CHHMA - EYE ON OUR INDUSTRY
Volume 14, Issue 30, August 13, 2014
Inside This Issue:
• Industry Memorial Golf Classic - October 1st
• Register Now for CSSA's Second Annual Meeting – September 24, 2014
• RONA Returns to Profit in Q2 Despite Weaker Sales
• Housewares Battle Pushes Bowring, Bombay into Bankruptcy Protection
• Canadian Tire Reports Strong Q2 Results, Names New CEO
• U.S. Private Equity Firm Considers Bid for Sears Canada, Report Says
• Target Cuts Profit Estimate as Data Breach Costs Rise, Canadian Chief Outlines Recovery Plans
• Home Depot Appoints New EVP Merchandising
• Housing Starts Rise in July More than Expected
• Building Permits Jump 13.5% in June
• Statistics Canada Says July Jobs Report Had Error, Updated Data to be Released Friday
• Hiring Outlook Optimistic for Rest of 2014: BMO
• Canadian Economy Picks Up Pace in May
• Latest U.S. Economic News
Association News
Industry Memorial Golf Classic - October 1st
The 13th Annual Industry Memorial Golf Classic is taking place on Wednesday, October 1st 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 are:
Bruce Webster - Spent most of his career in the home improvement industry. He worked at many companies, including being a buyer at Homecare and Cashway. He then joined TSC Stores as a senior category manager, and finished his career as a product manager at Home Hardware Stores. Bruce passed away last September.
Tom Ross - Served for 33 years as the Executive Director of the Canadian Retail Hardware Association (CRHA). Tom passed away on June 26 of this year.
Past honourees include: 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.
Registration and lunch starts at 10:30 a.m. with a shotgun start at noon. Dinner will commence at around 6:00 p.m.
For further details and to register, please click here.
Money raised from hole sponsorships and the silent auction will go towards the CHHMA Scholarship Program which provides support for children of CHHMA member company employees to attend university or college.
Consider donating an item or items for the silent auction. Housewares or hardware products, golf items or any item interesting and/or unique would be sincerely appreciated. Whether or not you can attend the event, your donation will contribute to the Scholarship Program which has benefited 70 young people since 2001.
Click here for a silent auction pledge form.
Stewardship News
Register Now for CSSA's Second Annual Meeting – September 24, 2014
The Canadian Stewardship Services Alliance (CSSA) would like to invite stewards of Packaging and Printed Paper Programs in British Columbia, Saskatchewan, Manitoba, and Ontario to attend its second Annual General Meeting on Wednesday, September 24.
The CSSA and its family of recycling organizations, Multi-Material BC (MMBC), Multi-Material Stewardship Western (MMSW), Multi-Material Stewardship Manitoba (MMSM), and Stewardship Ontario (SO), look forward to this opportunity to provide members with an update on stewardship activities in Canada, to hear from stewards, and to answer your questions.
At the September 24th meeting, stewards will learn about:
· CSSA's accomplishments over the past year including cost savings realized through harmonization;
· Year over year program performance and the factors driving costs in each program;
· Implementation status for the new MMSW program in Saskatchewan;
· 2015 Material Fee Schedules for MMBC, MMSW, MMSM and SO;
· What's happening in other provinces that have signalled their intent to implement packaging and paper EPR program.
Whether you participate in multiple programs or in just one jurisdiction, plan to attend the meeting on September 24 so that you have all the information you need to fulfill your 2015 stewardship obligations in British Columbia, Saskatchewan, Manitoba, and/or Ontario.
For your convenience, you can attend the meeting in person or follow via webinar.
Further discussion details will be distributed in advance of the meeting.
Date: September 24, 2014
Location: Via webinar, or in person at: International Plaza Hotel & Conference Centre (formally the Double Tree Hilton), Plaza A room,655 Dixon Road, Toronto, Ontario, M9W 1J3
Time: 10:00am - 1:00pm PDT/ 12:00 - 3:00pm CDT/ 1:00pm - 4:00pm EDT
To register (via webinar or in-person), click here.
For any questions, please email: info@cssalliance.ca or call 1-888-980-9549.
You can also contact our CHHMA stewardship consultants for assistance with any stewardship program at:
Al Marks, 416-282-0022 ext.24, steward@chhma.ca
Duncan Deans, 416-282-0022 ext.22, ddeans@chhma.ca
Industry News
RONA Returns to Profit in Q2 Despite Weaker Sales
RONA inc. reported a stronger-than-expected quarterly profit on Tuesday as lower costs helped offset a drop in sales due to tough competition in the home renovation market.
RONA said the results demonstrate the success of its turnaround plan and its need to stay focused on efficiency. The company reduced annual costs by $110-million in 2013 by cutting jobs, closing stores and selling assets.
