CHHMA - EYE ON OUR INDUSTRY
Volume 15, Issue 29, August 12, 2015

Inside This Issue:

• Register Now for the 14th Annual Industry Memorial Golf Classic on September 30th
• CHHMA Announces Scholarship Program Recipients for 2015
• Ontario Plans to Phase In New Pension Plan Beginning in 2017
• Experts Divided on Effect of Home Renovation Tax Break Pledge
• Orgill’s Canadian Operation to Acquire Chalifour Hardline Assets
• RONA Reports Best Quarterly Results in 3 Years, Raises Dividend
• Target to Rebrand CityTarget, TargetExpress Stores as Just Target
• China Devalues Yuan by 2%, Sees Biggest One-Day Fall Since 1994
• Canada’s Economy Could ‘Stop Bleeding’ Soon, Business Confidence Rebounding: Conference Board
• Housing Starts Decline in July
• Building Permits in Canada Jump 14.8% in June
• Canadian Economy Adds 6,600 Jobs in July, But Full-Time Hiring Declines
• Canada Headed for Worst ‘Non-Recession’ in 50 Years, BMO Warns
• Steadily Improving U.S. Jobs Market Supportive of Fed Rate Hike


Association News

Register Now for the 14th Annual Industry Memorial Golf Classic on September 30th

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

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

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

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

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

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

Click here to register online or click here for a: PDF registration form as well as a PDF silent auction pledge form. 


CHHMA Announces Scholarship Program Recipients for 2015

The CHHMA Board of Directors is pleased to announce the Scholarship Award recipients for 2015. The finalists were chosen for their outstanding achievement by a panel of independent judges. This year we are pleased to present five award winners:

Michael Baglio – Toronto, Ontario
Michael is the son of Lina Baglio from Moen.  Michael will be attending the University of Toronto to seek a degree in Kinesiology.  He was on the Honour Roll every year in high school and when not studying Michael is immersed in sports.  His dream is to pursue a career in sports medicine in order to help others while incorporating his love of sports.

Kevin Chan – Port Coquitlam, British Columbia
Kevin is the son of Richard Man Sang Chan from Recochem Inc.  He will be attending the University of British Columbia working towards a degree in Science.  Kevin achieved a 4.0 GPA and finished with "Honours with Great Distinction" every year of high school.  His dream is to graduate with a Bachelor in Medical Laboratory Science degree and focus on infectious disease.  Kevin enjoys working with children and volunteers with day camps and is also involved with the local SPCA.

Celine Genga – Maple, Ontario
Celine is the daughter of Lawrence Genga of Rust-Oleum Consumer Brands Canada.  She will be attending Ryerson University to pursue a degree in Graphic Communication Management.Celine is an avid soccer player and has played on several elite teams.  She also has a passion for photography and has used her talent to take the photos for the school yearbook and several sporting events.Celine has been on the Honour Roll the past two years and will graduate with Honours.

Douglas Turliuk – Mississauga, Ontario
Douglas is the son of Dave Turliuk from Newell Rubbermaid Inc. He will be attending Wilfrid Laurier University where he has chosen to pursue an Honours degree in Business Administration.  Douglas spent five weeks in Africa where he studied English and World Issues and found it to be not only an educational but an eye opening experience.In his spare time, Douglas loves to play hockey and snowboard.

Tina Zhong – Vaughan, Ontario
Tina is the daughter of Fiona Lu Chen from IPEX Inc.She will be attending the University of Western Ontario taking Business Management and Organizational Studies. Tina's passions lie in ecological conservation and she hopes to one day work for a clean energy or green company.  She was accepted to the Markham Mayor's Youth Council and was a very successful manager of two subcommittees, The Amazing Race, a charitable event and Markham Expo.

Congratulations to the winners for their outstanding achievements and to the member companies for encouraging their employee participation.

Since 2001, the CHHMA has awarded $160,000 towards scholarships and some 80 young people have benefited from the scholarship program. Recipients receive $1,000 per year for the first two years of study at an accredited post-secondary institution.


Government & Legislative News

Ontario Plans to Phase In New Pension Plan Beginning in 2017

The Ontario Liberal government plans to phase in its provincial pension plan beginning ‎in 2017, with benefits paid out to workers starting in 2022.

All employees in Ontario will belong to a workplace pension plan of one kind or another in five years after the proposed Ontario Retirement Pension Plan (ORPP) is implemented, Premier Kathleen Wynne said at a briefing Tuesday.

Wynne said she is determined to push forward on the made-in-Ontario pension plan despite the critics.

“I believe it is the right thing to do,” Wynne said of the plan, noting that two-thirds of Ontario workers have no pension plan other than the Canada Pension Plan (CPP).

