CHHMA - EYE ON OUR INDUSTRY
Volume 17, Issue 12, March 22, 2017

Inside This Issue:

• Don’t Miss Out On a Value-Packed Day of Education at the CHHMA Spring Conference & AGM - April 11th!
• Join Your Fellow Canadian Members and Retail Customers at Maple Leaf Night in Las Vegas on May 9th
• Registration for the CHHMA Ontario Golf Tournament & Spa Day (May 30) to Open Later this Week
• Register for the CHHMA Quebec Golf Classic - May 25th
• See How Your Company Can Increase Profitability at the ”Quantifying Value” Seminar on April 20th
• Jacques Gatien & Stew Valcour to be Inducted into Hall of Fame at CHHMA Spring Conference Luncheon
• Sears Holdings Warns It Has ’Substantial’ Doubts about Future
• Hudson’s Bay Exposes Saks Customer Info Online
• Nearly Half of Online Purchases in Canada Made at Foreign Retail Sites
• Canadian Retail Sales Jump More than Expected in January
• Toronto House Prices May Jump 25% this Year
• Latest U.S. Economic News

Association News

Don’t Miss Out On a Value-Packed Day of Education at the CHHMA Spring Conference & AGM - April 11th!

The 48th CHHMA Annual General Meeting & Spring Conference will take place on Tuesday, April 11, 2017, at the International Centre (Conference Facility) in Mississauga, ON.
This year’s theme is “Managing through turbulent times. What do we do now?”

And given the recent political & economic uncertainty, ever-changing retail/consumer shopping environment and financially challenging business climate, you and your company, more than ever, need the information and tools to help you achieve success.

This year’s conference speakers and topics were chosen with that in mind and the value-packed day plans to give you some of the answers you need to manage through these bumpy times.

Understanding Foreign Exchange Markets / Techniques of Hedging with Case Studies
Representatives from the Associated Foreign Exchange (AFEX) will provide a 20 minute overview on ‘How to Become Currency Neutral in Foreign Markets’ for the full audience which will cover off the benefits of implementing Foreign Exchange (FX) risk management solutions, general processes and tools that corporations use to manage foreign exchange (FX) and gaps that they often see from those plans, and some important suggestions on how best to manage FX exposure. Our speakers will then offer a one hour breakout session in more detail on Currency Risk and Techniques for Hedging, including case studies. See how you can effectively manage your foreign exchange exposure and help to stabilize profit margins.

Christopher Nicholson has over 20 years of experience working in the Foreign Exchange markets.He currently provides guidance to FX salespeople and traders nationwide, and serves as a member of the Senior Leadership team at AFEX in the role of VP Foreign Exchange AFEX. Prior to joining AFEX Chris held the role of VP, Director of Trading at Jameson Bank.

Matt Peddle is the Canadian Integrated Partnership Manager for AFEX and has been working for the company since their entry into the Canadian market with the acquisition of Jameson Bank in 2014. Matt develops and maintains partnerships with trades groups, corporations, and individuals across Canada. He has helped create a new division in AFEX to address a recent market shift for Financial Technology (Fintech) companies.

The Resilient Team - Building Resilience at Work
We live in a fast paced and instant society, where we do more with less, and where teams are often flooded with information on a daily basis, and change is frequent. The current economic downturn has created challenges and change, and in some cases, uncertainty. Resilience is a critical skill for leaders, teams and businesses to bounce forward during change, demanding times and following adversity. Resilient teams are more efficient, solution focused, embrace values and get through tough times with less impact on the team and results. During Charmaine Hammond’s breakout session you will learn the 5 steps to resilience, how to build a resilient life (at home and at work), say “no” without guilt, and manage the challenges associated with change.

Charmaine Hammond’s first career was as a Correctional Officer.She then pursued a career in dispute resolution as a corporate mediator, facilitating resolution for some of the most complex workplace conflicts.Surviving a near death sailboat accident taught Charmaine a lot about personal leadership and resilience. With an MA in Conflict Analysis & Management she brings more than two decades of helping business owners, leaders and employee teams learn how to effectively deal with everyday challenges including building a respectful workplace, managing conflict, leading multi-generational teams, leading through change/challenge and conflict, and helping leaders inspire the best performance from their team to improve results.