“The second quarter results show encouraging signs in sales. Same-store sales of the corporate stores in the retail segment have grown for the first time since 2010 compared to last year, despite the very challenging environment in the first half of the quarter. The net cost savings achieved by RONA’s recovery plan added $10.5 million to EBITDA in the quarter and $27.9 million year-to-date. These savings directly contributed to a 25% increase in adjusted net income in the second quarter and 80% increase year-to-date,” said Robert Sawyer, President and Chief Executive Officer of RONA, in a press release.
“The progress achieved to date, under our business plan, shows that we have rolled out the right initiatives to improve efficiency and turnaround underperforming business units. Given the slowdown in some areas of the country, particularly in Quebec, and the highly competitive environment, we must remain focused on improving our efficiency and increasing our market share through a better banner positioning. The repositioning of the TOTEM and Réno-Dépôt stores and the recent agreement announced with Ace Hardware are excellent examples of the steps we have taken to improve our value proposition. RONA will thus have a leaner infrastructure and clearer positioning to improve sales and profitability,” added Mr. Sawyer.
Still, arduous competition and a slowdown in some markets, notably in the province of Quebec, squeezed sales in the 13-week period ended July 29. Same-store sales declined 0.7% from a year earlier (an improvement from -3.4% in the first quarter) and overall revenue fell 4.4%.
“In our view, the home renovation spending market remains highly competitive, which coupled with a cautious consumer spending market, is likely to challenge RONA’s top line over the coming quarters,” Canaccord Genuity analyst Derek Dley said in a research note.
RONA’s closely watched adjusted earnings from continuing operations rose to $42-million, or 35 cents a share, in the second quarter, from $33.6-million, or 28 cents a share, in the year-before quarter.
Analysts, on average, had expected earnings per share of 33 cents, according to Thomson Reuters.
Net profit of $42-million reversed last year’s loss of $38.7-million.
Consolidated revenues from continuing operations fell to $1.19-billion, down 4.4% from $1.25-billion in the same quarter last year.
This decrease primarily reflects the closure of underperforming stores, a late spring in Quebec and Ontario which had an adverse impact on sales of building materials and seasonal goods in the first half of the quarter coupled to a decline in housing starts in Quebec, RONA’s biggest market.
For the first six months of 2014, consolidated revenues from continuing operations amounted to $1,957.8 million, compared to $2,081.9 million in the first half of 2013. On a same-store basis, sales were down in the retail segment by 1.7%.
Adjusted earnings from continuing operations for the first half of 2014 amounted to $27.6 million, or $0.23 per share, up 79.8% compared to $15.3 million, or $0.13 per share.
On July 29, 2014, RONA signed a long-term agreement for master licensing of the Ace Hardware brand with Ace Hardware International. Under this agreement, RONA has specific rights and privileges with respect to Ace Hardware brands, retail operating systems and web portals in Canada. The parties also signed a long-term distribution agreement giving RONA access to products available through Ace Hardware’s various distribution channels.
RONA said the agreement will allow the company to improve its offering to small dealers across the country while leveraging its existing distribution infrastructure. Furthermore, the reputation of Ace Hardware in North America will strengthen RONA’s banner portfolio.
Source: RONA inc., Reuters
Housewares Battle Pushes Bowring, Bombay into Bankruptcy Protection
(Article by Marina Strauss, The Globe and Mail)
A trio of housewares chains owned by a prominent Canadian retailing family has gone into bankruptcy protection, adding to a growing array of domestic stores that are faltering in the face of pressures from foreign powerhouses and online players.
Bombay & Co. Inc., Bowring & Co. Inc. and Benix & Co. Inc., owned by a member of the Isaac Benitah family that also owns Fairweather, International Clothiers and other chains, received court protection from creditors last week, owing $86.6-million, according to court documents. Almost half of the debts – $39.5 million – is owed to companies tied to brothers Isaac and Fred Benitah as secured creditors, the filings say.
The Benitah family is grappling with U.S.-owned rivals that have invaded Canada, such as Bed Bath & Beyond, Home Sense, Williams Sonoma, Pottery Barn and Crate & Barrel. As well, giant discounters Wal-Mart Stores Inc., Costco Wholesale Corp. and more recently, Target Corp., operate sizable home goods sections in their outlets here.
“It’s getting harder and harder for independents to survive against the big-box stores,” said Jamie Salter, chief executive officer of Authentic Brands Group LLC in New York, which buys rights to brands in order to bolster and license them to other businesses – although it is not considering acquiring any of the Benitah’s failing brands.
The three insolvent chains, Bombay, Bowring and Benix, each face “a severe liquidity crisis” and are in default of various financial and other covenants, according to a court filing. The court gave them until Sept. 5 to “solicit offers for a sale or investment and/or develop a comprehensive restructuring plan to address underperforming stores, right size its overhead and address liquidity constraints.”
Click here to read the full article.
Source: The Globe and Mail
Canadian Tire Reports Strong Q2 Results, Names New CEO
Last Thursday, Canadian Tire Corporation, Limited released second quarter results for the period ended June 28, 2014, reflecting solid revenue, sales and margin growth.
