% increase in the previous month, providing the economy with a strong start to the fourth quarter of 2014 — and maintaining a pace that would see annual growth exceed the previous two years. Overall GDP was 1.9% in 2012 and 2% in 2013.

Statistics Canada said mining and oil and gas extraction rose 1.2% in October, with manufacturing gaining 0.7% and construction rising by 0.3%. Educational services jumped 2.6% during the month, while wholesale trade fell back by 0.2% and retail activity was flat.

Goods production rose 0.4% in October. Notable gains were recorded in mining and oil and gas extraction as well as manufacturing.  Construction also increased in October. In contrast, utilities and the agriculture and forestry sector declined.  The output of service industries increased 0.3% in October, led mainly by growth in the public sector (education, health and public administration combined). The finance and insurance sector and professional services also advanced. Wholesale trade declined in October while retail trade was unchanged.

The public sector rose 0.8% in October, mainly as a result of an increase in educational services. Educational services rose 2.6% in October, returning to normal levels of activity following a labour dispute in British Columbia in September.

Mining, quarrying, and oil and gas extraction rose 1.2% in October, a second consecutive monthly increase.

Following a 3.6% increase in September, oil and gas extraction expanded 1.5% in October. The increase was led by non-conventional oil production, while natural gas production was down.

Mining and quarrying (excluding oil and gas extraction) increased 1.5% in October. A notable gain in potash mining more than offset a decline in copper, nickel, lead and zinc mining.

However, support activities for mining and oil and gas extraction declined 1.6% as a result of a decline in drilling services.

Manufacturing output grew 0.7% in October, after rising 0.8% in September. Non-durable goods manufacturing rose 0.9% as most major industrial groupings posted gains. Growth was notable in petroleum and coal products, chemical as well as plastic and rubber products manufacturing. Conversely, food manufacturing declined.

Durable-goods manufacturing increased 0.4%, mainly as a result of the manufacturing of fabricated metal products as well as furniture and related products. On the other hand, the manufacturing of machinery and of primary metals declined.

Wholesale trade declined 0.2% in October, after increasing 1.6% in September and 0.4% in August. The wholesaling of food, beverage and tobacco as well as personal and household goods was down.  However, wholesaling of building materials and supplies, petroleum products, motor vehicles and parts as well as miscellaneous wholesaling (which include agricultural supplies) was up in October.

Retail trade was unchanged in October. Declines in retailing activity at motor vehicle and parts dealers as well as furniture and home furnishings stores offset gains at building material and garden equipment and supplies dealers as well as electronics and appliance stores.

The finance and insurance sector was up 0.2% in October, a fifth consecutive monthly increase. Banking services and, to a lesser extent, financial investment services grew, while insurance services were down.

Construction rose 0.3% in October, led by increases in residential building as well as engineering and repair construction.  Non-residential building also grew.

The output of real estate agents and brokers was down 0.2% in October, after declining 0.7% in September.

After increasing 1.5% in August and 1.4% in September, utilities declined 1.8% in October. The demand for both electricity and natural gas was down in October.

The agriculture and forestry sector decreased 1.4% in October, mainly the result of lower crop production.

“While we don’t see the resource strength lasting into the new year, for now, there’s room for the economy to eclipse our 2.5% Q4 forecast,” said Avery Shenfeld, chief economist at CIBC World Markets.

“All that would be supportive for the Canadian dollar and negative for short term rates, with the caveat that expectations for 2015 don’t look as rosy in light of the energy price decline.” The Bank of Canada is relying on business investment and exports to carry the economy going into next year, taking over from consumer spending as the main driving of growth.

Signs of a sustained recovery in the United States, the destination for most of Canada’s goods and services, is expected to underpin our economy as well.

Source: Statistics Canada, The Financial Post 

Canada’s Retail Sales Little Changed in October

Canadian retail sales were unchanged in October, holding at a record high as gains in most sectors were offset by declines at motor vehicle and parts dealers, data from Statistics Canada showed on Dec. 19.

Excluding motor vehicle and parts dealers, retail sales rose 0.2%. Economists had forecast a 0.2% drop in overall sales after a sharp rise of 0.8% in the previous month.

Sales held at $42.85 billion, matching the previous month's record. Sales rose in six out of the 11 sectors, including building material and garden equipment dealers, as well as electronics and appliance stores.

After removing the effects of price changes, retail sales in volume terms were relatively unchanged.

Consumer spending has been bolstered by a stronger job market and low borrowing costs, which have fueled spending on big-ticket items such as houses and appliances. The Bank of Canada has warned strained consumer finances and the chance of a drop in housing prices are a key risk to the financial system.