Other Keynote Presentation Topics:

Economic and Financial Outlook - An economic review by one of Canada’s top economists from the TD Bank of the Global, U.S. and Canadian economies and the key forecasts moving forward.

Changing Retail Trends & Shopping Patterns; The Trump Effect - In this presentation, you will hear about the changing trends at retail and changing shopping patterns of the various generations from millennials on up and learn how you can best get your brand message across to today’s consumers! In addition, you will get some insight into the ‘Trump Effect’ on today’s economy.

How Digital & Mobile is Impacting the Retail Experience; Grow Your Business Using Digital Tools - In the final keynote address from Google Canada, you will get some valuable information on how digital and the growth of mobile is impacting the retail experience and how you can get more visibility using search as well as use more dynamic digital tools to meet customer expectations and grow your business.

Also, the Hardware & Housewares Industry Hall of Fame Inductions will occur during the luncheon prior to the afternoon program. Key customers will be invited to attend as well. Join us as the industry inducts Mr. Jacques Gatien (Atlantic Promotions) and Mr. Stew Valcour (Kent Building Supplies) into the Hall of Fame. Click here to see further details on these two worthy recipients.

Click here for more details and to register online.

Click here to download a PDF brochure on the Spring Conference & AGM which also includes a registration form on the last page.

So we hope you and your colleagues will join us on April 11th.

Join Your Fellow Canadian Members and Retail Customers at Maple Leaf Night in Las Vegas on May 9th

Maple Leaf Night is taking place this year on the evening of Tuesday, May 9th, 5:30 p.m. - 8:00 p.m., at the Mirage Hotel & Casino in Las Vegas. This popular social event is open to CHHMA members and their retail customers in town for the National Hardware Show (May 9-11).

There are still sponsorship opportunities available at a cost of $775 CDN which entitles your company to corporate identification on all tickets, letterheads and event signage. It also entitles your company to one complimentary ticket for the host who will participate in the receiving line and two additional complimentary sponsor tickets.

Additional sponsor tickets can also be purchased for a reduced price of $129 CDN.

Regular individual tickets are $189 CDN or $225 CDN at the door.

Retailers/customers are invited to attend complimentary on behalf of the sponsors.

To sign up as a sponsor online, click here. For a sponsorship PDF form, click here.

For regular registration, click here.

Registration for the CHHMA Ontario Golf Tournament & Spa Day (May 30) to Open Later this Week

CHHMA and COPA will be holding a joint golf tournament on Tuesday, May 30th, 2017 at the three-time Canadian Open Championship Course, Angus Glen Golf Club in Markham, Ontario.

Golfers have the option of playing individual score on the south course or scramble format on the north course.

Registration & lunch will start at 11:30 a.m. with a 1:00 p.m. tee off. Dinner will commence at 7:00 p.m.

Golfer Passports will be available at the registration table for $20 (no tax), all proceeds will go to support each Association’s Scholarship Fund. The passport will include:

• Entry into several draws
• Participation in all competition holes
• 3 golf balls
• Angus Glen Golf Club hat
• $25 gift certificate to the pro-shop
• Men’s or ladies’ Nike Victory Polo shirt (retail value $65)

The $20 can be paid in cash, cheque or credit card and a receipt will be issued for each passport purchased.

Non-Golfers Activities

In addition, non-golfers can spend their leisure time at the Hilton Toronto/Markham Suites Conference Centre & Spa, 8500 Warden Avenue, Markham, Ontario. Spa appointments will be booked throughout the day. Once you have registered and chosen your package, Nicole Gamble will contact you to arrange your specific time.

If you would like to add lunch and/or other services to your package you can discuss this with Nicole Gamble when she contacts you.

Your spa package includes: one spa package, complimentary parking and refreshments, use of the Eucalyptus steam room and access to the fitness centre pool and Jacuzzi. NOTE: The fitness centre will be accessible from 10:00 a.m.