The company reported net income of $178.9-million, or $2.12 per share, in the second quarter, from $154.9-million, ($1.91) in the same period a year ago. That beat analysts’ average estimates of $2.02, according to Thomson Reuters.
Consolidated revenue rose 4.8% to $3.2-billion amid strong retail and gas sales, and income before income taxes in the retail segment climbed 22.7% to $149.6-million.
The market also warmed to the news that Canadian Tire president Michael Medline will be the retailer’s next CEO, coming as it did on the heels of strong second quarter results.
The spring period is historically critical for the country’s biggest seller of auto parts and housewares, representing almost 25% of its annual sales and closest in importance to the pre-Christmas fourth quarter for its Canadian Tire stores.
Fortunately businesses such as sporting goods, fishing and hunting enjoyed the best quarter “in history” due to the introduction of new brands, while the company managed to reap solid gains in all of its retail divisions.
"The second quarter is an important one for Canadian Tire as families get ready to spend more time outdoors or tackle jobs around the home after a long winter. Performance at Canadian Tire was strong across all categories, particularly given the late arrival of spring weather," said Stephen Wetmore, CEO, Canadian Tire Corporation.
"FGL Sports' core banner, Sport Chek, continued to post impressive results in a very competitive retail landscape and had its third consecutive quarter of double-digit same store sales growth. When we look at Financial Services, it exceeded our expectations again which is impressive given that its 2013 comparable was so strong," continued Wetmore.
Same-store sales rose 2.8% at Canadian Tire, 8.2% at FGL Sports and 3.2% at Mark’s even though “the weather was not our friend,” Mr. Medline told analysts on a conference call to discuss results for the second quarter.
“Our efforts are paying off by shifting our focus to thinking more like a group of specialty retailers and less like a general merchant.”
The retailer’s shares closed up $2.73, or 2.6%, to $107.26 in Toronto after hitting an intraday high of $110.38 last Thursday.
Mr. Medline will take over the top job in December from Mr. Wetmore, who has been largely credited with turning around the company’s middling performance since he took the job six years ago.
With competition increasing and the prospect of Target opening in Canada, Mr. Wetmore encouraged executives to focus on the retailer’s core bench retail strengths — automotive, sporting and outdoor goods, and household items.
He advised the board in early 2013 that he had hit many of his original objectives and suggested it was a good time to look for his successor.
“One of the things I didn’t hit during my tenure was a 10% (return on invested capital)…it’s a huge focus in the years to come,” said Mr. Wetmore, who will remain on the company’s board in a new, non-executive position of deputy chairman after stepping down.
Between 2010 and 2013, the retailer saw cumulative average growth of 14% in per-share earnings, return on invested capital of 7.4% and a 16% return to shareholders.
Mr. Medline has worked closely on all key aspects of corporate strategy since being named president in November and during his 13 years has been in charge of operating most of its business units, most notably overseeing a turnaround in its automotive business.
A key focus of his will be to roll out a series of digital initiatives to improve sales and customer loyalty at the retailer, including the rollout of a “Canadian Tire Money” loyalty card and mobile app later this year.
While the retailer is not abandoning its paper Canadian Tire flyer any time soon, it will invest more heavily in digital advertising for its core brand after Sport Chek saw a great sales lift from digital promotions on Facebook and Twitter.
“This is not the sleepy retail industry of decades ago,” Mr. Medline said. “We have to stay on offence.”
The Financial Post’s Hollie Shaw spoke with Mr. Medline last Thursday about the Canadian Tire brand, retail competition in Canada and future acquisitions. Click here to read a Q&A with the incoming CEO.
Source: Canadian Tire, The Financial Post
U.S. Private Equity Firm Considers Bid for Sears Canada, Report Says
The New York Post reported last week that the private-equity firm Sycamore Partners has shown an interest in purchasing Sears Canada.
“Sycamore, which recently bought Jones Group, Talbots and Hot Topic, is considering a bid for Sears Canada with a plan that could include “running the business,” said the Post story, citing unnamed sources close to the negotiations.
Sears Canada has been up for sale since May, after billionaire hedge fund owner Eddie Lampert sold off most of the prime locations and issued handsome dividends to shareholders.
Spokesmen for Sycamore, Sears Canada and Sears Holdings Corp. declined to comment on the story.
“Hopes for an auction of the controlling stake, which is being run by Bank of America Merrill Lynch, have been muted, with many insiders predicting a holiday season liquidation of the 61-year-old franchise, which employees roughly 20,000,” according to the Post article.
Stefan Kaluzny, described by the Post as a notoriously shrewd dealmaker, is a founder and managing director of Sycamore, which is based in New York City. The firm specializes in consumer and retail-related investments, with a stated strategy of partnering with established management teams to improve the operating performance of their businesses.
