CHHMA - EYE ON OUR INDUSTRY
Volume 16, Issue 22, June 9, 2016
Inside This Issue:
• Need Some Tips on Digital Marketing? - Join us on June 14th for Webinar
• Sign-Up for June 20 Webinar on “How Digital is Changing Stores in Canada"
• Applications for CHHMA Scholarship Program Due by July 15th
• Sears Canada to Cut More Costs, Price Match as Posts Larger First Quarter Loss
• Dollarama Beats Profit Expectations as Sales and Margins Rise
• Keurig Discontinues Cold-Beverage Maker After Less than a Year
• HBC Sees $15 billion in Sales this Year, Nearly Quadruple its Revenue in 2013
• Wal-Mart Tests Grocery Delivery with Uber; Use of Drones in Distribution Centre
• Pace of Housing Starts Slows in May
• Value of Building Permits Drops on Weakness in Ontario
• More Sources Call on Canadian Government to Cool Surging Home Prices
• Latest U.S. Economic News
Association News
Need Some Tips on Digital Marketing? - Participate in June 14th Webinar
Sofie Andreou of Sofie Andreou & Associates, who was a keynote speaker at the CHHMA Spring Conference & AGM in April, held a free webinar earlier this morning for CHHMA and COPA members on the topic of Digital Marketing.This introductory webinar focused on the basics and provided tips in each of Facebook, Twitter and LinkedIn.
If you missed this morning’s webinar, there is an opportunity to participate in the same webinar next Tuesday, June 14th from 1:30 p.m. to 2:15 p.m. with a possibility of more webinars with Sofie in the future.
If there is interest from the membership, we will also look to extend access to Sofie's online digital marketing tutorials called "Coffee Break Learning" in the fall. To find out more on Coffee Break Learning or Sofie click here: http://www.sofieandreou.com
For the GoToMeeting sign-in details for the webinar and links to a few of Sofie’s video tutorials which you might find useful, click here.
Sign-Up for June 20 Webinar on “How Digital is Changing Stores in Canada”
On Monday, June 20, CHHMA members will once again have an opportunity to participate in a webinar (at no cost) put on by Michael Rogosa, a senior analyst at RetailNet Group.
Mr. Rogosa previously held a webinar on March 22nd for CHHMA and COPA members that presented some interesting demographic information and consumer trends impacting retail sales in Canada.
This time, the webinar topic will be: How Digital is Changing Stores in Canada.
Canada’s low scale and adoption of ecommerce has been well documented, but many have made the mistake of overlooking the broader impact digital tools and capabilities are having on the retail environment. While Canada has not seen the same movement in products leaving stores as many other developed nations, the shopper’s path to purchase and value chain have changed dramatically.
This session we will look at the impact of digital tools on the path to purchase and show examples of retailer investment in digital integration in the store.
The webinar will start at 2:00 p.m. EDT and last approx. 30 minutes.
To register for the webinar, click here.
Applications for CHHMA Scholarship Program Due by July 15th
The CHHMA is once again pleased to be able to offer the opportunity for children of employees of our member companies to apply for a scholarship to help offset the cost of post-secondary education. The Association recognizes the importance of education and therefore encourages children of our member companies to attend University or College. Successful candidates receive $1,000 CDN per year for the first two years of study leading to a diploma or degree from an accredited community college or university.
The scholarship program is available to the dependents of any current full-time employees of the CHHMA or member companies. The program is only offered to Canadian companies or divisions of companies based in Canada which are members of the CHHMA. The member company must remain a member in good standing in order for the student to qualify for the second year of the scholarship.The student's parent or guardian must be an active full-time employee with at least one year seniority with the CHHMA or member company as of July 15th in the year of application. Applicants must be preparing to enter an accredited community college or university in the fall term, and attain a minimum average of 75% in the last year of high school (or CEGEP).The decision of the Selection Committee and the CHHMA is final and not open to appeals.The CHHMA reserves the right to withdraw a scholarship should the student's parent(s) or guardian(s) voluntarily leave the employment of the CHHMA or member company, or if employment is terminated for just cause prior to the start of the school year, or if the company terminates its membership in the Association.
Complete details, application forms and information sheets (for bulletin board postings) in English and French can be found at http://www.chhma.ca/Public/Scholarship-Program. Please print off and post these notices in your lunch room or high traffic area.