About 3.5 million workers will be part of the made-in-Ontario plan, which has become a flashpoint between Premier Wynne and Prime Minister Stephen Harper in the early days of the federal election campaign.

Harper, while campaigning in the GTA, slammed the provincial plan.

“That’s a huge tax hike. It’s not a good idea. It’s a bad thing for the middle class and it’s obviously a bad thing as well for jobs. And it’s a bad thing for our economy,” said Harper, who spoke out unprompted.

Harper has refused to increase CPP benefits as requested by several provincial leaders as well as ruling that the federal government will not administer the plan for Ontario.

Wynne said her preferred option is to have the federal government administer the plan, but the Ontario government is now looking at procuring a private-sector partner.

David Dodge, former Governor of the Bank of Canada was appointed Chair of the ORPP Administrative Corporation nominating committee to advise the government on the establishment and governance of the new corporation.

The proposed plan when fully implemented would bring in about $3.5 billion annually.

Like the Canada Pension P‎lan, the ORPP would be equally funded by both employers and employee.

Self-employed workers are also to be included, but for this to happen the province needs federal help which the Conservative government has refused to do.

The Ontario government also says it is designing the plan to make it portable. Workers between 18 and 70 years old are eligible for the plan, which includes all types of work, such as part time and seasonal.
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At age 65 a worker can start collecting benefits.

A chart provided in the briefing documents shows that an employee earning $45,000 a year would contribute $2.16 a day to the plan – her or his employer would match that. At the end of 40 years, the employee would collect $6,410 a year.

An employee earning $90,000, which is the maximum amount allowed, would contribute $4.50 a day – as would the employer – and would collect $12,815 a year at the end of four decades.

About 50% of workers in Ontario do not have a workplace pension plan or contribute to an RRSP, according to a government official.

In addition, the government has expanded the definition of “comparability” so some employers who currently have qualifying registered Defined Benefit (DB) or Defined Contribution (DC) pension plans will not need to contribute to the ORPP.  To be exempt, the DB or DC pension plans must meet certain qualifying criteria:
All other employers will start paying into the ORPP unless their savings plans are converted to a qualifying plan prior the timeframes outlined below:

In 2016, the ORPP Administrative Corporation, which has yet to be established, will reach out to every employer in Ontario to determine current savings offerings, if any, and the appropriate implementation phase.‎

Beginning in January 2017, employers with 500 or more workers, who do not have registered pension plans, will contribute. The contributions will also be phased in. For example, in 2017, large employers and their employees will each contribute 0.8%, and by 2019 they will contribute 1.9%.

The next year, medium-sized employers – 50 to 499 employees – will start their contributions.

In 2019, small employers, with fewer than 50 employees, will join.
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The Ontario government say employers and employees will not contribute more than 1.9%. The plan aims “to replace 15% of an individual’s pre-retirement earnings up to $90,000,” according to briefing documents.
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The government has long called for reforms to CPP to enable Canadians to save more for retirement, and as the federal government has not moved forward the province introduced its own pension plan with the long-term goal of having other provinces join in.

“The ORPP is truly forward-looking, making Ontario a better place to work, invest and age. We are doing this for the next generation — our children and grandchildren to ensure they can retire with the security they deserve,” Premier Wynne stated in a release.

Source: The Globe and Mail, The Toronto Star 


Experts Divided on Effect of Home Renovation Tax Break Pledge

Experts are divided on what impact a federal Conservative promise to revive a home renovation tax credit could have on the real estate industry, with some predicting it could add more fuel to red-hot housing markets while others say it likely wouldn’t have any impact at all.

Ahmed Helmi, a Toronto-area real estate broker with Royal LePage Real Estate Services Ltd., says the tax rebate could encourage homeowners to renovate and stay put, leading to lower inventories on the market.

In hot housing markets like the Greater Toronto Area, that could continue to push soaring home prices higher, Helmi predicts.

“There will be the same number of buyers trying to compete for a smaller number of homes that are available on the market,” he says.

But Toronto broker Desmond Brown says Stephen Harper’s election campaign promise to make the renovation tax credit permanent — which the prime minister said is contingent on economic circumstances — is “not going to make an impact at all” because the amount of money offered is too low.

The renovation tax credit was first introduced in 2009 as a temporary measure intended to spur the economy by incentivizing consumers to spend during the recession.
However, the new program — which would offer homeowners a 15% tax refund on renovations of up to $5,000 — would pay less than the last, which provided a rebate on up to $10,000 of total spending.

“You can’t do a heck of a lot for $5,000,” said Brown. “That might be the floor in a kitchen.”

Toronto realtor Derek Ladouceur said the tax credit might encourage a small number of Canadians to flip houses — purchasing fixer-uppers, renovating them and then putting them back on the market — but overall, the measure is unlikely to have any “profound effect” on the real estate market.