The firm is also invested in Aéropostale, Coldwater Creek, Nine West and Stuart Weitzman.
The Post reported that an initial round of bids for Sears Canada was completed in June, and a second round of bidding began last month.
“Sycamore may be the only firm that’s serious about keeping all of Sears Canada alive,” according to the Post article.
Interest from retailers including Walmart, Hudson’s Bay and Canadian Tire has been limited to a fraction of Sears Canada’s real-estate locations, the Post story went on to say.
“Indeed, sources said the fragmented interest has posed a challenge for retail liquidators led by Hilco and Gordon Brothers, who have been scrambling to assemble proposals to break up the chain.”
Sears Canada to gain $27.7 million from sale of its stake in Winnipeg mall
Meanwhile, last Wednesday, Sears Canada announced that it will receive $27.7 million from divesting its 20% stake in the Kildonan Place shopping centre in Winnipeg.
The move is part of a sale of the property with partner Ivanhoe Cambridge, which owns the remaining 80% of the interest.
Kildonan Place is being sold to H&R Real Estate Investment Trust for $138.5 million.
"Sears will continue to operate its department store at Kildonan Place," said Douglas C. Campbell, President and Chief Executive Officer, Sears Canada Inc. "This transaction will have no effect on associates employed at the store, or on the operation of the store which will continue to serve the residents of Winnipeg and surrounding area as it has proudly done for nearly 35 years since its opening in 1980."
Source: The Toronto Star, The Canadian Press
Target Cuts Profit Estimate as Data Breach Costs Rise, Canadian Chief Outlines Recovery Plans
Target Corp. announced last week that it is cutting its second-quarter earnings estimate due to a significant rise in costs related to a data breach last year and higher promotions and discounts to lure customers in North America.
The company has been struggling to move past a devastating data breach during the 2013 holiday season, in which hackers stole at least 40 million payment card numbers and 70 million other data.
The bleak forecast comes less than a week after Target named former PepsiCo Inc. and Sam’s Club executive Brian Cornell as its new CEO (effective Aug. 12) as it tries to regain customer confidence.
It is the first time Target has appointed an outsider as its CEO.
Cornell replaces CFO John Mulligan, who had been acting as interim chief executive since May, when former CEO Gregg Steinhafel resigned following the data breach.
Target said it incurred $111-million in net pre-tax expenses in the second quarter ended July with respect to the breach, most of which was money set aside to cover claims related to the data theft. That was much higher than the $26-million incurred till the first quarter.
U.S. same-store sales were flat in the second quarter as customers continued to pull back spending, the company said in a statement.
Target also said sales were weak in Canada. The company lost nearly $1-billion last year north of the border due to a botched expansion plan.
The company also said it incurred $285-million in pre-tax losses in the quarter, due to an early retirement of $725-million of its long-term debt.
Target estimated adjusted earnings of about 78 cents per share for the second quarter, lower than its prior forecast of 85 cents to $1.00 per share.
Analysts on average were expecting a profit of 91 cents per share, according to Thomson Reuters.
As of August 4th, Target’s share price has fallen 15.7% in the past year.
Target will report its full second-quarter results on August 20.
Meanwhile, new Target Canada president Mark Schindele outlined his plans to fix the company’s raft of problems including empty shelves and high prices in an article by the Globe and Mail’s Marina Strauss, read here.
Source: Reuters, The Globe and Mail
Home Depot Appoints New EVP Merchandising
The Home Depot announced on July 30 that Ted Decker has been promoted to Executive Vice President – Merchandising, effective August 4, 2014. In his new role, Decker will be responsible for all aspects of merchandising strategy and operations, reporting to Craig Menear, president – U.S. Retail.
Decker is a 14-year veteran of The Home Depot, where he most recently served as senior vice president of retail finance, pricing analytics and assortment planning. He has played an integral role in the company's merchandising transformation, leading the implementation of new pricing and analytics processes, as well as new merchandise planning and assortment tools.
"Ted's business acumen and retail experience have enabled him to serve as a broad contributor to our success in the marketplace over the past several years," said Menear. "His leadership and strategic expertise make him a perfect fit to lead our merchandising team going forward."
Prior to joining The Home Depot in 2000, Decker held various positions in strategic planning, business development, finance and treasury at Kimberly-Clark Corp. and Scott Paper Co.
Source: The Home Depot
Economic News
Housing Starts Rise in July More than Expected
New home construction in Canada topped economists’ expectations for July.
The strong showing suggests that builders are undaunted by the potential for a real estate slowdown.
A number of economists have been saying for some time that more homes appear to be being built than demographics suggest are required, and economists generally have been forecasting a moderation in housing starts. But low interest rates continue to fuel demand in the housing market, giving builders an incentive to keep up a brisker pace than expected.
