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Volume 16, Issue 36, September 21, 2016

Inside This Issue:

• Last Call for Next Tuesday’s Industry Memorial Golf Classic
• TIMBER MART’s President Bernie Owens Latest Guest Speaker at CHHMA Breakfast on October 26 in Montreal
• Save the Date: Seminar on the Secrets of Power Negotiating® and Developing Persuasive Proposals – November 23
• Seminar Provides Key Insights into the Present and Future Ecommerce World
• Canadian Tire Announces New Appointments
• Canada Revenue Agency in Standoff with RONA Over Client Information
• Walmart Canada Extends Visa Ban to Stores in Manitoba
• Empire Co. Profit Falls as Challenges in Western Canada Persist
• Target CEO Sees Potential in Small Stores
• Get Used to Low Interest Rates, Bank of Canada Signals
• Ontario Has Little Choice but to Tax Foreign Home Buyers, CIBC Economist Warns
• Canadian Home Resales Fall in August, Seen Cooling in 2017
• Latest U.S. Economic News

Association News

Last Call for Next Tuesday’s Industry Memorial Golf Classic   

The 15th Annual Industry Memorial Golf Classic is set for next Tuesday, September 27th at the Blue Springs Golf Club in Acton, Ontario.

If you would still like to attend, please contact Pam Winter at 416-282-0022 ext. 21 or

The event is held on behalf of the hardware and housewares industry and it honours stalwarts from the industry who have passed away. CHHMA members and non-members are welcome to attend.

This year’s honourees are: David Holden (Hamilton Beach), Leonard Lee (Lee Valley Tools) and Warren Parr (D.H. Howden/TSC Stores).

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

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

Money raised from the event will go towards the CHHMA Scholarship Program which provides support for children of CHHMA member company employees to attend university or college.

The event will start off with registration and breakfast at 8:00 a.m. with a 9:00 a.m. tee off. Dinner will commence at around 2:30 p.m.

For further details, click here

TIMBER MART’s President Bernie Owens Latest Guest Speaker at CHHMA Breakfast on October 26 in Montreal  

The CHHMA is pleased to be presenting Mr. Bernie Owens, President of TIMBER MART, at a CHHMA Breakfast Seminar on the morning of October 26 at the Hôtel Holiday Inn Montréal-Longueuil.

Mr. Owens began his career in the building-supply industry over thirty years ago, serving a long tenure at building-material manufacturer, CertainTeed – a subsidiary of multinational corporation, Saint-Gobain.Throughout his 21 years at CertainTeed, Mr. Owens served various roles including, General Manager - Finish Products for North America and Vice President of Sales for the company’s gypsum and insulation business units. Over the years, Owens adopted global best practices and fostered relationships with buying groups and building-material suppliers nationwide. Owens also went on to further his studies in business at international business school, INSEAD and York University’s Schulich School of Business.

Today, as the president of TIMBER MART, Mr. Owens leads the organization with a global industry perspective, fresh ideas, clear vision, and a relentless drive to make TIMBER MART the buying group of choice for Canadian independent building material and hardware entrepreneurs.

We look forward to hearing from Mr. Owens and his inside look into how he’s led TIMBER MART through some of their biggest organizational changes over the last three years. He'll explain how he’s leveraged change for TIMBER MART to become a best-in-class organization today – and supports Canadian independent entrepreneurs with a buying group that is better, faster and lower cost than ever before.

After the presentation, there will be a Question and Answer Period. Mr. Owens will also be accompanied by members of his management team.  

Click here for all the details and to register.

Save the Date: Seminar on the Secrets of Power Negotiating® and Developing Persuasive Proposals – November 23, 2016

Attention: CHHMA Members

Interested in improving business results and profitability? Can you and members of your organization develop persuasive proposals and negotiate effectively? Are you sure?

Effective proposal development and negotiating skills are essential for everyone.

Save the Date: November 23, 2016

The CHHMA has organized a special tailored one-day seminar for association members featuring negotiating expert Michael E. Sloopka.