“To add a stimulus into the only aspect of the economy that is strong right now — the housing market — doesn’t make a lot of sense to me,” Ladouceur said.

David Madani, an economist with Capital Economics, said the government is “playing with fire” by encouraging homeowners to take on more housing-related debt, noting that most Canadians fund renovations by borrowing against their homes.

“The government is truly addicted to housing specifically as a source of economic sustenance, despite countless warnings from the Bank of Canada and international institutions such as the IMF and OECD among others,” Madani said.

But Will Dunning, the chief economist at the Canadian Association of Accredited Mortgage Professionals, said programs such as the renovation tax credit don’t change consumer behaviour — they merely subsidize and speed up activity that was going to happen anyway.

“Yes, there may be a short-term surge in activity as a result of the introduction of the program, but that’s going to be offset later on, when the activity that was going to happen, say, a year from now, has already happened,” he said. “The real impact of this is going to be negligible.”

The Canadian Home Builders’ Association welcomed the announcement, saying the tax credit would help bring money out of the underground economy — a “chronic problem” in the renovations and repairs industry, where many contractors are paid under the table.

“Tax credits that require homeowners to get receipts also help to protect them from ‘cash’ contractors who leave a trail of bad work and broken promises,” Kevin Lee, the association’s chief executive, said in a statement.

Source: Article by Alexandra Posadzki, The Canadian Press     


Industry News

Orgill’s Canadian Operation to Acquire Chalifour Hardline Assets

TIM-BR MART Group announced on Tuesday the sale of the hardlines assets of its distribution arm, Chalifour Canada Ltd. to Orgill Canada Hardlines, ULC, a wholly owned, Canadian-based subsidiary of Orgill, Inc.

“The strategic alliance resulting from this transaction will offer both our membership and the Canadian independents at large, many competitive advantages; they will have access to a Canadian hardlines distribution solution that will offer an expanded product selection, combined hardware buying power, hardlines security of supply and international import opportunities,” said Bernie Owens, president of the TIM-BR MART Group.  “Ultimately, the alliance will provide the independent building material and hardware entrepreneur with a solid foundation to better compete every day against the growing box store formats in Canada.”

“Orgill Canada Hardlines will combine the best of both Chalifour and Orgill,” says Ron Beal, chairman, president, and CEO of Orgill, Inc. “The new company will service the Canadian independent hardlines retailer and will not offer a separate banner. Our goal is to be inclusive rather than exclusive, and we will focus on providing a unique mix of products, competitive pricing and cutting edge services to help the independent retailer profitably compete in his or her local market throughout Canada.”

Orgill Canada’s acquisition of the assets will include their complete ownership and operation of Chalifour Canada’s London, Ontario, distribution center, as well as the ownership of the hardware inventory in Chalifour Canada’s Surrey, British Columbia facility.

TIM-BR MART will maintain ownership and operation of their lumber and building material (LBM) distribution center in Saint-Nicolas, Quebec, and continue to operate their Surrey facility, including Orgill Canada’s hardlines offering from that location. Orgill Canada will ultimately integrate Orgill, Inc.’s current Canadian operations into the London facility.

The transaction is subject to government regulatory review. Terms of the deal were not released.

Source: Hardware Retailing, Hardlines, Hardware+Building Supply Dealer


RONA Reports Best Quarterly Results in 3 Years, Raises Dividend

RONA inc. reported its best quarterly results in more than three years on Tuesday as it raised its dividend 14%.

The company said its net profit attributable to shareholders was up 19.1% to $49.9 million or 46 cents per share for the three months ended June 28. That's up from $42 million or 35 cents per share a year earlier.

RONA also announced it will pay a quarterly dividend of four cents per share on Sept. 25. In the past, it paid a 14 cents per share annual dividend distributed twice a year, but it will now move to a quarterly payout.

Revenues in RONA's busiest quarter of the year increased 5.9% to $1.26 billion from $1.19 billion a year ago.

RONA was expected to earn 45 cents per share on $1.25 billion of revenues, according to analysts polled by Thomson Reuters.

The company said retail sales grew 6.7% due to merchandising strategies and the repositioning of the Reno-Depot banner in Quebec, while distribution sales rose 3.7%.

Same-store sales grew 5.4% in the retail segment, well above analyst expectations. Except for the fourth quarter of 2014, it was the highest quarterly sales growth from existing operations since the first quarter of 2010.

Sales in the distribution segment rose 3.7% due to the positive impact of new programs for affiliate stores as well as a shift in sales from the first quarter to the second quarter the company said.

CEO Robert Sawyer said the company marked a fourth consecutive quarter of growth despite the ongoing decline in housing starts across the country and a stagnant economy.