Canada Mortgage and Housing Corporation (CMHC) said on Monday that Canadians housing starts increased to a seasonally adjusted annual rate (SAAR) of 189,784 units in July, compared with 185,952 in June.
The federal agency reported the overall increase came as the pace of urban starts increased slightly to 200,098 units in July, compared with 198,665 in June.
It said multiple urban starts decreased 2.0% to 115,870 units in July from June, while single-detached urban starts increased 4.7% to 67,062 units.
In July, the seasonally adjusted annual rate of urban starts increased in Atlantic Canada and Ontario, and decreased in the Prairies. Modest decreases were also observed in British Columbia and Quebec.
Rural starts were estimated at a seasonally adjusted annual rate of 17,166 units, up 5.1% from 16,328 in June.
What the economists had to say:
“The trend in construction has increased modestly in recent months due to in large part to multiple starts, which have strong variability from month-to-month,” said Bob Dugan, CMHC’s Chief Economist. “Nevertheless, CMHC continues to expect a soft landing for the new home construction market in Canada.”
Housing starts have rebounded since the unusually cold winter, which had put a damper on housing activity. “This actually points to a solid increase in construction this year versus 2013,” said Bank of Nova Scotia economist Derek Holt.
Bank of Montreal economist Benjamin Reitzes pointed out in a research note that most of the gains last month came from Ontario, “where starts surged 21%, with the bulk of the increase in multi-units and in Toronto.
“That won’t help ease fears about condo overbuilding,” he wrote.
But he concluded that “Canadian homebuilding is trending toward the upper end of estimates of demographic demand but isn’t at worrying levels just yet.”
Housing starts have now gained strength for four months in a row, and starts during the first seven months of this year are now slightly higher than during the same period last year, economists at RBC noted.
“While the persistence of low mortgage rates has likely contributed to underlying housing demand remaining firm – with home resales and housing starts continuing to post solid gains – we anticipate that housing affordability pressures will increasingly weigh on housing demand and housing market activity will resume a moderating trend in the second half of 2014,” the RBC research note stated. “The slowing in activity for the remainder of the year will help offset the earlier strength with our forecast calling for housing starts to come in at a 186,000 pace for 2014 as a whole (compared to 188k in 2013) before slowing to levels slightly below the rate of household formation…”
Economists at TD Bank said last month that the market is still considered to be “at least moderately overbuilt,” largely due to condos, and predicted that price growth will cool.
“Builders will respond to higher inventories and lower price gains by scaling back construction activity, with housing starts trending down to 175,000-180,000 units [annualized] over the next 12 months – a pace supported by underlying fundamentals,” they forecasted.
Source: CMHC, The Gobe and Mail
Building Permits Jump 13.5% in June
The value of Canadian building permits issued unexpectedly jumped by 13.5% to $8.0 billion in June led by higher construction intentions for institutional and industrial buildings in Quebec and commercial buildings in Alberta, Statistics Canada reported last Thursday.
Market analysts had expected a 2% month-on-month decline after the 15.4% advance seen in May.
Compared to June 2013, building permits were up 20.1%.
In the residential sector, the value of permits edged up 0.4% to $4.2 billion, a fourth consecutive monthly increase. The gains observed in four provinces were mostly offset by declines in the other provinces. Ontario posted the largest advance, followed by Nova Scotia and Quebec. British Columbia had the largest decrease.
Municipalities issued $2.4 billion worth of building permits for single-family dwellings in June, up 5.5% from May. It was the third consecutive monthly advance. Increases were reported in six provinces, led by Alberta, with Ontario, Quebec and British Columbia following.
Construction intentions for multi-family units fell 6.0% to $1.7 billion in June. This decline came in the wake of three straight monthly increases and was mainly due to lower construction intentions in Western Canada. Conversely, Ontario, Nova Scotia and Quebec posted gains.
At the national level, municipalities approved the construction of 16,770 new dwellings in June, down 4.6% from May. The decrease was mainly due to a 10.7% decline in multi-family units to 10,202. The number of single-family dwellings rose 6.9% to 6,568 units.
Meanwhile, the value of non-residential building permits rose 32.5% to $3.8 billion in June, a third consecutive monthly gain. Quebec was responsible for most of the growth at the national level. Declines were recorded in six provinces, with Manitoba and Ontario posting the largest decreases. Both provinces reported sharp gains in May.
The value of building permits in the institutional component more than doubled to $1.3 billion in June. Construction intentions for institutional buildings were up in four provinces. Quebec, which had the largest advance, posted a sharp increase in construction intentions for medical facilities.
In the industrial component, construction intentions rose 63.9% to $744 million, up for a third consecutive month. The increase was mainly attributable to higher construction intentions for information technology buildings in Quebec and utilities buildings in Ontario.
Canadian municipalities issued $1.8 billion worth of commercial building permits in June, 2.1% less than in May. The decline was a result of lower construction intentions in a variety of commercial buildings, including hotels and restaurants, warehouses and retail complexes. Declines were observed in seven provinces, with Ontario and Manitoba posting the largest decreases.