When: November 23, 2016 – 8:30 a.m. to 4:30 p.m.(Continental Breakfast at 8:00 a.m. and Lunch at 12 noon)

Where: Corporate Event Centre at the Centre for Health & Safety Innovation (CHSI), 5110 Creekbank Road, Mississauga, Ontario

Who Should Attend: Senior management, sales management, all levels of sales and marketing personnel, and relevant cross-functional staff

Investment Required: $399.00, plus $29.95 for course materials (HST not included)

What You Will Learn: The morning session will focus on teaching attendees topline negotiating strategies, tactics, techniques, and powerful tips. The afternoon session will focus on teaching attendees a proven formula for developing more persuasive proposals that also impact your company’s line item and business reviews, as well as its new product launches.

Don’t miss out on the benefits and return on investment from attending this cost-effective one-day seminar that will help improve your business results and outcomes. Spread the word to members of your organization who can also benefit from improving their negotiating and proposal development skills.

Additional details will be provided within the coming weeks.

Seminar Provides Key Insights into the Present and Future Ecommerce World

Chelsea Gross, an analyst from RetailNet Group (RNG) in New York, provided an excellent presentation last week to members of the CHHMA and Canadian Office Products Association (COPA). The joint association seminar event was held on September 13th at the Centre for Health & Safety Innovation (CHSI) in Mississauga and received rave reviews from those in attendance.

RNG’s Global and Canadian outlook gave valuable insight into what ecommerce represents today in sales and where it is projected to go; what the key drivers are that are impacting ecommerce; how digital is impacting consumers and the behavioural differences between generations; what are today’s/tomorrow’s online shopping expectations; the important ecommerce challenges for brands & retailers and new fulfillment initiatives that are taking place as well as new technologies that will be impacting the retail landscape in the years to come.

Chelsea answered a number of questions from the audience following the presentation and we would thank her for taking the time to come speak to our members.

RNG has also conducted some webinars earlier in the year for CHHMA/COPA members on ecommerce and retail/consumer demographics and we look forward to conducting future events with them.

Industry News

Canadian Tire Announces New Appointments

Canadian Tire announced last week that Greg Hicks has been appointed to the new position of Group SVP, Consumer Products & Retail Experience. In this new role, Mr. Hicks will oversee both the General Merchandise and Automotive businesses and take on the responsibility for the store experience.

“We see great opportunity to improve the retail experience by ensuring our merchandising strategies are both clearly understood and easy to execute in our stores. With that, I am pleased to announce the promotions of Oliver Horton to SVP, General Merchandising and Andrew Davies to SVP, Automotive both of whom will continue to report into me. These are incredibly important roles that have been filled by two highly capable senior leaders with great experience. Both have a proven ability to work with vendors to build breakthrough product assortments and drive collective performance,” Greg said in a notice to vendors.

Source: Canadian Tire  

Canada Revenue Agency in Standoff with RONA Over Client Information

RONA inc. has been locked in a legal battle with the Canada Revenue Agency for the past several months over the confidentiality of client information.

Tax authorities want RONA to hand over a list of their commercial clients as part of an ongoing investigation into the underground economy.

The Journal de Montreal says investigators want a complete list of participants in the RONA contractor program which provides exclusive offers and discounts to business clients.

The agency has already investigated almost 6600 contractors and found 1277 who had failed to file a tax return at least once in a period from 2008 to 2012.

RONA says the agency is trying to intimidate the industry.

Source: The Journal de Montreal, Hardlines

Walmart Canada Extends Visa Ban to Stores in Manitoba

Walmart Canada announced last Thursday that it will start informing its Manitoba customers that all 16 stores in the province will not accept Visa as of Oct. 24.

The move comes as the retail giant and the credit card company remain locked in a battle over merchant fees.

Walmart pledged in June that it would stop accepting Visa at its more than 400 Canadian stores, saying it pays more than $100 million in fees annually for customers using credit cards.

But the retailer took only a small step toward fulfilling that June pledge when it dropped the credit card from its three locations in Thunder Bay, Ont., on July 18.

Visa, the country’s largest credit card firm, shot back by encouraging Walmart customers “to use their cards at the more than 5,200 stores in Thunder Bay that accept Visa.”

Visa said it had offered Walmart one of the lowest rates for any merchant in the country but the retailer wanted more.

If it had given in, Visa said, Walmart’s merchant fees would have been lower than those charged to local grocery markets, pharmacies, convenience stores, charities and schools.

Visa cards may be banned in more stores if the companies cannot reach an agreement, a Walmart spokesman said, though he did not say which ones.