The CHHMA must receive applications from potential candidates no later than July 15th.
Since 2001, the CHHMA has awarded $160,000 towards scholarships and some 80 young people have benefited from the scholarship program.
Industry News
Sears Canada to Cut More Costs, Price Match as Posts Larger First Quarter Loss
Sears Canada Inc. reported a bigger quarterly loss on Wednesday, and said it would cut more costs this year, as the company struggles with declining sales.
Hit by increasing competition, Sears Canada has been shutting stores and cutting jobs.
The company, whose largest shareholder is Sears Holdings Corp CEO Edward Lampert and his hedge fund, raised its 2016 cost reduction target to $127-$155-million from the $100-million-$127-million it forecast in March.
Sears Canada said it cut about $80-million in costs in the first quarter ended April 30 and said savings would be reinvested in growth initiatives.
The retailer said it would offer “a more logically designed merchandise assortment,” to drive faster inventory turns, and higher sales per square foot.
The company, which agreed sell and lease back a distribution outlet in Calgary in March, said on Wednesday it has entered a similar agreement for another outlet in British Columbia.
Same-store sales at its “core” locations (95 department stores and 39 home stores) fell 6.9% and overall same-store sales were down 7.4%.
The net loss in the quarter increased to $63.6-million, or 62 cents per share, from $59.1-million, or 58 cents, a year earlier.
Revenue fell 14.5% to $595.9-million.
Sears Canada said it has implemented a strategy to match rivals’ lowest appliance and mattress prices – changing prices in its stores daily – in a reflection of the significant impact of Internet comparative shopping on traditional retailers.
Brandon Stranzl, executive chairman of Sears, said in an interview with the Globe and Mail that the retailer started a couple of weeks ago to match appliance prices with the lowest rates in the market every morning.
The initiative will soon be applied to mattress prices as well, he said.
“You will see fairly substantial changes in how we go to market in appliances and mattresses,” he said. “We want to establish price trust with consumers.”
Mr. Stranzl, who took the top job at Sears almost a year ago, is racing to turn around the troubled retailer, launching changes in various departments and setting up a digital lab while slashing costs and selling off real estate and other assets.
The initiatives have yet to show up in the company’s overall results. He said it will take until next spring to see a “noticeable” impact on the financials.
The retailer said the first quarter sales decline was the result of an array of factors, including a drop in sales of big-ticket items such as major appliances following the termination of a credit card agreement.
By the fall, Sears will launch two pilot prototype stores with some of its new concepts, such as apparel shops geared at younger consumers and an expanded cosmetics section.
Sears’ price matching in appliances and mattresses is a way for the retailer to do the price comparison work for the customers, Mr. Stranzl said.
“They don’t have to do the work,” added Becky Penrice, chief operating officer at Sears.
The practice of retailers matching prices is becoming increasingly common, although consumers often have to show a rival merchant’s advertisement or flyer to prove a lower price elsewhere.
Mr. Stranzl said Sears will cut the price another 10% if a customer finds a lower price at a rival.
Ms. Penrice said Sears uses a third-party online “price scraping” tool to identify daily market pricing. It sends its stores a report for matching the lowest price compared with major competitors nationally.
She said the mattress category is different from major appliances because mattress brands and models are inconsistent among retailers.
Thus in mattresses, “we focus on comparable features of major competitors to establish the market price at a national level,” she said.
“While we do change prices on major appliances daily, the mattress category prices fluctuate less frequently, but we will check with the same frequency as we do with appliances,” she said.
Sears’ overall goal is to more than double its sales per square foot, which is roughly $200 today, he said.
Source: Reuters, The Globe and Mail
Dollarama Beats Profit Expectations as Sales and Margins Rise
Canadian dollar-store operator Dollarama Inc. reported a bigger-than-expected rise in first-quarter profit on Wednesday, helped by higher sales and margins, and slightly raised its margin forecast for the year.
The company raised its earnings before interest, taxes, depreciation and amortization (EBITDA) margin forecast for fiscal 2017 to 21.0-22.5% from 20.5-22.0%.
Dollarama, which sells items for up to $3, said items priced higher than $1.25 accounted for 60.5% of sales in the first quarter ended May 1, up from 55.8% a year earlier.
That helped the retailer boost its gross margin to 37% in the quarter from 36% a year earlier.