Head-to-Toe Package
Signature Pedicure (1 hour 15 minutes)
Signature Manicure (45 minutes)
Hair Wash & Style (45 minutes)

Rejuvenation Package
Therapeutic Massage (30 minutes)
Signature Pedicure (1 hour 15 minutes)
Signature Manicure (45 minutes)

Sponsorships

Various sponsorships will be available, including a hole sponsorship for $200 (plus HST)! Upgrade to a competition hole by supplying a prize with a minimum value of $100 (proceeds from the hole sponsorships will go to support each Association’s Scholarship Fund). Other sponsorship opportunities will be available and listed on the registration.

Registration for this event will open later in the week so check your email for communiques on how to register or visit the CHHMA website at Upcoming Events for the links.

Register Now for the CHHMA Quebec Golf Classic - May 25th

This year’s CHHMA Classique de golf / Golf Classic is once again being held at the top quality Club de golf Le Fontainebleau in Blainville, Quebec on Thursday, May 25th.

Registration and brunch will start at 9:00 a.m., with an 11:00 a.m. shotgun start. After golf, there will be dinner with wine followed by prize presentations.

In order to maintain the most reasonable cost possible, the tournament depends on company sponsors, so please consider sponsoring a hole while registering.

For all the details and to register, click here: French Registration English Registration

This golf day is always an industry highlight with great turn-out from the customer and vendor sides so mark your calendar and hope we see you there!

See How Your Company Can Increase Profitability at the ”Quantifying Value” Seminar on April 20th

In today’s competitive marketplace, everyone is concerned about their bottom line. And while companies are focused on closing deals and reaping the financial benefits, one aspect that is often overlooked is measuring and understanding value. But it can make all the difference in the success of your dealings.

On April 20, the CHHMA and COPA are hosting an informative session about the power of value which you not want to miss!

Participants will find out how to get paid for value created. The financial benefits of value creation and pricing are well-known, so why is it that so many companies don’t achieve the results they want after they have done the work to create something of value? Procurement can be a main contributor to bringing value and profit to an organization.

Attendees will learn that the recognized best method on the buy or sell side is to measure, and acquire, or price, market and sell based on value created and realized. The evolution from Total Cost of Ownership (TCO) to Total Profit Added™ looks more holistically at cost savings and profit improvement.

Companies with a value-based sales strategy are 35% more profitable than those with a weak execution on value. At the same time, companies that buy based on best value are 36% more profitable. By focusing on the right things, both parties can be more profitable. It is not a zero-sum game.

Join us on April 20 to learn about the updated strategies, techniques, methodologies, to sell or buy based on Total Profit Added and realize the sustainable benefits of the right sales and procurement strategy.

The presentation will wrap up with a question and answer period, so come prepared with some questions for Todd and he’ll be sure to shed some light on the different topics you want to learn more about.

About the Speaker
The informative session will be presented by Todd Snelgrove, a leading expert in the field of value. With over 15 years’ experience as a team leader on understanding, presenting, calculating, and procuring Total Cost of Ownership, and the new gold standard, Total Profit Added™ (TPA™), Todd has developed and implemented his leading insight into strategies for sales and marketing programs, strategic account management, customer value partnership agreements, TCO / TPA™ procurement strategies, and many programs that help customers and companies increase profitability by measuring and understanding value.

Todd has demonstrated successful customer and supplier partnership agreements with Fortune 1000 companies in many industries and sectors around the world. His insightful work has been featured in articles on value buying, selling, pricing, communicating, and procuring in several noteworthy publications.

He directed and edited Value First, Then Price, which was released in 2016. In the book, Todd and co-author Andreas Hinterhuber explain how you can quantify value in business-to-business markets from the perspective of both buyers and sellers, from sales, to pricing, to procurement, to prepare you for success.

The presentation will wrap up with a question and answer period, so come prepared with some questions for Todd and he’ll be sure to shed some light on the different topics you want to learn more about.

Location: CHSI, 5110 Creekbank Rd, Mississauga,ON
Date: Thursday, April 20, 2017
Registration: 1:00 p.m.
Presentation: 1:30 p.m. to 3:45 p.m.
Cost: $99.00 + HST per person or $149.99 + HST (includes his book)

For a PDF registration form, click here.

Online registration will open very shortly.