“We’re committed to continuing negotiations with Visa, and we are still hopeful to reach an agreement.”

When the battle first erupted, the Retail Council of Canada called on the federal government to intervene to mandate lower fees for all merchants.

A spokesman for Finance Minister Bill Morneau said he was waiting to receive a report on the matter before deciding “how we can ensure this market stays competitive in the future.”

The Government said last week that it will conduct a further review of the fees charged by credit-card networks and the effects of reduced fees by Visa Inc. and MasterCard Inc. over the past two years. The two credit-card companies said their independent audits back up their voluntary commitments to lower fees to an average of 1.5% over that period.

While Visa Inc. and MasterCard Inc. agreed in late 2014 to reduce Canadian fees to an average of 1.5% – from 1.6% to 1.7% previously – Wal-Mart and other large retailers generally negotiate their own terms.

Smaller retailers say the voluntary fee reductions aren’t enough to prevent small businesses from feeling the pressures of high rates that have a disproportionately deeper impact on them.

Wal-Mart’s escalation of its Visa fight illustrates the large retailer’s clout, said Gary Sands, chair of the Small Business Matters Coalition and vice-president of the Canadian Federation of Independent Grocers. “There is not a small retailer in Canada that can afford to go head to head with Visa. l mean, kudos to Wal-Mart for doing that, but we can’t.”

Canadian businesses pay $5-billion to $7-billion annually in interchange swipe fees, said Trish Anderson, a vice-chair of the coalition and president of the Canadian Independent Petroleum Marketers Association. And 98% of businesses in Canada are defined as small and medium-size. “It is these businesses that are paying the bulk of these billions of dollars in fees annually siphoned out of the economy to the payments industry,” she said.

Source: The Canadian Press, Reuters, The Globe and Mail

Empire Co. Profit Falls as Challenges in Western Canada Persist

Empire Co. Ltd. reported last Thursday that the company earned $65.4-million in its latest quarter compared with $108.8-million a year ago as its stores in Western Canada continued to struggle.

The parent company of the Sobeys grocery store chain says the profit for the quarter ended Aug. 6 totalled 24 cents per diluted share, down 38.5% from 39 cents per diluted share a year ago. That fell far below analysts’ mean consensus estimates of 36 cents per share, according to Thomson Reuters.

On an adjusted basis, Empire said it earned a first-quarter profit of $73.6-million or 27 cents per diluted share compared with an adjusted profit of $121.7-million or 44 cents per diluted share a year ago.

Sales in the company’s first quarter amounted to $6.19-billion, down 1% from $6.25-billion in the same quarter last year.

Empire said Sobeys’ same-store sales excluding the negative impact of fuel sales fell 1.2% from the same period last year. Excluding fuel and its Western Canadian retail business, same-store sales would have increased 0.6%.

Sobeys pinned the sales slide to a negative impact from its price-cutting program in Western Canada, the “soft sales trend in most of the store network” and an overall economic downturn in the oilpatch.

Price cuts also took a toll on the retailer’s margins: Gross margin decreased 20 basis points to 24.1%, compared to 24.3% in the same period last year.

Empire was hit by heavy losses last year related to its acquisition of Canada Safeway as Sobeys expanded its position in Western Canada.

Marc Poulin, the chief executive who had led the company when it made the $5.8-billion deal to buy the Canadian Safeway assets in 2013, left the company earlier this year.

Empire interim chief executive Francois Vimard said challenges persist including the performance of its stores in Western Canada.

“However we continued to make important progress against a number of key structural initiatives designed to ensure we meet the needs and expectations of our customers and see the return of long-term profitable growth for the company,” Vimard said in a statement.

“Management intends to spend the remainder of fiscal 2017 focusing on building sales, identifying cost reductions across the organization and improving our execution at store level.”

Source: The Canadian Press, The Financial Post  

Target CEO Sees Potential in Small Stores

Target Corp. CEO Brian Cornell is thinking small when it comes to expanding the big-box retailer.

Mr. Cornell envisions eventually opening hundreds of smaller “flex-format” stores that could be a major part of Target’s future growth, he told reporters last Wednesday during the company’s fall national meeting at its Minneapolis headquarters.