The Montreal-based company’s profit rose 28.4% to $83.2 million ($65.7 million), or 68 Canadian cents per share.
That beat analysts’ average estimate of 63 Canadian cents, according to Thomson Reuters.
Dollarama’s sales rose 13% to $641 million. Same-store sales growth, however, slowed to 6.6% from 6.9%.
The retailer said it opened eight new stores in the first quarter.
Up to Tuesday’s close of $92.59, Dollarama’s shares had risen nearly 30% in the past 12 months.
Source: Reuters
Keurig Discontinues Cold-Beverage Maker After Less than a Year
Keurig Green Mountain Inc., the single-serve coffee company acquired by JAB Holding this year, will discontinue its cold-beverage machine less than a year after a rollout hampered by delays and tepid demand.
The company plans to phase out the product — known as the Keurig Kold — and offer customers a full refund if they’ve already bought one, according to a statement on Tuesday. The move handed a victory to soda-machine maker SodaStream International Inc., which saw its shares jump almost 3% on the news.
The Keurig Kold, released last year, was the company’s big bet that it could duplicate the success it had with single-serve coffee machines. The idea was to let customers make their own soda at home, providing an alternative to SodaStream machines. Coca-Cola Co. threw itself behind the effort, agreeing to buy a stake in the company. Coca-Cola Chief Executive Officer Muhtar Kent said last year that the Keurig Kold might be a bigger hit than the company’s original coffee machine.
However, there were questions about its affordability for the average consumer. The suggested retail price of the bulky countertop units was $369.99, with each soda pod costing more than a dollar — significantly more expensive than buying and storing cans of soda in your fridge.
Reaction to the device ended up being underwhelming, according to Stifel Financial Corp. That raised concerns that it would become at best a niche product. JAB and other investors then stepped in to acquire the company for about US$14 billion and brought in a new CEO.
“We are grateful to all of our consumers who have supported our company in the innovation of single-serve beverages,” Suzanne DuLong, a spokeswoman for Keurig, said. “Reimagining how beverages can be created, personalized and enjoyed will continue to guide Keurig’s strategy into the future.”
Source: Bloomberg News, The Associated Press
HBC Sees $15 billion in Sales this Year, Nearly Quadruple its Revenue in 2013
The Hudson’s Bay Company expects sales of $15 billion from its global retail banners this year as the department store chain opens new stores and makes inroads into the European market with new stores in Germany, Belgium and the Netherlands.
That is almost quadruple the company’s annual revenue when it went public in 2013, when sales were about $4 billion, chief executive Jerry Storch told the company’s annual general meeting of shareholders last week, but the acquisitions of banners such as luxury chain Saks Fifth avenue have allowed the company to beneficially leverage its scale.
The Hudson’s Bay Company expects sales of $15 billion from its global retail banners this year as the department store chain opens new stores and makes inroads into the European market with new stores in Germany, Belgium and the Netherlands.
That is almost quadruple the company’s annual revenue when it went public in 2013, when sales were about $4 billion, chief executive Jerry Storch told the company’s annual general meeting of shareholders last week, but the acquisitions of banners such as luxury chain Saks Fifth avenue have allowed the company to beneficially leverage its scale.
“This growth allows us to become more efficient across all areas of the business, from buying, to shipping, to the manufacturing of our private label products,” he said.
Consolidated retail sales in fiscal 2015 were $11 billion, an increase of 37% per cent, largely due to the retailer’s acquisition of the Kaufhof department store chain in Germany and Belgium.
In January, HBC acquired Gilt Groupe, an online “flash sale” retailer. And just last month, the company announced it will open 20 stores under its own Hudson’s Bay banner in the Netherlands beginning in 2017.
HBC has also seen “excellent results” from both the Saks and Saks Off Fifth banners in Canada after their recent opening, Storch said.
The company reports its first quarter results later today.
Source: The Financial Post
Wal-Mart Tests Grocery Delivery with Uber; Use of Drones in Distribution Centre
Wal-Mart Stores Inc. will begin testing the delivery of groceries using Uber and Lyft drivers, aiming to match the convenience of services offered by Amazon.com Inc. and other e-commerce companies.
The retailer will start trying out Uber in Phoenix and Lyft in Denver within the next two weeks, Wal-Mart’s chief operating officer of e-commerce, Michael Bender, said in a statement. The company previously began a pilot program in March using Deliv to deliver Sam’s Club groceries and other merchandise in Miami.