Following two months of declines, building material and garden equipment and supplies dealers (+2.0%) registered the largest increase among all subsectors.
Sales at electronics and appliance stores (+3.2%) advanced for the fifth consecutive month for the first time since mid-2008. Sales in this subsector have been trending upwards since early 2014 on the strength of new product releases.

Higher receipts were reported for the second consecutive month at food and beverage stores, up 0.5% in October. This gain mainly reflected higher sales at supermarkets and other grocery stores (+1.0%), which more than offset declines at beer, wine and liquor stores (-0.8%) and convenience stores (-1.4%). Sales at specialty food stores (-0.3%) declined for the fifth time in six months.

Following a 3.4% increase in September, receipts at motor vehicle and parts dealers decreased 0.6% in October. Lower sales at new car dealers (-0.6%) accounted for most of this decline. Used car dealers reported their fourth decline in five months, falling 1.8% in October. Sales at other motor vehicle dealers (-1.0%) were lower for the first time in three months.

Higher sales were reported at automotive parts, accessories and tire stores (+1.0%).

Sales at gasoline stations declined 1.1% in October, the fourth consecutive monthly decrease.

Receipts at furniture and home furnishings stores declined 2.6%. Home furnishings stores were down 4.2% following a 5.0% increase in September, while sales at furniture stores decreased 1.6%.

General merchandise store sales were down 0.4% in October, as department stores (-0.7%) and other general merchandise stores (-0.2%) declined for the third time in four months.

Sales at clothing and clothing accessories stores declined 0.6% in October. Lower sales were reported at clothing stores (-0.8%) and shoe stores (-0.5%), while jewellery, luggage and leather goods stores advanced 1.0%.

Retail sales were down in nine provinces in October. The only province to register higher sales was Ontario (+0.5%), rising for the sixth time in seven months.

Source: Statistics Canada, Bloomberg News

Latest U.S. Economic News 

U.S. Pending Home Sales Rise Modestly in November
Contracts to buy previously owned U.S. homes rose only modestly in November, pointing to a still-sluggish housing market despite several months of stronger economic growth and hiring.

The National Association of Realtors (NAR) said on Dec. 31 that its Pending Home Sales Index, based on contracts signed last month, gained 0.8% to 104.8. The NAR also revised its index in October to a slightly lower level.

These contracts become sales after a month or two. Contracts rose in the Northeast, South and West but fell in the Midwest.

The U.S. housing market has been recovering in fits and starts from its near collapse during the 2007-09 recession. The pace of sales suffered a setback in mid-2013 when higher interest rates shocked the market.

Economists polled by Reuters had forecast total pending home sales rising 0.5% in November from the previously reported level.

Compared to October of last year, contracts were up 4.1%.

Source: Reuters

U.S. Home Price Growth Slows Further in October
U.S. single-family home price appreciation slowed less than forecast in October, as there were hints of some re-acceleration in home prices in some cities by year-end, according to a closely watched survey released on Dec. 30.

The S&P/Case Shiller composite index of 20 metropolitan areas gained 4.5% in October from the prior year, compared with a revised 4.8% increase in September.  A Reuters poll of economists forecast a 4.4% increase.

On a seasonally adjusted monthly basis, prices in the 20 cities rose 0.8% for the month. A Reuters poll of economists had forecast an increase of 0.4%.

However, non-seasonally adjusted prices fell 0.1% in the 20 cities on a monthly basis, Analysts had expected them to be unchanged.

“After a long period when home prices rose, but at a slower pace with each passing month, we are seeing hints that prices could end 2014 on a strong note and accelerate into 2015,” David Blitzer, chairman of the index committee at S&P Dow Jones Indices, said in a statement.

A broader measure of national housing market activity rose at a 4.6% clip on a year-over-year basis, compared with a 4.8%
rate in September.

The seasonally adjusted 10-city gauge rose 0.7% in October versus a revised 0.2% gain in September, while the non-adjusted 10-city index dipped 0.1% for a second straight month in October.

Source: Reuters

U.S. Economy Grows at Quickest Pace in 11 Years

The U.S. economy grew at its quickest pace in 11 years in the third quarter, the strongest sign yet that growth has decisively shifted into higher gear.

The Commerce Department on Dec. 23 revised up its estimate of GDP to a 5% annual pace, citing stronger consumer and business spending than it had previously assumed.

U.S. GDP tallied its fastest growth pace since the third quarter of 2003. The U.S. economy was previously reported to have expanded at a 3.9% rate.

GDP growth has now been revised up by a total of 1.5 percentage points since the first estimate was published in October.  Big revisions are not unusual as the government does not have full information when it makes its initial estimates.

U.S. stock index futures extended their gains after the report, while U.S. Treasury debt yields rose slightly. The dollar rose to a fresh eight-year high against a basket of currencies.