Target has quietly opened 23 smaller stores called CityTarget and TargetExpress locations in major cities such as Chicago and Philadelphia and has plans to add nine more this year and at least 16 in 2017. Typically taking up less than 50,000 square feet, the smaller stores enable the company to expand into downtown areas where a big-box footprint isn’t possible. The shops also create pickup points for online orders, helping Target compete with Inc.

The stores don’t have the same product selection as a typical Target and are more targeted at the demographics of a specific market. For example, the retailer’s store in New York’s Tribeca neighbourhood, opening next month, will have a focus on baby and kids merchandise to meet the needs of the area’s plentiful family population, Mr. Cornell said.

That’s “unlike our store at the University of Maryland, where there is very little baby, not a lot of toys, and a big focus on beauty and apparel,” he said.

Other product tweaks in smaller locations include smaller pack sizes to better fit the needs of urbanites taking public transportation and items that appeal to local tastes, such as Red Sox merchandise in a Boston location.

Rival Wal-Mart Stores Inc. abandoned a strategy of opening smaller stores earlier this year, opting instead to focus its attention on its super centres and grocery-store-sized Neighborhood Markets. Unlike Target, many of Wal-Mart’s smaller stores were in rural areas.

Source: Bloomberg News

Economic News

Get Used to Low Interest Rates, Bank of Canada Signals

Bank of Canada Governor Stephen Poloz is signalling that a move to raise interest rates will likely be delayed again as the Canadian economy struggles to gain traction.

Mr. Poloz acknowledged Tuesday that the central bank’s current projection that the economy will get back to full capacity near the end of 2017 may be too optimistic.

“It is quite evident that our economy is still facing strong headwinds, and we need stimulative monetary policy to counteract them and move us closer to full capacity,” Mr. Poloz said in a speech to a group of economists in Quebec City.

Many economists don’t expect the central bank to begin pushing up its key interest rate until mid-2018. The rate has been set at 0.5% since July, 2015.

The bank is slated to release it next quarterly forecast Oct. 19, at which time it will revise its official estimate of when the economy will return to full capacity – a key precondition for raising rates.

Mr. Poloz said the antidote to a slow-growth future is more infrastructure spending and open borders – both within Canada and internationally – through deals such as the Trans Pacific Partnership (TPP) and the Canada-Europe free-trade agreement.

“In a low-growth world, these three initiatives taken together could have a significant impact on economic growth, year after year,” he said.

“These are opportunities we simply cannot afford to miss.”

Based on what he called a “reasonable estimate,” Mr. Poloz said the combination of freer trade and more infrastructure spending could boost Canada’s GDP by 3% to 5% a year over the next decade. That’s the equivalent of $100-billion a year in extra income for Canadians.

Both the TPP and the free-trade deal with Europe are bogged down in the ratification process and could take years to come to fruition. The agreement with Europe, for example, must be ratified by the 28 European Union member states.  Ratification of the 12-country TPP is facing similar delays, most notably in the United States, where the two main U.S. presidential candidates – Democrat Hillary Clinton and Republican Donald Trump – say they are opposed to the deal.

“We all need to encourage [trade liberalization], both within Canada and internationally, since the world seems to be entering a phase of doubt about the benefits of international trade,” Mr. Poloz said. “We know from history that sliding into protectionism would be highly counterproductive.”

He also said that governments in Canada need to make sure that tax and immigration policies aren’t holding back business growth, particularly for “new and young firms.”

Mr. Poloz also warned that individual Canadians and businesses need to gird themselves for interest rates that are likely to stay “lower-for-longer.”

“We cannot just sit back and wait for these slow-moving forces to reverse,” he argued. “People and companies, investors and savers, all need to understand these forces and make adjustments.”

He urged individuals to put away more savings for retirement, work longer and change the mix of their investments. Similarly, companies must lower their expectations about future investments. Companies must recognize that investment returns won’t get back to where they were before the 2008-09 financial crisis any time soon, Mr. Poloz said.

“In the current and prospective environment, 4% will probably turn out to be a pretty good return,” Poloz said.

Source: The Globe and Mail, The Canadian Press            

Ontario Has Little Choice but to Tax Foreign Home Buyers, CIBC Economist Warns 

The Ontario government has little choice left but to enact a 15% tax on foreign home buyers, says CIBC World Markets deputy chief economist Benjamin Tal.