The move steps up competition with Amazon’s burgeoning grocery-delivery service and provides a potential new avenue of growth for Uber and Lyft. The idea is to let Wal-Mart customers pick out groceries online and then have employees fill the order and give it to one of the ride-hailing companies’ drivers. Shoppers will pay a US$7-to-$10 delivery charge to Wal-Mart to have the groceries brought to their door.
Meanwhile, inside a 1.2 million-square-foot Wal-Mart distribution centre near its headquarters, a buzzing sound — like a swarm of bees — comes from an aisle of shelves laden with merchandise from diapers to microwaves.
Flying up and down the seemingly endless aisle is a drone with a custom-built camera that takes 30 pictures a second. The aircraft is capturing images of every item to make sure it’s placed in the appropriate spot on the shelves so employees can quickly find it when it’s needed by a store.
Wal-Mart demonstrated the technology to reporters at a media event before last Friday’s shareholders meeting.
When the drone finds an item in the wrong slot, an employee at an “air traffic control” centre will see a red mark on a real-time computerized map of the rack and send a worker to move the misplaced item. Scanning all of the shelves in the centre takes two employees one month to do manually. The drone can complete the task in an hour. The job also is dangerous for humans, requiring them to ride a lift several stories into the air to reach the top shelves. The drone doesn’t even need a pilot.
The distribution-centre drone is still in testing and will be for at least six to nine more months, said Shekar Natarajan, a Wal-Mart vice president who handles emerging technologies. But it’s one of the early ways Wal-Mart sees drones playing a role in its logistics network, which includes more than 100 distribution centres and roughly 4,500 U.S. stores. The Bentonville, Arkansas-based company wouldn’t discuss any other specific drone projects in the works beyond tracking inventory.
Wal-Mart asked the U.S. Federal Aviation Administration last year for a waiver to test drones outdoors, with a goal of eventually using them to deliver goods to consumers. The company also wants to use drones to a ssist with tracking merchandise, such as taking inventory of trailers outside its distribution centres, according to the FAA filing.
Companies such as Amazon.com Inc and Alphabet Inc. have been testing drones designed to deliver small packages to people’s homes, a concept that both have said is still years away. While the FAA is finalizing regulations to allow more widespread commercial drone flights, it must craft an entirely new set of rules permitting the long-distance, robotic flights required for deliveries.
Wal-Mart has been trying to play catch-up with Amazon in delivery, opening a new network of online fulfillment centres to speed shipping times and testing a subscription shipping service similar to Amazon Prime. It has also been pushing in-store pickup, where customers can order items online and have them ready for pick up at their local Wal-Mart.
Greater use of technology was a theme of Wal-Mart’s annual meeting last Friday, with Chief Executive Officer Doug McMillon pointing to e-commerce spending and sales-floor advancements. He also used the new Facebook Live service to connect with associates.
“Our investments in education and training, store structure, wages, hours and sales floor technology are to support you and enable you to serve your customers and members,” he said.
Wal-Mart has moved to boost worker pay over the past two years, raising minimum wages to US$10 an hour in February. But labour organizations are pushing the company to embrace a US$15-an- hour base. The advocacy group Our Walmart said it held conversations with McMillon last week ahead of the meeting to discuss their demands.
The delivery push has taken on greater urgency as Americans shift more of their spending online. Wal-Mart previously began offering home delivery in Denver and San Jose, California. It also encourages customers to place orders online and pick up the goods at stores — a bid to capitalize on its thousands of U.S. locations.
“We’ll start small and let our customers guide us, but testing new things like last-mile delivery allow us to better evaluate the various ways we can best serve our customers how, when and where they need us,” Bender said.
At the meeting, shareholders approved the company’s slate of directors, which cut the size of its board to 12 directors. Four existing members, including former CEO Mike Duke and founding family member Jim Walton, decided not to stand for re- election. Aida Alvarez and Roger Corbett also are retiring from the board.
Stuart Walton, the grandson of founder Sam Walton and the son of Jim Walton, was the only new board member added. With the current makeup, independent directors account for about two- thirds of the body. A measure to require Wal-Mart to have an outsider as its chairman was voted down at the meeting.