"This performance underscores the success of the various merchandising and banner repositioning strategies we implemented just over a year ago," he said in a news release.

RONA's revenues in the second quarter were the highest since the same period in 2012. Almost $97 million in adjusted pre-tax operating profits (earnings before interest, taxes, depreciation and amortization) were the highest since the third quarter of 2011.

Over the past year, the company has repurchased 11 million shares or 9.2% of its outstanding shares.

For the first six months of the year, consolidated revenues are up 4.3% to $2.04 billion from $1.96 billion for the same period of 2014. This change mainly reflects a 6.4% increase in the retail segment, including strong 5.2% growth in same-store sales.

Adjusted net income amounted to $38.8 million, or $0.35 per share, compared to $27.6 million, or $0.23 per share, for the first half of 2014.

Source: RONA inc., The Canadian Press 


Target to Rebrand CityTarget, TargetExpress Stores as Just Target

As Target Corp. began rolling out smaller-format stores in the past few years, their names — CityTarget and TargetExpress — sometimes sparked confusion.

While CityTarget stores located in dense urban areas are generally smaller than Target’s other big-box stores, that wasn’t the case with the CityTarget store that opened last month next to Fenway Park in Boston.

At 160,000 square feet, it’s actually larger than Target’s typical suburban stores, which are closer to 135,000 square feet in size.

And while the Target store on Nicollet Mall next to the Minneapolis-based retailer’s headquarters is definitely in the middle of a dense part of the city, it was not considered a CityTarget.

So now, Target is jettisoning those CityTarget and TargetExpress labels and will soon rebrand all of them as just Target.

“It’s about a simplified ¬experience for our guests,” said Erika Winkels, a Target spokeswoman. “It also helps guests understand that you’re not only limited to what’s in the four walls of that store.”

Target placed iPads throughout the smaller-format stores for customers to buy items directly from Target.com.  Shoppers then have the option to have those items delivered to their homes or to pick them up in the store.

Target currently has about 14 TargetExpress and CityTarget stores across the United States. It will begin rebranding them with just the bull’s-eye logo in October.

The company, which first announced the change in a blog post at A Bullseye View, added that it remains committed to its urban growth strategy. Smaller-format stores located in urban areas have been one of CEO Brian Cornell’s key strategies for growth now that the retailer has slowed down building big-box stores amid a saturated retail landscape in the suburbs.

The company noted that it will open six new stores in October. Four of them were slated to be TargetExpress stores. They will still be smaller-format stores as planned, but will now just be called Target. The other two stores in Texas and California will be traditional big-box stores.

So what about SuperTarget? The name used to describe the retailer’s big-box stores with a full grocery assortment will remain — at least for now.

Winkels said Target is continuing to evaluate a number of things, but has no changes to announce about SuperTarget.

Source: Minneapolis Star Tribune     


Economic News

China Devalues Yuan by 2%, Sees Biggest One-Day Fall Since 1994

China devalued its currency on Tuesday after a run of poor economic data, a move it billed as a free-market reform but which some suspect could be the beginning of a longer-term slide in the exchange rate.

The central bank set its official guidance rate down nearly 2% to 6.2298 yuan per dollar – its lowest point in almost three years – in what it said was a change in methodology to make it more responsive to market forces.

It was the biggest one-day fall since a massive devaluation in 1994 when China aligned its official and market rates.

“Since China’s trade in goods continues to post relatively large surpluses, the yuan’s real effective exchange rate is still relatively strong versus various global currencies, and is deviating from market expectations,” the central bank said.

“Therefore, it is necessary to further improve the yuan’s midpoint pricing to meet the needs of the market.”

The People’s Bank of China (PBOC) called it a “one-off depreciation,” but economists disagreed over the significance of a move that reversed a previous strong-yuan policy that aimed to boost domestic consumption and outward investment.

“For a long time, I gave the PBOC credit for holding the line on the renminbi (yuan) and recognizing that while it might be tempting to try to shore up the old-growth model by devaluing the currency, that really was a dead end,” said fund manager Patrick Chovanec of U.S.-based Silvercrest Asset Management.

He said a strong yuan was needed to force China toward consumption and away from low-end manufacturing. “What the world needs from China is not more supply; what it needs is demand.”

The devaluation followed weekend data that showed China’s exports tumbled 8.3% in July, hit by weaker demand from Europe, the United States and Japan, and that producer prices were well into their fourth year of deflation.

The move hurt the Australian and New Zealand dollars and the Korean won, fanning talk of a round of currency devaluations from other major exporters. But some of Asia’s most interventionist central banks appeared to be holding their nerve on currency policy.

“I don’t think the move would trigger a global currency war,” a Japanese policymaker said.