In contrast, Alberta, British Columbia and Newfoundland and Labrador reported gains.
Overall, the total value of permits was up in five provinces in June, led by Quebec, with Alberta a distant second.
Quebec reported the largest increase by far, with substantial advances in construction intentions for institutional buildings, industrial buildings and, to a lesser extent, multi-family dwellings.
Alberta's growth was largely due to higher construction intentions for commercial buildings and single-family dwellings.
The largest decline occurred in Manitoba, with commercial buildings accounting for most of the decrease.
Source: Statistics Canada, Reuters
Statistics Canada Says July Jobs Report Had Error, Updated Data to be Released Friday
Statistics Canada says it made an error in formulating its July jobs numbers.
The federal agency says the source of the error has been identified and corrected, and updated July job estimates will be released on Friday.
A week ago, Statistics Canada reported that a measly 200 jobs had been created in July, a number that fell spectacularly short of expectations.
Economists had expected that the economy would bounce back from an unexpected decline of 9,400 jobs in June, and add as many as 20,000 new jobs the following month.
Instead, Statcan reported that the number of full-time jobs fell by 59,700 while part-time jobs increased by 60,000 — figures it now suggests were faulty.
Statistics Canada says it takes the error “very seriously” and is launching a review of its data verification methods. The results of the review will be published as soon as they’re available.
“Nobody likes to find an error in a process,” said Sylvie Michaud, Statistics Canada’s Director-General of Education, Labour and Income statistics. “We are convinced it’s an isolated incident. We take pride in the quality control and the process we put in this. So as I say, right now the priority is releasing the data for Friday but we will also have a team that will look at the process to see why wasn’t found.”
Statistics Canada has faced reductions to its overall budget and staffing levels, but Ms. Michaud said that was not a factor in the mistake.
“I can tell you that there were no cuts that were done on the Labour Force Survey program budget,” she said.
Source: The Canadian Press, The Globe and Mail
Hiring Outlook Optimistic for Rest of 2014: BMO
Employment growth actually looks brighter for the second half of the year despite disappointing job numbers in July, according to a new BMO Economics report.
Both a rebound in the economy in the second quarter and expectations for solid growth bode well for Canada’s employment prospects, despite the fact that just 200 net new jobs were created last month, says the BMO Hiring Report released on Monday.
"Service-sector job growth has been much stronger than manufacturing sector job growth in the past year," said Robert Kavcic, Senior Economist, BMO Capital Markets. "Looking ahead, we expect manufacturing and export-related industries to pick up on the back of stronger U.S. demand and the lagged impact of the weaker loonie. Exports climbed 1.1% in June and the upward trend can support an increase in Canadian employment levels."
Mr. Kavcic noted that service-sector employment should remain sturdy, especially in areas such as professional & business services, health care and education, while retail and construction employment could lose some momentum.
"Many businesses in Canada are making investment choices based on a number of factors - including the sector in which they operate in and their own business plans to make the most of their dollars spent when hiring," said Steve Murphy, Head of Canadian Commercial Banking, BMO Bank of Montreal. "The importance of making targeted investments - in human capital and other business areas - in order to remain competitive and grow should remain top of mind."
According to BMO Economics, net hiring intentions for businesses in 2014 are:
+ 18% for the manufacturing sector;
+ 17% for the service sector; and
+ 7% for the retail sector.
The study also revealed more than half (55%) of large businesses (with 50 employees or more) plan to expand the size of their workforce while one-quarter (24%) of small organizations (with fewer than 10 employees indicate they have plans to hire this calendar year.
Regionally, Albertan business owners are the most likely to increase the size of their workforce, followed by business owners in Atlantic Canada (35% and 32%, respectively). Business owners in the Prairies are most likely to keep the size of their workforce the same (70%), followed by those in British Columbia (66%).
|
Overall
|
ATL
|
QC
|
ON
|
Prairies
|
AB
|
B.C.
|
| Increase size of workforce |
26%
|
32%
|
19%
|
26%
|
22%
|
35%
|
26%
|
| Keep size of workforce the same |
66%
|
62%
|
72%
|
64%
|
70%
|
59%
|
66%
|
| Net hiring |
+18%
|
+26%
|
+10%
|
+16%
|
+14%
|
+29%
|
+18%
|
“Many businesses in Canada are making investment choices based on a number of factors, including the sector in which they operate in and their own business plans to make the most of their dollars spent when hiring,” said Steve Murphy, head of Canadian commercial banking, BMO Bank of Montreal.
“The importance of making targeted investments in human capital and other business areas in order to remain competitive and grow should remain top of mind,” he noted.
The Pollara telephone survey of 502 Canadian business owners was conducted between March 7 and March 24. The margin of error for this survey is within 4.4%, 19 times out of 20.