Source: Bloomberg News
Economic News
Pace of Housing Starts Slows in May
The Canada Mortgage and Housing Corporation reported on Wednesday that the pace of housing starts slowed last month compared with April.
The seasonally adjusted annual rate (SAAR) for May came in at 188,570 units for the month, down 1.5% from 191,388 in April.
The six-month moving average of the seasonally adjusted annual rate was 191,000 in May compared with 194,950 in April.
“Housing starts slowed in May, and are now on pace to reach 191,000 units in Canada — falling within the upper range of our housing market outlook forecast for the year,” said Bob Dugan, CMHC chief economist. “The decline we see in the trend is led by fewer multiple starts in urban areas, particularly in larger centres like Toronto.”
The pace of urban starts slowed by 2.5% in May to 170,432 units as multiple-unit starts fell 5.7% to 110,834 and single-detached starts increased 4.2% to 59,598.
The annual pace of urban starts fell in British Columbia and the Prairies, but increased in Ontario, Atlantic Canada, and Quebec.
Rural starts were estimated at a seasonally adjusted annual rate of 18,138 units, up 8.8% from 16,675 units in April.
Source: CMHC, The Canadian Press
Value of Building Permits Drops on Weakness in Ontario
The value of Canadian building permits issued in April fell for the second month in a row, slipping by 0.3% from March to $6.9 billion on lower construction intentions in Ontario, Statistics Canada said on Wednesday.
Analysts polled by Reuters had predicted a 1.5% increase after March's 6.3% decline. April marked the first time since February 2015 that the value of permits had dropped for two consecutive months.
The value of residential permits declined 1.8% to $4.3 billion in April. The decrease in the value of multi-family dwelling permits more than offset the gain posted by single-family homes. Declines were reported in six provinces, led by Ontario, followed by Quebec and Nova Scotia.
In the multi-family dwellings component, the value of permits declined 6.2% to $1.9 billion in April, the third drop in four months. Decreases were posted in seven provinces, led by Ontario, where the decline followed a 31.6% increase the previous month. Quebec and Nova Scotia followed a distant second and third. In contrast, multi-family dwelling construction intentions in Alberta increased significantly.
The value of permits for single-family dwellings was up 1.8% to $2.5 billion in April, a third consecutive monthly increase. Compared with the same month in 2015, the value of permits was relatively unchanged in April. Advances were widely spread among half the provinces. Alberta and New Brunswick led the increase, while Manitoba posted the largest decline.
Municipalities approved the construction of 16,232 new dwellings in April, up 3.0% from the previous month. The increase was led by multi-family dwellings, which advanced 1.6% to 10,202 new units. Single-family homes were up 5.6% to 6,030 new units.
In the non-residential sector, the value of building permits was up 2.5% to $2.5 billion in April, following a 21.4% drop the previous month. The increase was the result of higher construction intentions for institutional and commercial buildings. Gains were posted in six provinces, with Alberta responsible for most of the increase.
The value of institutional building permits was up 15.4% to $695 million in April, after posting a 10.5% decline the previous month. Higher construction intentions for universities and other government buildings contributed to the advance. Gains in Alberta offset declines observed in four provinces, led by Ontario.
In the commercial component, the value of permits was up 2.5% to $1.5 billion in April, following a 26.9% decline in March. The advance was largely the result of higher construction intentions for recreational facilities, distribution warehouses and research centres. Gains were reported in seven provinces, led by Ontario and Manitoba.
The value of industrial building permits fell for a third consecutive month, down 16.5% to $346 million in April, the lowest level since October 2013. Lower construction intentions for manufacturing plants and transportation-related structures led the decline. Decreases were reported in eight provinces, led by Ontario.
Regionally, half the provinces posted lower construction intentions in April, led by Ontario, followed distantly by Quebec and Nova Scotia. Conversely, Alberta reported the largest gain.
The value of permits in Ontario was down 9.2% in April, following two consecutive monthly gains. Every component posted a decline, with the exception of commercial buildings. The decrease was mainly attributable to lower construction intentions for multi-family dwellings, institutional structures and industrial buildings. The value of permits for multi-family dwellings fell 20.1% in April, following a 31.6% increase the previous month.
In Quebec, the value of permits declined 4.9% to $1.2 billion in April, after increasing the two previous months. The decrease was attributable to lower construction intentions for multi-family dwellings and, to a lesser extent, industrial buildings. All other components posted advances.