Beijing’s action most affects the currencies of the countries that do a hefty amount of trade with China, notably Australia, New Zealand and Japan, said Greg Moore, senior currency strategist at RBC Capital Markets.

“For CAD, the impact is less clear and would come indirectly through either the broad reaction of USD or commodity prices,” he added.

“The reaction in both of those channels has been mixed, but I would say the risk is tilted toward a higher USD/CAD (broad USD strength and pressure on commodity prices.)

By that, he means the Canadian dollar is likely to tumble even further.

Economists pointed out that until Tuesday, China had held the yuan firm while its neighbours had debased their currencies.

While a weaker yuan will not cure all the ills of China’s exporters, which suffer from rising labour costs and quality problems, it would help relieve deflationary pressure, a far bigger economic concern in the view of some economists.

Falling commodity prices have been blamed for producer price deflation, putting China at risk of repeating the deflationary cycle that blighted Japan for decades.

Growth in China, the world’s second-largest economy, has slowed markedly this year and is set to hit a 25-year low even if it meets its official 7% target.

The devaluation hit shares in Asia and Europe. Chinese airline stocks also fell, given the impact higher fuel prices would have on their bottom line, though exporter stocks rose.

Some said the move was also to blame for a fall in futures contracts tracking the S&P 500 index, given the potential hit to U.S. exports to China.

Spot yuan ended at 6.3231 on Tuesday, its weakest close since September 2012. The spot yuan is allowed to rise or fall by 2% from a midpoint that is set each day.

In the past, the central bank set the midpoint by a formula based on a basket of currencies, but the methodology was never publicized and many believed the midpoint was frequently used as a way to bend the market to policy goals.

Under the new method, investors moving assets out of yuan could take the rate lower in the weeks ahead.

The yuan had been locked in an extremely narrow intraday range since March, varying only 0.3%.

Some economists said the devaluation was also designed to support Beijing’s push for the yuan to be included in a basket of reserve currencies known as Special Drawing Rights (SDR), which are used by the International Monetary Fund to lend money to sovereign borrowers.

“The PBOC aims to move the renminbi to a freer floating and accessible currency, prerequisites for it to be given the IMF’s reserve stamp of approval, and will see it move in a wider band,” said Angus Campbell, analyst at FXpro.

The IMF proposed in a report this month to put off any move to add the yuan to its benchmark currency basket until after September 2016, and it gave mixed reviews of Beijing’s progress in making key financial reforms to its currency market.

Source: Reuters, The Globe and Mail


Canada’s Economy Could ‘Stop Bleeding’ Soon, Business Confidence Rebounding: Conference Board

Canadian businesses appear surprisingly upbeat these days, optimistic that the worst of the oil shock-driven economic slump is likely behind them and the “bleeding” will stop soon.

“Critically, the pessimism regarding the general economy has mostly subsided,” the Conference Board of Canada said Monday. “The return in confidence is translating into stronger investment intentions.”

The Conference Board’s closely monitored index of business confidence rebounded in the second quarter of 2015, rising to a reading of 105.6, after two consecutive quarterly declines that pushed the index to a six-year low of 86.5.

The sudden optimism comes after what can only be described as a dismal year of recession-level economic contractions — predominantly due to the global collapse in oil prices — and meager employment creation and weak exports.

The deep impact on growth has already led to two cuts in the Bank of Canada’s trendsetting interest rate in 2015. Stephen Poloz, the central bank governor, could move the current 0.25% lending level even lower this year if the economy doesn’t begin to grow again later this year.

But that may not be necessary.

Conference Board economist Fares Bounajm said the confidence index is “forward looking . . . (so) it doesn’t really tell you much about what has happened in the past, but what we expect to see in the future.”

“The previous six months were really bad for the economy. The fact that we’re seeing an increase in business confidence suggests that at least we’re stabilizing, that the bleeding will stop,” Bounajm said in an interview.

“Historically, our business confidence index has been highly correlated with GDP growth. And in the past two quarters, our business confidence plummeted twice in a row and we also saw GDP growth declining during that period,” he said.

“With a rebound this quarter (in the index), it may suggest that the worst is over and the economy will stop contracting . . . and will probably start to expand in the second half of the year.”

In Monday’s confidence report, the Conference Board said its survey of 1,500 senior Canadian business leaders showed 11.3% of business leaders still expected overall economic conditions to deteriorate over the next six months — but that’s down from a three-and-a-half-year high of 29.5 earlier this year.

Those anticipating an improvement in economic conditions rose 4.4 percentage points to 22.6% in the latest poll.

Stronger confidence should translate into increased investment, as well, with 56.5% of companies indicating they plan to spend more on buildings, machinery and equipment — up from 47.7% in the previous survey.