Source: BMO Economics, The Toronto Star
Canadian Economy Picks Up Pace in May
Canada’s GDP jumped in May at the fastest pace in four months as car makers ramped up production.
Output rose 0.4%, following a 0.1% gain in April, Statistics Canada reported on July 31st.
It was the fifth straight monthly gain in domestic output adding to signs the economy is making progress on what Bank of Canada Governor Stephen Poloz said will be a two-year recovery toward full output. The central bank on July 16 estimated annualized growth of 2.5% in April-to-June period after the expansion slowed to 1.2% in the first quarter.
The rise from April, when Canada’s GDP grew by a sluggish 0.1%, was more than the 0.3% advance forecast by market analysts. Overall growth year-over-year expanded to 2.3% from 2.1%.
Canada’s economy has emerged from a harsh winter that slowed orders and dampened growth at the beginning of the year.
The output of service industries increased by 0.4% in May on broad growth across most sub-sectors while goods-producing industries rose 0.5% on strength in manufacturing as well as mining and oil and gas extraction.
Wholesale trade rose 1.2% in May, after expanding 1.3% in April. The gain in May was mainly due to increases in wholesaling of motor vehicles and parts as well as in machinery, equipment and supplies. Wholesaling of personal and household goods as well as food, beverage and tobacco products also increased. In contrast, wholesaling of building materials and supplies, miscellaneous wholesalers and farm products declined.
Retail trade increased 0.5% in May, following 1.1% growth April. Notable gains were recorded at building material and garden equipment and supplies stores, at motor vehicles and parts dealers and, to a lesser extent, at furniture and home furnishings stores. On the other hand, there were declines at food and beverage stores and at health and personal care stores.
Manufacturing output grew 0.8% in May. Durable-goods manufacturing grew 0.9%, mainly as a result of growth in motor vehicle production (+13%) and, to a much lesser extent, increases in primary metal and in furniture and related products. In contrast, miscellaneous manufacturing, computer and electronic product manufacturing and wood product manufacturing decreased.
Non-durable goods manufacturing grew 0.7% in May, with increases in most major industrial sub-groups. Gains were notable in manufacturing of chemical as well as petroleum and coal products.
Overall, mining, quarrying and oil and gas extraction increased 0.7% in May.
Oil and gas extraction advanced 0.7%, as a result of increases in both crude petroleum and natural gas production.
Support activities for mining and oil and gas extraction expanded 4.3%, as both drilling and rigging services grew.
In contrast, mining and quarrying (excluding oil and gas extraction) decreased 1.5% in May. This was mainly due to a decline in the copper, nickel, lead and zinc mining industry, partly as a result of maintenance activities. Potash mining also declined.
Construction increased 0.5%, largely as a result of gains in residential building and repair construction. Engineering construction edged up while non-residential building construction edged down.
The output of real estate agents and brokers rose 7.2% in May, as activity in the home resale market increased.
The transportation and warehousing services sector rose 1.0% in May, mainly owing to increases in rail and air transportation services.
The finance and insurance sector edged down 0.1% in May. A decline in banking services more than offset increases in financial investment and insurance services.
Utilities declined 0.9% in May, owing to a lower demand for both electricity and natural gas.
Professional services advanced 0.4%, mainly as a result of a gain in legal services.
Source: Statistics Canada, Bloomberg News
Latest U.S. Economic News
U.S. Retail Sales Flat in July on Auto Industry Decline
U.S. retail sales were unexpectedly flat in July, pointing to some loss of momentum in the economy early in the third quarter.
The Commerce Department said on Wednesday retail sales, which had increased 0.2% in June, were held back by a second straight month of declines in receipts at auto dealers, as well as weak sales of furniture and electronics and appliances.
July’s reading was the weakest since January. Economists polled by Reuters had forecast retail sales, which account for a third of consumer spending, increasing 0.2% last month.
So-called core sales, which strip out automobiles, gasoline, building materials and food services, and correspond most closely with the consumer spending component of GDP, edged up 0.1% in July. That suggested a moderation in consumer spending early in the third quarter.
Core sales rose by a revised 0.5% in June. They were previously reported to have increased 0.6% and economists had expected them to advance 0.4% in July.
The retail sales report, which was generally weak, suggested third-quarter growth will probably pull back after the April-June quarter’s brisk 4.0% annualized rate.
Receipts at auto dealerships fell 0.2% in July after declining 0.3% the prior month. Sales at non-store retailers, which include online sales, slipped 0.1%.
Sales at clothing retailers rose 0.4% and receipts at sporting goods shops gained 0.2%.
Sales at electronics and appliances stores fell 0.1%, while receipts at building materials and garden equipment suppliers rose 0.2%.
Source: Reuters
U.S. Home Prices Post Smallest Year-to-Year Gain in 20 Months
U.S. home prices rose in June by the smallest year-over-year amount in 20 months, slowed by modest sales and more properties coming on the market.