Construction intentions in Nova Scotia fell 45.6% to $65 million in April, following a 62.0% increase in March. Every component recorded lower permit values, led by multi-family dwellings, institutional structures and commercial buildings.
In Alberta, the value of building permits increased 27.7% to $1.2 billion in April. The advance was largely attributable to multi-family dwellings and institutional structures.
Source: Statistics Canada, Reuters
More Sources Call on Canadian Government to Cool Surging Home Prices
Canadian bankers are calling on the government to take further steps to cool surging housing markets in Toronto and Vancouver.
The heads of National Bank of Canada and Bank of Nova Scotia said last week that mortgage down-payment requirements should be boosted to tame the market, joining the Organisation for Economic Cooperation and Development (OECD), which also commented last week that measures should be taken to reduce the risk to financial system from household debt and rising prices.
Down payments should return “over time” to 10% from 5% National Bank Chief Executive Officer Louis Vachon said.
“For the longest time, we had minimum 10% cash down and we had 25-year maximum amortization and that worked very well,” Vachon, said. “I think over a period of time that’s where we need to gravitate back to.”
His comments follow those by Brian Porter, CEO of Scotiabank, who said the country’s third-largest lender was easing back on mortgage lending because it was “concerned” about high prices in the two cities.
“We just took our foot off the gas the last couple quarters in terms of mortgage growth for the reasons I cited, in terms of Vancouver and Toronto,” Porter said. Porter told the Globe and Mail that the government could consider several measures including raising down payments, increasing the qualifying rate for five-year fixed mortgages and imposing a temporary luxury tax on foreign buyers.
The comments come as price rises in the two cities remain undaunted by moves by the government earlier this year. Foreign buyers, particularly in Vancouver, are adding to the upward pressure. The federal government in mid-February raised down-payment requirements to 10% for the portion of a house above $500,000 while making it more costly for banks to fund lending.
Canadian Finance Minister Bill Morneau said in an interview three weeks ago that it’s too soon to know the impact of federal changes to mortgage rules aimed at cooling the Vancouver and Toronto markets.
“It’s been just about three months it’s been in place, so it’s early days,” Morneau said at the time. We continue to be very focused on this file. Both Toronto and Vancouver continue to have house price escalations that force us to pay close attention.”
Vancouver’s property market will drive British Columbia’s housing sales past its 2005 high to a record this year before prices cool next year, according to a forecast from the western province’s real estate board last Thursday. Home sales in the province will rise 12% and prices will jump 20% this year, the British Columbia Real Estate Association said.
Home sales jumped nationwide by 10% in April from a year earlier, the most activity for that month and the second- highest level on record, according to the Canadian Real Estate Association. In Vancouver, prices increased 25% to an average of $844,800 from the year before and sales climbed 15%. The average price of a detached home in Toronto jumped 19% over the same time.
The OECD said as part of its global report last Wednesday that “macro-prudential measures,” or regulations, should be “tightened further and targeted regionally to reduce financial- stability risks from high household debt and house prices.”
“Very low borrowing rates have encouraged household credit growth and underpinned rapidly rising housing prices, particularly in Vancouver and Toronto, which together are a third of the Canadian housing market,” the OECD said.
Vancouver Mayor Gregor Robertson over the weekend also called on the federal and provincial governments to intervene with measures to cool off the region’s scorching real estate market.
The frenzied sales activity within Vancouver’s city limits has spilled into the suburbs over the past three years. Record-high prices have been set across the Lower Mainland, including properties in the Fraser Valley.
“These trends are not sustainable and we need to be wide awake to the risks they pose to the stability of our economy, let alone the impact they have in pushing local residents, especially young people, families and seniors, out of our neighbourhoods,” Mr. Robertson said in a statement on Sunday.
He reiterated his call for the provincial government to introduce a speculation tax to discourage houses from being flipped by investors for short-term gains.
Mr. Robertson had raised the idea of such a tax in May, 2015, when housing critics at a Vancouver rally sought to draw more attention to the lack of affordable accommodation, especially for millennials. On Sunday, he said the chorus is growing louder about the impact of soaring real estate prices in the region.
“While adding more housing supply is crucial, it is not an affordability solution on its own,” Mr. Robertson said.
“With unregulated, speculative global capital flowing into Metro Vancouver’s real estate, we are seeing housing prices completely disconnected from local incomes. First and foremost, housing needs to be for homes, not just treated as a commodity.”