The U.S. economy expanded at a 4.6% rate in the second quarter, meaning it has now experienced the two strongest back-to-back quarters of growth since 2003. Economists polled by Reuters had expected growth would be raised to a 4.3% pace.

But the pace of growth likely slowed in the fourth quarter.

In a second report, the Commerce Department said non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, was unchanged after declining 1.9% in October.

The continued weakness in the so-called capital goods orders is at odds with industrial production data, which has shown strong momentum in the manufacturing sector.

But a rapidly strengthening labour market and lower gasoline prices should provide the economy with sufficient momentum in 2015 and keep the Federal Reserve on course to start raising interest rates by the middle of next year.

Underscoring the U.S. economy’s firming fundamentals, growth in domestic demand was revised up to a 4.1% pace in the third quarter instead of the previously reported 3.2% pace. It was the fastest pace since the second quarter of 2010.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, grew at a 3.2% pace, the fastest since the fourth quarter of 2013, instead of the previously reported 2.2% rate.

Growth in business investment was raised to an 8.9% pace from a 7.1% rate, with a stronger pace of spending than previously thought on equipment, intellectual property products and non-residential structures accounting for the revision.

Inventories were also revised higher, with restocking now being neutral to GDP growth instead of being a mild drag. That also helped to offset downward revisions to export growth.

But inventories could undercut output in the fourth quarter.

Spending on residential construction was also revised higher, as were government outlays. Export growth was cut to a 4.5% rate from the previously reported 4.9% pace, while imports were also revised down.

Source: Reuters

U.S. New Home Sales Fall for Second Straight Month in November
Sales of new U.S. single-family homes fell for a second straight month in November, a sign that the housing market recovery remains fragile.

The Commerce Department reported on Dec. 23 that sales declined 1.6% to a seasonally adjusted annual rate of 438,000 units.
October’s sales pace was revised down to 445,000 units from 458,000 units.

Economists polled by Reuters had forecast new home sales rising to a 460,000-unit pace in November.

U.S. new home sales, which account for about 8%t of the housing market, tend to be volatile month to month. Compared to November last year, sales were down 1.6%.

The U.S. housing market is being hobbled by a slow pace of household formation, a result of sluggish wage growth. An acceleration is expected next year as a strengthening labour market fosters a faster pace of wage growth.

During the month, new home sales fell in the Northeast, the Midwest and the South. They rose 14.8% in the West.

The stock of new houses available on the market rose 1.4% to 213,000, the highest since May 2010.

At November’s sales pace it would take 5.8 months to clear the supply of houses on the market, up from 5.7 months in
October. The median new home price rose 1.4% from a year ago to $280,900.

Source: Reuters

U.S. Home Resales Hit Six-Month Low in November
U.S. home resales tumbled to a six-month low in November after two straight months of strong increases, underscoring the uneven nature of the housing market recovery.

The National Association of Realtors (NAR) said on Dec. 22 that U.S. existing home sales dropped 6.1% to an annual rate of 4.93 million units, the lowest level since May.

October’s sales pace was revised slightly down to 5.25 million units from 5.26 million units. November’s decline probably does not signal the start of a weakening trend and in part reflected stubbornly low inventories.

Economists polled by Reuters had expected sales to fall only to a 5.20-million unit pace.

Housing has struggled to shift into higher gear after stagnating in the second half of 2013 in the wake of a jump in mortgage rates, which have since pulled back from their peaks.

It has lagged an acceleration in U.S. economic activity as tepid wage growth, a shortage of properties available for sale and higher home prices sidelined first-time buyers.

Source: Reuters

U.S. Consumer Sentiment Rises to Best Level Since 2007
U.S. consumer sentiment jumped in December to its highest level in nearly eight years on cheaper gasoline and better job and wage prospects, a survey released on Dec. 23 showed.

The Thomson Reuters/University of Michigan’s final December reading on the overall index on consumer sentiment came in at 93.6, its best showing on a final basis since January, 2007, and the latest in a string of increases since August.

The reading was up from 88.8 the month before but under the preliminary reading of 93.8. It was above the median forecast of 93.5 among economists polled by Reuters.

“Consumers held the most favourable long-term prospects for the national economy in the past decade,” said Richard Curtin, the survey’s director. “Importantly, the 2014 gains in jobs and wages were widespread across all population subgroups and regions.”

The survey’s barometer of current economic conditions rose to 104.8 from 102.7 in November, versus a forecast of 105.1.

The survey’s gauge of consumer expectations also climbed to 86.4 from 79.9 in November and was above the expected 85.0.

The survey’s one-year inflation expectation was unchanged from November at 2.8% but down from 3.0% a year earlier, Curtin said in a commentary.

Source: Reuters


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