Data provider CoreLogic said last week that prices rose 7.5% in June compared with 12 months earlier.
That’s a solid gain but less than the 8.3% year-over-year increase in May and a recent year-to-year peak of 11.9% in February.
On a month-to-month basis, June prices rose just 1%, down from 1.4% in May. But CoreLogic’s monthly figures aren’t adjusted for seasonal patterns, such as warmer spring weather.
The slowing price gains should make buying a house more affordable. Prices had risen sharply last year, along with mortgage rates. At the same time, Americans’ paycheques haven’t risen nearly as fast, having increased roughly 2% a year since the recession ended – about the same pace as inflation. Many would-be buyers, particularly younger ones, were priced out of the market as a result.
Sales of existing homes fell in the second half of last year and have only modestly recovered since then. They rose to a seasonally adjusted annual rate of 5.04 million in June, the third straight increase. But that was still 2.3% fewer than the pace a year earlier.
And a measure of signed contracts slipped 1.1% in June, suggesting that sales might cool in coming months. It typically takes one to two months for a signed contract to become a completed sale.
More homes have been put up for sale, though the supply remains generally tight. There were 2.3 million homes for sale at the end of June, 6.5% higher than a year ago.
Home prices in Arkansas fell 0.4% in June compared with a year earlier, CoreLogic’s report said. It was the only state to post a decline. The states with the biggest increases were Michigan, where prices jumped 11.5%; California, 11.3%; Nevada, 11.1%; Hawaii, 10.8%; and Oregon, 9.5%.
Overall, prices rose in 98 of the 100 largest cities tracked by CoreLogic from a year earlier. They fell in Worcester, Massachusetts and in Little Rock, Arkansas.
Most economists forecast that sales will barely rise this year from 2013’s pace of 5.1 million. Sluggish sales, in turn, will slow annual price gains this year to roughly 5% or 6%, economists predict.
Source: The Associated Press
U.S. Consumer Spending Rises, Inflation Pressures Muted
U.S. consumer spending rose for a fifth straight month in June, but a moderation in price increases suggested the Federal Reserve will not raise interest rates any time soon.
The Commerce Department reported on August 1st that U.S. consumer spending increased 0.4% after rising by an upwardly revised 0.3% in May.
Spending, which accounts for more than two-thirds of U.S. economic activity, had been forecast rising 0.4% after a previously reported 0.2% gain in May.
When adjusted for inflation, consumer spending increased 0.2% after edging up 0.1% the prior month.
Consumer spending in the second quarter increased at a 2.5% pace and the rise in June augurs well for an acceleration in spending in the third quarter.
Spending is being supported by steady gains in income, which rose 0.4% in June, thanks to an improving labour market.
Despite the gains in spending, inflation retreated in June.
A price index for consumer spending rose 0.2% after advancing 0.3% in May. In the 12 months through June, the personal consumption expenditures (PCE) price index rose 1.6%. It had increased 1.7% in May.
Excluding food and energy, prices edged up 0.1% after gaining 0.2% the prior month. The so-called core PCE price index is the Federal Reserve’s preferred inflation measure.
It increased 1.5% from a year ago, still below the Fed’s 2% target, after rising by the same margin in May.
Source: Reuters
U.S. Economy Adds 209,000 Jobs, Unemployment Rate Rises to 6.2%
U.S. payrolls increased by 209,000 in July, a solid reading that extends the steadiest period of job creation since the end of the recession.
American employers now have added more than 200,000 jobs for six consecutive months, arguably the most impressive string of gains since 2006. The unemployment rate, which the Labor Department derives from a separate survey of households, rose to 6.2% from 6.1% in June.
The Wall Street consensus estimate was for an increase in non-farm payrolls of 230,000 and a jobless rate of 6.1%. The June increase in hiring was revised to 298,000 from 288,000 and the May reading was changed to 229,000 from 244,000.
The U.S. economy is getting stronger after a harsh winter caused GDP to contract. An early estimate by the Commerce Department two weeks ago said GDP advanced at annual pace of 4% in the second quarter, one of the fastest rates since the recession.
Consumer spending, business investment, exports, stockpiling and government spending all gained, Commerce said.
Companies kept hiring even as economic output slumped through the winter, suggesting confidence in the outlook. The Federal Reserve policy committee acknowledged the economy is getting stronger and dropped its long-standing worry that weak inflation risked morphing into deflation. The Fed left its plan to leave its benchmark interest rate at zero well into next year, however, saying that other labour-market indicators suggest “significant underutilization of labour resources.”
Among the indicators that most troubles Fed chair Janet Yellen is an elevated level of longer-term unemployment, which Labor said essentially was unchanged in July at 3.2-million people, or about a third of the labour force. The overall participation rate remained stuck at its lowest since the 1970s. Average hourly earnings rose 2% from a year earlier, slightly faster than inflation.
Source: The Globe and Mail
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