Part of those increased spending plans is reflected in the share of companies concerned about a drop in their finances. Just 4.8% of companies in the current survey expected their finances to worsen, down from a six-year high of 21.6% in the previous poll.

There were temporary factors in the U.S. that affected Canada’s overall GDP — among them, extremely harsh winter weather and labour disruptions at U.S. West Coast port facilities.

“All these factors really hurt exports in the first half of the year. But, luckily, a lot of them were temporary,” said Bounajm, at the Conference Board.

“So, we do expect both the U.S. economy to rebound in the second half and (Canadian) exports as well.”

Source: Article by Gordon Isfeld, The Financial Post


Housing Starts Decline in July

Canadian housing starts fell more than expected in July from June but were broadly in line with demographic fundamentals and analysts said housing remained a bright spot in Canada’s otherwise sluggish economy.

The Canada Mortgage and Housing Corporation (CMHC) reported on Tuesday that the seasonally adjusted annualized rate (SAAR) of housing starts fell 4.6% to 193,032 in July from a downwardly revised 202,338 units in June. Forecasters had expected 195,000 starts.

With the six-month trend at 185,586 starts in July compared to 184,035 in June, analysts said homebuilding has settled into a pace that meets demographic demand, seemingly unaffected by the low oil prices and economic drag felt in many other sectors.

“Housing starts in Canada have been trending higher over the past three months, with gains in multiple starts offsetting declines in single starts,” said Bob Dugan, CMHC’s chief economist. “The decline in single starts is in line with CMHC’s expectations of buyers shifting demand away from higher priced new single-detached homes towards lower-priced alternatives. Gains in multiple starts are largely due to higher rental apartment starts, a substantial portion of which are seniors’ residences.”

The SAAR of urban starts decreased by 5.9% in July to 176,998 units. Multi-unit urban starts decreased by 8.2% to 119,478 units in July and the single-detached urban starts segment decreased slightly, by 0.8% to 57,520 units.

In July, the seasonally adjusted annual rate of urban starts decreased in Ontario, the Prairies, Atlantic Canada and Québec, while it increased in British Columbia.

Rural starts were estimated at a seasonally adjusted annual rate of 16,034 units, up 13.0% from 14,193 units in June.

“While there are regional weak spots and strong spots, there is hardly a hint of recession in the national housing market figures. Overall Canadian construction activity continues to look very sturdy,” Robert Kavcic, senior economist at BMO Capital Markets, wrote in a research note.

“The housing market continues to stand out as a pillar of strength for the Canadian economy amid a very low interest rate environment,” David Tulk, chief Canada macro strategist at TD Securities, wrote in a research note.

“With the Bank of Canada expected to remain quite accommodative, we see further momentum in both sales and construction through the second half of the year.”

Source: CMHC, The Canadian Press 


Building Permits in Canada Jump 14.8% in June

The total value of building permits issued in June beat expectations and wiped out a decline from the month before, jumping 14.8% to $7.7 billion, mainly because of apartment and condo construction projects, according to Statistics Canada data last Friday.

Analysts had forecast an increase of only 5.0%. May's decline was revised to 13.9% from 14.5%.

Construction intentions in the residential sector increased 15.9% to $4.6 billion in June, following a 13.2% decline the previous month. Gains were posted in nine provinces, led by Quebec, Alberta and Ontario. British Columbia registered a slight decrease.

After two consecutive monthly declines, construction intentions for multi-family dwellings rose 36.9% to $2.2 billion in June. Higher construction intentions for apartment and apartment-condominium projects in Quebec, Alberta and Ontario contributed most to the gain at the national level. British Columbia had a small decline following a 17.4% increase the previous month.

The value of building permits for single-family dwellings rose 1.6% to $2.4 billion in June. Advances were posted in eight provinces, with New Brunswick, Manitoba, Saskatchewan and Ontario recording the largest gains. Alberta registered a second consecutive monthly decrease in the value of permits for single-family dwellings.

Canadian municipalities approved the construction of 17,609 new dwellings in June, up 13.7% from May. This increase was mostly attributable to multi-family dwellings, which rose 20.3% to 11,785 units. The number of single-family dwellings increased 2.2% to 5,824 units.

In the non-residential sector, the value of permits rose 13.2% to $3.2 billion. Gains were posted in five provinces, led by Alberta, British Columbia and Ontario. Manitoba, Quebec and Saskatchewan registered the largest declines following large increases in May.

Canadian municipalities issued $1.1 billion worth of institutional building permits in June, up 30.9% from May. The value of institutional building permits rose in six provinces. Alberta accounted for most of the gain, the result of higher construction intentions for educational institutions, and library and museum buildings. Manitoba and Quebec registered the largest decreases in the institutional component following gains the previous month.