Benjamin Tal, deputy chief economist at CIBC World Markets Inc., said last month that while it is unclear how extensive foreign investment is within the Vancouver region’s housing market, it makes sense to implement a speculation tax, notably on overseas buyers who engage in flipping.
Data from BC Assessment from Jan. 1, 2014, to early 2016, shows a general flipping rate of 5.6% of the single-family detached properties surveyed within the City of Vancouver. But some observers say that rate understates the impact on prices because in a rising market, three or four homes flipped in a neighbourhood will influence the value of similar properties listed in that area.
The mayor also suggests B.C. Premier Christy Clark’s Liberal government implement a luxury tax on high-end sales.
“I urge the provincial and federal governments to heed the warnings from the financial sector and implement clear measures to rein in the excesses of Vancouver’s housing market,” Mr. Robertson, who has been lobbying Ottawa to invest money to create more affordable housing, said.
On Wednesday, Federal Finance Minister Bill Morneau said he won’t put a timetable on when the government might be prepared to take further action to cool the country’s housing sector.
“We’re making sure that we have a deep dive into the information to ensure that any considerations we have for change are evidence-based,” he said to reporters following an address to the Economist magazine’s Canada Summit in Toronto.
“Our ongoing goal is to ensure we understand the market in all of its complexity; that we consider all the evidence to determine what measures are necessary on an ongoing basis to ensure that Canadians have the ability to buy homes.
“When and if we have something to say, we’ll say it.”
“We intend to keep on continuing to look at what the drivers are,” he said. “There are underlying impacts around population demographics, there are impacts around the labour market, there are impacts around supply, and we’re also looking at the impacts of foreign investors. All of these are part of our consideration as we look at the market.”
He declined to say when the government might be ready to reveal more detailed data on the role of foreign buyers on the surging prices in markets such as Vancouver and Toronto, nor would he say if this would be a focus of any possible policy actions by the government.
“I can tell that we’re looking closely at all sources of information right now,” he said. He said that in addition to the funds the recent federal budget earmarked for Statistics Canada to gather deeper statistical data on foreign ownership, the government is gathering data from Canada Mortgage and Housing Corp. as well as analysis from the Bank of Canada and the Finance department’s own in-house research.
“That is an important part of our considerations on how to best manage the market,” he said.
Source: Bloomberg News, The Globe and Mail, The Toronto Star
Latest U.S. Economic News
U.S. Hiring Hits Five-Year Low
The U.S. economy created the fewest number of jobs in more than five years in May as employment in the manufacturing and construction sectors fell sharply, suggesting a deterioration in the labour market that could make it harder for the Federal Reserve to raise interest rates.
Nonfarm payrolls increased by only 38,000 jobs last month, the smallest gain since September 2010, the Labor Department reported last Friday. Employment gains were also restrained by a month-long strike by Verizon workers, which depressed information sector payrolls by 34,000 jobs.
Underscoring the report’s weakness, employers hired 59,000 fewer workers in March and April than previously reported. While the unemployment rate fell three-tenths of a percentage point to 4.7% in May, the lowest since November 2007, that was in part due to people dropping out of the labor force.
“This unusual jobs report puts the Fed in a tricky position. Disappointing job creation numbers, including adverse revisions to prior monthly estimates, argue for the Fed to remain highly accommodative for now,” said Mohamed el-Erian, chief economic adviser at Allianz in Newport Beach, California.
The Fed bank has signalled its intention to raise rates soon if job gains continued and economic data remained consistent with a pickup in growth in the second quarter.
Fed Chair Yellen said last week that a rate increase would probably be appropriate in the “coming months,” if those conditions were met. The U.S. central bank hiked its benchmark overnight interest rate in December for the first time in nearly a decade.
The weak employment report bucks data on consumer spending, industrial production, goods exports and housing that have suggested the U.S. economy is gathering speed after growth slowed to a 0.8% annualized rate in the first quarter.
Economists polled by Reuters had forecast payrolls rising 164,000 in May and the unemployment rate falling to 4.9%.
The goods producing sector, which includes mining, manufacturing and construction, shed 36,000 jobs, the most since February 2010. Even without the Verizon strike, payrolls would have increased by a mere 72,000.