More than a month after British Columbia put into effect a similar tax, Ontario has made no mention on what action it will take to cool the red hot Toronto housing market. The Greater Toronto Area is now the lone market experiencing a rapid price surge in Canada, says Tal, as evidence emerges Vancouver’s market is now cooling.

“With other centres taxing foreign investment, Ontario will have little choice but to do the same,” he said in a note to clients.

The economist goes on to explore a few other housing policy options that both provincial and federal governments will potentially need to use to fix the current market. Tal notes that even if home prices in Canada stop increasing today, the imbalance has left the Canadian economy in a dangerous imbalance.

“They are already elevated enough in many centres in a way that compromises the risk profile of the market as a whole,” he said.

The problem is that because Canadians have taken out such large mortgages in markets such as Toronto and Vancouver, there is almost no room to service debt if interest rates rise. A recent study found that more than 700,000 Canadians can’t even handle a 0.25% increase in the current rate.

“The key risk facing the market is not a wave of defaults but rather a situation in which higher mortgage rates down the road will elevate debt financing costs at the expense of other spending — a trajectory that is potentially recessionary,” he said.

Tal said ultimately, governments need to make it more difficult to borrow to “save Canadians from themselves” and avoid a recession down the road.

The economist says the federal government could consider raising the minimum down payment on homes valued between $500,000 and $1 million to more than 10%. (Last year, the government raised the down payment portion on the value of homes between that range from 5% to the current 10%.)

He also points to potential new policies beyond lending. Tal suggests governments could be pushing cities, especially in Ontario, to fast-track the approval process for new residential construction. He has taken aim at this before, calling the current market one where policymakers are using demand tools to fix a “supply problem.”

New policy could also help increase the rental supply in Ontario, as seniors and young people are increasingly becoming locked out of the market.  He lists providing tax incentives for the development of large rental units, as well as changing rent control regulations to allow for more rental units, as one potential tool.

Finally, Tal says that governments should be doing more to monitor subprime and alternative lenders. A number of scandals have hit the space in the past year, including the firing of dozens of brokers last year by alternative lender Home Capital Corp. after they were discovered falsifying incomes for clients.

Source: Article by John Shmuel, The Financial Post 

Canadian Home Resales Fall in August, Seen Cooling in 2017  

Sales of existing Canadian homes fell in August, notching the fourth straight monthly decline, the Canadian Real Estate Association (CREA) reported last Thursday suggesting Canada’s long housing boom has begun to slow.

The industry group said sales via Canadian MLS® Systems fell 3.1% in August from July, the largest monthly drop in nearly two years, as a tax on foreign buyers in Vancouver sent buyers to the sidelines and doused activity in Canada’s most expensive market.

In a separate report, CREA also revised down its forecast for sales and prices in 2016 and 2017, suggesting Canada housing boom peaked in early 2016 and has begun to cool.

CREA said the drop in sales activity in August was driven in part by a sharp decline in British Columbia as the provincial government imposed a 15% property transfer tax on foreign buyers of homes in Vancouver.

By contrast, sales in Ontario have held steady in recent months near record levels and have yet to show signs of cooling, data showed.

“Single family homes sales were already cooling before the new land transfer tax on foreign home buyers in Metro Vancouver came into effect,” Gregory Klump, CREA’s chief economist, said in a statement. “The surprise announcement of the new tax caused sales to brake hard.”

Real estate groups and developers had largely opposed the tax on foreign buyers, but a voter backlash against wealthy investors, mostly from mainland China, had put pressure on government to do something to cool price appreciation in the already expensive market.

Actual sales, not seasonally adjusted, were up 10.2% from August 2015, and were up from year-ago levels in about three-quarters of all Canadian markets, led by Greater Toronto. By contrast, Greater Vancouver posted the largest year-over-year sales decline.

The number of newly listed homes fell by 2.7% in August 2016 compared to July. While new supply was down in just over half of all local markets, declines in the Lower Mainland, Greater Toronto and Montreal far outweighed the monthly rise in new listings in less active markets.

With sales and new listings both down by similar magnitudes in August, the national sales-to-new listings ratio was 61.6%, which was little changed from 61.8% in July. The ratio had previously been as high as 65.3% in May.