In the industrial component, the value of permits rose 29.1% to $535 million, the fourth increase in five months. There were gains in six provinces, led by Quebec and Ontario, where the advances were mainly attributable to higher construction intentions for maintenance and utilities buildings.

The value of permits for commercial buildings decreased 1.3% to $1.5 billion, following three consecutive monthly gains.  Lower construction intentions for recreational buildings, office buildings and laboratories more than offset increased intentions for retail complexes, and hotels and restaurants. Quebec, Saskatchewan and New Brunswick registered the biggest decline, while British Columbia recorded the largest increase in this component.

Regionally, the value of permits rose in every province except Saskatchewan in June. Alberta, Quebec, Ontario, and British Columbia registered the largest increases.

The gain in Alberta occurred as a result of higher construction intentions for institutional structures and multi-family dwellings. In Quebec, the advance came mostly from increased intentions for multi-family dwellings.

In Ontario, the increase was the result of higher construction intentions for residential buildings, mainly multi-family dwellings and industrial buildings. In British Columbia, the gain originated from all three non-residential components, particularly commercial projects.

The total value of building permits in Nova Scotia rose 58.2% to $152 million. The gain in June was the result of higher construction intentions for residential buildings, principally multi-family dwellings.

Saskatchewan was the lone province to register declines, as a result of lower construction intentions for commercial projects and, to a lesser degree, industrial buildings.

Source: Statistics Canada, Reuters 


Canadian Economy Adds 6,600 Jobs in July, But Full-Time Hiring Declines

Canada added an estimated 6,600 jobs in July from June, in a mixed report from Statistics Canada last Friday that left analysts concluding that while the economy was not spectacular, it was at least “steady as she goes.”

The gain in July nearly mirrored a fall in June while holding on to May’s outsized gain of 58,900. The average increase is 19,700 jobs in the last three months and 11,200 in the last half year.

Compared with 12 months earlier, employment is up 161,000 positions or 0.9%, the result of more full-time work. Over the same period, the total number of hours worked rose 1.2%.

The unemployment rate held at 6.8% for the sixth straight month.

The median forecast in a Reuters survey of economists was for a gain of 5,000 jobs, with the jobless rate at 6.8%.

However, the number of full-time positions fell by 17,300 and the number of employees actually fell an estimated 33,900, with the self-employed rising by 40,500. Employment grew in the services sector but fell in the goods-producing sector.

“Obviously, it’s not a particularly strong report. We saw an outright decline in full-time jobs. But it also doesn’t show a pronounced weakening in the economy,” Bank of Montreal Chief Economist Doug Porter said.

“Typically, if we were having a full-blown recession, you would have this process where output declines and then employment declines and then spending declines and it feeds on itself, and we’re just not seeing that in Canada.”

“In Canada, it’s serving as a steady-as-she-goes type of release. The U.S. number is the same kind of thing, where it’s close enough to the market where it doesn’t really drive too much,” said David Tulk, chief Canada macro strategist at TD Bank.

“Despite a cooling in the economy during the first half of the year, the trend in the labour market isn’t yet pointing to Canada being in recession,” said Nick Exarhos, at CIBC World Markets.

Not surprisingly, resources-dependent Alberta shed more than 4,000 jobs last month, nearly matching June’s losses.

Since the province’s most recent employment peak in September, the labour force has lost 28,000 positions, or 15% overall.

Employment in Quebec increased by 22,000 in July, lowering the unemployment rate by 0.3 percentage points to 7.7%. Compared with 12 months earlier, employment in the province was up by 44,000 or 1.1%.

Employment in Ontario was unchanged in July. Compared with 12 months earlier, employment in the province was up by 67,000 (+1.0%) and the unemployment rate fell 1.1 percentage points to 6.4%, the lowest rate since September 2008.

Friday’s report showed a drop of 8,300 jobs in construction during June and a loss of 4,600 workers in manufacturing.

“Despite a likely contraction in GDP in the first half of the year, the labour market has held up surprising well,” said economist Benjamin Reitzes, at BMO Capital Markets.

Source: Statistics Canada, Reuters, The Financial Post 


Canada Headed for Worst ‘Non-Recession’ in 50 Years, BMO Warns

Canada’s economy is heading for its worst non-recession showing in more than 50 years, the Bank of Montreal warns.

But while the first half of 2015 was ugly, the rest of the year should show a pick-up, BMO said in a new forecast last week.

We already know that the Canadian economy contracted at an annual pace of 0.6% in the first three months of the year, and BMO now believes it shrank 1% in the second quarter.

“The contraction has been persistent, pronounced (totalling 2% annualized), and somewhat pervasive,” said BMO senior economist Sal Guatieri.