The Verizon workers, who were considered unemployed because they did not receive a salary during the payrolls survey week, returned to their jobs last Wednesday. They are expected to boost June employment.
Other details of the employment report were less encouraging. Average hourly earnings rose five cents, or 0.2%. That kept the year-on-year rise at 2.5%.
Economists say wage growth of between 3.0% and 3.5% is needed to lift inflation to the Fed’s 2.0% target. There are, however, signs that inflation is creeping higher as the dampening effects of the dollar’s past rally and the oil price plunge dissipate.
A broad measure of unemployment that includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment held steady at 9.7% in May.
The labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, fell 0.2 percentage point to 62.6%.
The job gains in May were broadly weak, with the private sector adding only 25,000 jobs, the smallest since February 2010. Manufacturing employment fell by 10,000 jobs and construction payrolls dropped 15,000.
Mining employment maintained its downward trend, shedding 10,000 positions. Mining payrolls have dropped by 207,000 since peaking in September 2014, with three-quarters of the losses in support activities.
Retail payrolls rose 11,400 after shedding jobs in April for the first time since December 2014. Wholesale trade employment fell by 10,300 jobs. Temporary help jobs dropped 21,000. There were declines in utilities and transportation and warehousing employment. Government payrolls increased 13,000.
Source: Reuters
Fed Survey Finds Modest Growth in Many Regions
The Federal Reserve said last Wednesday that the U.S. economy grew at a modest pace in much of the country from April to mid-May, leading to tightening labour markets and higher wages.
The Fed’s latest survey of business conditions found that half of its 12 regions described growth as modest, while Dallas said economic activity had increased “marginally.” Two districts – Chicago and Kansas City – said growth had slowed from the past report. New York described activity as “generally flat.”
The report, known as the Beige Book, will be discussed at the Fed’s upcoming meeting on June 14-15. The information in the report could be cited as a reason to hold off on a rate hike.
While employment grew only modestly since the last report, “tight labour markets were widely reported” in most areas, according to the Beige Book. Employers across the country were having a harder time finding workers to fill jobs. Wages were up modestly, especially in areas where workers were in high demand.
In Atlanta and Richmond, “high-skill workers in high-demand fields continued to be hard to find, and low-skilled jobs were also becoming harder to fill,” the Beige Book said.
Fed Chair Janet Yellen said Friday that an interest rate hike would be appropriate in the coming months if the economy kept improving. In an appearance at Harvard, Yellen said that while economic growth was relatively weak at the end of last year and the beginning of this year, the U.S. economy appeared to be picking up based on recent data.
But various reports are painting a mixed picture. The government last week reported that consumer spending surged in April, but a separate report showed that construction spending suffered widespread setbacks in the same month.
The Beige Book also presented a mixed view of conditions. It was based on readings from the 12 Fed regional banks that were collected before May 23.
In San Francisco, economic activity was expanding at a “moderate” pace. Meanwhile, six regions – Philadelphia, Cleveland, Atlanta, Chicago, St. Louis and Minneapolis – reported slightly less upbeat “modest” growth. Three regions which indicated a slowdown.
Consumer spending, which accounts for 70% of economic activity, dampened some areas. Three districts – Boston, New York and Philadelphia – said cool spring weather had curtailed retail sales compared to last year. A number of retailers reported increased competition from online sales.
In manufacturing, Cleveland, Chicago and Minneapolis reported modest increases. But New York, Philadelphia, St. Louis and Kansas City said that manufacturing had declined, and San Francisco reported a flat reading for manufacturing.
The report found that the energy sector, which has been under pressure with falling prices, remained weak. Oil drilling continued to contract in the Dallas, Kansas City and Minneapolis districts.
Anticipation of a rate hike at either the next June meeting or in July has been rising since the Fed released the minutes of its discussions at its April meeting. The minutes showed that Fed officials believed the strengthening economy might warrant a rate hike in June.
But the gathering will take place only a week before British voters decide whether to support a move to leave the European Union. The Fed may be reluctant to raise rates in advance of the British vote. Analysts believe a hike at the July 26-27 meeting is more realistic.
The Fed raised its key policy rate for the first time in nearly a decade in December, pushing the rate from a record low near zero to a range of 0.25% to 0.5%. But after increased global weakness and financial market turmoil in January and February, the Fed has kept rates unchanged so far this year.
Source: The Associated Press
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