CREA said there were 4.8 months of inventory on a national basis at the end of August 2016. This was up from 4.6 months in the previous three months and marked the first increase in almost a year.

The number of months of inventory had been trending lower since early 2015, reflecting increasingly tighter housing markets in Ontario – and, until recently, in B.C. It nonetheless remains below two months in Victoria and virtually everywhere within the Greater Golden Horseshoe region, including Greater Toronto, Hamilton-Burlington, Oakville-Milton, Guelph, Kitchener-Waterloo, Cambridge, Brantford, the Niagara Region, Barrie and Woodstock- Ingersoll. Indeed, major areas within the GTA have less than one month of inventory.

The Aggregate Composite MLS® HPI rose by 14.7% y-o-y in August 2016, the biggest gain since October 2006.

For the seventh consecutive month, y-o-y price growth accelerated for all Benchmark property types tracked by the index.

Two-storey single family home prices posted a 16.3% year-over-year increase in August 2016, as did townhouse/row units.  One-storey single family homes followed close behind with a y-o-y increase of 14.4%, while apartment unit prices rose 11.7% y-o-y.

While prices in 9 of the 11 markets tracked by the MLS® HPI posted y-o-y gains in August, increases continue to vary widely among housing markets.

Greater Vancouver (+31.4%) and the Fraser Valley (+38.3%) posted the largest y-o-y gains by a wide margin. Smaller double-digit y-o-y percentage price gains were also recorded by
Greater Toronto (+17.2%), Victoria (+18.9%) and Vancouver Island (+13.1%).

By contrast, prices were down -4.1% y-o-y in Calgary in August.  Although prices there have held steady since May 2016, they have remained down from year-ago levels since September 2015 and are 4.7% below the peak reached in January 2015.

Additionally, prices were down by -0.9% y-o-y in Saskatoon in August. While prices have remained below year-ago levels since August 2015, they are on track to begin rebounding before year-end should current trends persist.

Meanwhile, home prices posted additional y-o-y gains in Greater Moncton (+6.6%), Regina (+3.7%), Greater Montreal (+2.5%) and Ottawa (+1.7%).

The MLS® Home Price Index (MLS® HPI) provides the best way of gauging price trends because average price trends are prone to being distorted by changes in the mix of sales activity from one month to the next.

The actual (not seasonally adjusted) national average price for homes sold in August 2016 was $456,722, up 5.4% y-o-y, making it the smallest increase since January 2015.

The national average price continues to be pulled upward by sales activity in Greater Vancouver and Greater Toronto, which remain two of Canada’s tightest, most active and expensive housing markets.

Greater Vancouver’s share of national sales activity has diminished, causing it to have less upward influence on the national average price. Nonetheless, if Greater Vancouver and Greater Toronto are excluded from calculations, the average price is reduced by about $100,000 to $357,033.

CREA Updates Housing Forecast

In its latest quarterly forecast released last Thursday, CREA said it projects national sales activity to rise 6.0% in 2016 to 535,900 units and average prices to climb 10.1% to $487,800 this year.  That forecast is slightly below one made three months ago, when a 6.1% gain in sales and a 10.8% rise in prices were projected.

Among the provinces, British Columbia is still forecast to post the largest annual increase in activity this year (+14.6%) notwithstanding that much of its strength is in the rear-view mirror at this point.

Prince Edward Island is forecast to post the largest annual percentage increase in sales this year (+20.1%). This would make it one of only four provinces to set a new annual sales record in 2016, along with British Columbia, Manitoba and Ontario.

Among provinces where housing market prospects are closely tied to the outlook for natural resource prices, Alberta is still expected to record the largest annual decline in activity in 2016 (-8.8%), followed by Saskatchewan (6.1%). Meanwhile, Newfoundland and Labrador is now forecast to register a small increase of 1.2% due to stronger than expected sales in the second quarter.

Although housing demand remains strong among many housing markets in Ontario, a lack of supply is projected to restrain the increase in sales activity (+7.1%) this year.

Elsewhere, sales are forecast to rise in Manitoba (+5.3%), Quebec (+5.2%), New Brunswick (+2.8%) and Nova Scotia (+3.1%), reflecting recent sales momentum and anticipated improvements in economic prospects in these provinces.