“It was led by the goods-producing sector (-7.7%) in general, and energy and mining industries, in particular,” he added.

“Plunging energy investment likely resulted in a double-digit decline in overall business spending in the first half of the year.”

The BMO report is bleak where the first half of the year, and the oil provinces, are concerned.

“Alberta, Newfoundland and Labrador, and possibly Saskatchewan, face recessions this year given their high resource exposure,” BMO said.

“Even if the nation avoids a true recession, 2015 will likely mark the worst non-recession year in over half a century.”

Mr. Guatieri predicts economic growth will perk up to about 2.5% in the second half of the year, but that would bring the year’s total to a measly 1.2%.

There are some bright spots: Exports showed a dramatic bounce in June, the oil shock will “at least abate,” and the government’s new child benefit tax scheme will put more money in the pockets of consumers.

On top of that is the pre-election spending “in the longest federal campaign since around Confederation.”  

Housing markets are also strong, Mr. Guatieri said.

The Bank of Canada has already cut its benchmark rate twice this year, and is counting on a loonie-sparked rebound in exports.

Some economists speculate it could do so again. But at the very least, the central bank won’t be hiking rates any time soon.

The ever-lower loonie should also help, according to several economists.

“Currency movements can take up to three years to fully affect net exports, and the loonie’s 20% dive against the greenback in the past two years is the largest ever recorded in such a period,” Mr. Guatieri said.

“Encouragingly, exports rebounded sharply in June, likely marking the start of an improving trend in the earlier record-large trade deficit.”

Source: Article by Michael Babad, The Globe and Mail 


Steadily Improving U.S. Jobs Market Supportive of Fed Rate Hike  

U.S. employment rose at a solid clip in July and wages rebounded after a surprise stall in the prior month, signs of an improving economy that could open the door wider to a Federal Reserve interest rate hike in September.

Nonfarm payrolls increased 215,000 last month as a pickup in construction ad manufacturing employment offset further declines in the mining sector, the Labor Department said last Friday. The unemployment rate held at a seven-year low of 5.3%.

Payrolls data for May and June were revised to show 14,000 more jobs created than previously reported. In addition, the average workweek increased to 34.6 hours, the highest since February, from 34.5 hours in June.

Though hiring has slowed from last year’s robust pace, it remains at double the rate needed to keep up with population growth. The Fed last month upgraded its assessment of the labour market, describing it as continuing to “improve, with solid job gains and declining unemployment.”

Average hourly earnings increased five cents, or 0.2%, last month after being flat in June. That put them 2.1% above their year-ago level, but left them well shy of the 3.5% growth rate economists associate with full employment.

Still, the gain supports views that a sharp slowdown in compensation growth in the second quarter and consumer spending in June were temporary. Economists polled by Reuters had forecast nonfarm payrolls increasing 223,000 last month and the unemployment rate holding steady at 5.3%.

Wage growth has been disappointingly slow.  But tightening labour market conditions and decisions by several state and local governments to raise their minimum wage have fuelled expectations of a pickup.

In addition, a number of retailers, including Walmart , the nation’s largest private employer, Target and TJX Cos have increased pay for hourly workers.

The jobless rate is near the 5.0% to 5.2% range most Fed officials think is consistent with a steady but low level of inflation.

A broad measure of joblessness that includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment fell to 10.4%, the lowest since June 2008, from 10.5% in June.

The labour force participation rate, or the share of working-age Americans who are employed or at least looking for a job, held at a more than 37-1/2-year low of 62.6%.

The fairly healthy employment report added to robust July automobile sales and service industries data in suggesting the U.S. economy continues to gather momentum after growing at a 2.3% annual rate in the second quarter.

Employment gains in July were concentrated in service industries. At the same time, construction payrolls rose 6,000 thanks to a strengthening housing market, after being unchanged in June. Factory employment increased 15,000 as some automakers have decided to forgo a usual summer plant shutdown for retooling. Manufacturing payrolls rose 2,000 in June.

More layoffs in the energy sector, which is grappling with last year’s sharp decline in crude oil prices, were a drag on mining payrolls, which shed 4,000 jobs in July.

Oilfield giants Schlumberger and Halliburton and many others in the oil and gas industry have announced thousands of job cuts in the past few months.

Source: Reuters

  

 Upcoming CHHMA Events 

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

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

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

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

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

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

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

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"Eye On Our Industry" is published by the CHHMA as an information resource for our members. Member input regarding content and format is welcomed. Please contact Michael Jorgenson by email: mjorgenson@chhma.ca, or call at (416) 282-0022, ext. 34. CHHMA is located at 1335 Morningside Ave., Suite 101, Scarborough, ON, M1B 5M4 www.chhma.ca

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