Year-over-year average price gains have continued to mount in Ontario and British Columbia. While having accelerated in the former, price growth showed tentative signs of moderating in the latter. As a result, the average home price forecast for Ontario has been raised further but revised lower for B.C., reflecting a bigger than anticipated decline in higher-priced single detached home sales in the Lower Mainland region.

In provinces where economic and housing market prospects are closely tied to the outlook for the oil patch and other natural resource industries, average prices appear to be stabilizing in Alberta and Saskatchewan while softening further in Newfoundland and Labrador.

Average prices in other provinces are either rising modestly or remain stable, reflecting well balanced supply and demand.

The average resale price is forecast to rise 9.2% to $695,000 in British Columbia this year and slightly more in Ontario ($524,600; +12.7%). Elsewhere, average prices are forecast to rise by 1.6% in Manitoba and by 2.1% in both Quebec and New Brunswick.  Annual average prices in Alberta, Saskatchewan and Nova Scotia are projected to remain largely stable.

By comparison, the average price forecast for Prince Edward Island (+9.3%) has been raised to reflect exceptionally strong price gains in the second quarter. Newfoundland and Labrador’s average price is now forecast to ease by 6.4%.

In 2017, national sales are forecast to number 532,900 units, representing a decline of -0.6% from projected activity this year.

Transactions in B.C. and Ontario are anticipated to remain strong but fall short of this year’s record levels due to deteriorating affordability and a lack of supply for single family homes. British Columbia home sales are forecast to decline by 4.0%, while annual sales in Ontario are forecast to retreat by 1.0%.

Sales are also forecast to ease slightly in 2017 in New Brunswick (-0.6%), Nova Scotia (-2.2%) and Prince Edward Island.

In the case of New Brunswick and Prince Edward Island, those declines are more a story about unexpected strength in 2016. The sales forecast for Prince Edward Island in 2017 is still historically very strong, as the province’s economy is expected to continue to benefit from a lower Canadian dollar.

Meanwhile, consumer confidence should start to strengthen and slowly draw homebuyers off the sidelines in Alberta, Saskatchewan and Newfoundland and Labrador as oil prices and economic prospects gradually improve. The forecast rise in Alberta’s sales in 2017 also reflects slow sales activity in the first quarter of 2016, a repeat of which is not expected.

Sales activity is forecast to continue rising in Manitoba (+2.8%) and Quebec (+1.8%), reflecting further anticipated improvements for these provinces economic prospects.

The national average price is forecast to ease by 0.2% to $486,600 next year, with modest price gains near or below inflation in most provinces save for British Columbia, which is forecast to see a small decline of about 2%.

That flat profile for the national average price in 2017 along with a decline in British Columbia is reminiscent of 2012, when a more normal year for activity in Greater Vancouver followed record level sales activity at the highest end of its housing market the year before. As such, the forecast decline reflects the influence of sales activity on average price, as it did in 2012 versus 2011.

Meanwhile, an ample supply of listings relative to demand will continue to keep price gains in check in other provinces, although inventories have begun to shrink in provinces where supply had been elevated in recent years.

Source: CREA, Reuters  

Latest U.S. Economic News  

U.S. Housing Starts Take a Breather; Single-Family Permits Rise
U.S. housing starts fell more than expected in August as building activity declined broadly after two straight months of solid increases, but a rebound in permits for single-family dwellings suggested demand for housing remained intact.

Groundbreaking decreased 5.8% to a seasonally adjusted annual pace of 1.14 million units, the Commerce Department said on Tuesday.

Permits for future construction slipped 0.4% to a 1.14 million-unit rate last month as approvals for the volatile multi-family homes segment tumbled 7.2% to a 402,000 unit-rate. Permits for single-family homes, the largest segment of the market, surged 3.7% to a 737,000-unit pace.

Economists polled by Reuters had forecast housing starts falling to a 1.19 million-unit pace last month and building permits rising to a 1.17 million-unit rate.

Last month’s decline in starts was largely anticipated as groundbreaking activity has been running well ahead of permits approvals over the past several months, especially in the single-family housing segment.

The drop left starts just below their second-quarter average. Economists expect that residential construction will contribute to U.S. economic growth in the third quarter after being a small drag on output in the April-June period.

The Atlanta Federal Reserve is estimating GDP rising at a 3.0% annual rate in the third quarter. The U.S. economy grew at a 1.1% rate in the second quarter.

Demand for housing is being driven by a tightening labour market, which is lifting wages. A survey of homebuilders published on Monday showed confidence hitting an 11-month high in September, with builders bullish about current sales now and over the next six months, as well as prospective buyer traffic.

Housing market strength helped Lennar Corp, the second-largest U.S. homebuilder, report higher-than-expected profit and revenue for the third quarter.

Lennar, which builds single-family homes, said it sold 6,779 homes in the three months ended Aug. 31, up 7.3% from a year earlier, while its average sales price rose more than 3%.

Groundbreaking on single-family homes dropped 6.0% to a 722,000-unit pace in August, the lowest level since last October. With permits for the construction of single-family homes rising last month, single-family home building could rebound in the month ahead.

The single-family housing market is being supported by a dearth of previously owned homes available for sale. Single-family home construction tumbled 13.8% in the Northeast and dropped 13.1% in the South. Starts rose strongly in the West and Midwest.

Housing starts for the volatile multifamily segment fell 5.4% to a 420,000-unit pace. The multifamily segment of the market has been buoyed by strong demand for rental accommodation as some Americans shun home ownership in the aftermath of the housing market collapse.

Momentum could slow with rents appearing close to peaking and rental vacancy rates bottoming.

Source: Reuters

U.S. Home Builder Sentiment Rises in September as Sales Improve
Confidence among U.S. home builders has surged to the highest level in nearly a year, reflecting a brighter outlook for sales now and into 2017.

The National Association of Home Builders/Wells Fargo builder sentiment index released Monday climbed six points this month to 65 following a downwardly revised reading of 59 in August.

Readings above 50 indicate more builders view sales conditions as good rather than poor. The index has been mostly at 58 since rising to 61 in January. The last time it reached 65 was October last year.

Builders’ view of current sales and a gauge of traffic by prospective buyers rose. Their outlook for sales over the next six months also increased.

Sales of new U.S. homes accelerated in July to the fastest pace in nearly nine years.

Source: The Associated Press

U.S. Retail Sales Weak in August
U.S. retail sales fell more than expected in August amid weak purchases of automobiles and a range of other goods, pointing to cooling domestic demand that further diminishes expectations of a Federal Reserve interest rate increase this week.

Other data from last Thursday showed the U.S. labour market continuing to tighten with layoffs remaining very low last week, and underlying producer inflation creeping up in August.

Coming on the heels of reports showing a slump in manufacturing activity in August and a slowdown in job growth, the retail sales data could temper hopes of a strong rebound in economic growth in the third quarter.

“Continued momentum in household spending in an important component in the Federal Reserve’s growth narrative and the softening in the third quarter is consistent with the theme of patience. A September hike is simply too soon,” said Brittany Baumann, an economist at TD Securities in New York.

The Commerce Department said U.S. retail sales declined 0.3% after edging up 0.1% in July. Sales were up 1.9% from a year ago. Excluding automobiles, gasoline, building materials and food services, retail sales slipped 0.1% last month after a similar drop in July.

These so-called core retail sales correspond most closely with the consumer spending component of GDP.

Economists had forecast overall retail sales slipping 0.1% and core sales climbing 0.3% last month.

The U.S. central bank raised its benchmark overnight interest rate at the end of last year for the first time in nearly a decade, but has held it steady since amid concerns over persistently low inflation.

Firming Inflation

The Fed could still raise interest rates as inflation pressures are gradually firming. A separate report from the Labor Department showed producer prices, excluding food, energy and trade services, increased 0.3% in August after being unchanged in July.

The so-called core PPI increased 1.2% in the 12 months through August, the biggest gain since December 2014. It increased 0.8% in June.

The decline in U.S. retail sales last month was led by a 0.9% fall in receipts at auto dealerships. Sales at service stations dropped 0.8%. Households also cut back on discretionary spending, with sales at online retailers slipping 0.3% and receipts at sporting goods and hobby stores decreasing 1.4%.

There were also declines in sales at furniture and building material stores. Receipts at clothing stores, however, rose 0.7%. Sales at electronics and appliance outlets gained 0.1% and receipts at restaurants and bars rose 0.9%.

Despite the drop in retail sales last month, consumer spending will likely remains supported by a strong labour market.   

Source: Reuters                       

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