Industry News

Jacques Gatien & Stew Valcour to be Inducted into Hall of Fame at CHHMA Spring Conference Luncheon

In this, the 33rd year, the CHHMA is honoured to serve as the custodian of the Hardware & Housewares Industry Hall of Fame and is pleased to announce that two deserving industry veterans - M. Jacques Gatien, founder of Atlantic Promotions, and Mr. Stew Valcour of Kent Building Supplies will be inducted on April 11, 2017 at an industry luncheon sponsored by the CHHMA.

The Hardware & Housewares Hall of Fame was established in 1984 to recognize the achievements of our industry’s leaders and pioneers. Since that time 63 industry icons, inventors, business founders and builders from the retail and manufacturing sectors have received the honour.

Jacques Gatien
M. Gatien was born a salesman, beginning his career successfully demonstrating and selling at tradeshows and fairs throughout Quebec. In the early 1960’s, he moved from doing in-store demonstrations to live TV and history was being made.In 1965, he decided to become his own boss and started to introduce innovative new products to the marketplace and founded Atlantic Promotions Inc. with two partners. Over the years the company introduced many products and brands including T-Fal cookware, Krazy glue, Bee Mop, Oscar Broom, Nu Finish and Pant Saver car mats, just to name a few. In 1985, M. Gatien introduced the Starfrit brand (translation: “The Fries Star”) to Canadian consumers. In 1996, he redefined the company, focusing on kitchen products and owning the brand, since then the Heritage, Lock & Lock, The Rock and Ricardo brands have been added. Atlantic Promotions celebrated 50 years in business in 2015 and it wouldn’t be a stretch to say that every Canadian household has been touched by at least one of their products.

Stew Valcour
Mr. Valcour began his career with Beaver Lumber in 1976 stocking shelves. After stops at D.H. Howden, Lockharts and Thornes he ended up at what was then McLeods in Winnipeg in 1981. It was during his time there, working his way up to the VP level, that he credits for learning the do’s and don’ts of running a business. In 1988, he was given the opportunity by Jim Irving to take over what was then a chain of 5 stores known as Kent Building Supplies with 230 staff. With a mandate to expand the business over the next 28 years they have grown to 50 stores, 7 truss plants and 1 gypsum supply company and over 3,400 employees. Through the years, he has also been involved in several of the other Irving businesses, but his passion has always been the Kent family and living up to the mission of “Being the best source of home improvement products in the community.”

The luncheon will be held in conjunction with the annual CHHMA member Spring Conference and is included in the conference package. Tickets for the Hall of Fame Lunch will also be available for purchase individually. Please contact Pam Winter at 416-282-0022 ext.21 or pwinter@chhma.ca for more information.

To view the entire list of those previously inducted into the Hall of Fame, or the criteria to nominate someone for next year’s award, visit our website at http://www.chhma.ca/Public/Hall-of-Fame.

Sears Holdings Warns It Has ’Substantial’ Doubts about Future

Sears Holdings Corp, once the largest U.S. retailer, warned on Tuesday about its ability to continue as a going concern after years of losses and declining sales.

“Our historical operating results indicate substantial doubt exists related to the company’s ability to continue as a going concern,” Sears said in its annual report for the fiscal year ended Jan. 28.

The company said an inability to generate additional liquidity might limit its access to new merchandise or its ability to procure services. Continued operating losses also could restrict access to new funds under its domestic credit agreement, according to the filing.

Sears, which employs 140,000 people, announced a major restructuring plan in February with hopes of cutting costs by $1 billion through the sale of more stores, jobs cuts and brand asset sales. And it’s reconfiguring its debts to give itself more breathing room.

But it has to get more people through the doors or shopping for Sears brands online.

Sales at Sears and Kmart locations that have been open at least a year, a key indicator of a retailer’s health, dropped 10.3% in the final quarter of 2016.

Sears shares were down 17.6% in premarket trading on Wednesday.

The company is also considering selling some of its businesses, such as the Kenmore appliances and DieHard car battery brands.

The Sears catalogue was an emblem of the post-World War II consumer boom in the United States but the company was unable to adjust to the changing retail landscape and rising competition from Wal-Mart Stores, Target Corp and others.

The company lost $2.22-billion in the year ended Jan. 28. Since 2013 it has accumulated $7.4-billion in losses and seen revenue fall 44% to $22.1-billion.

During that time, Sears cut the number of its U.S. stores by nearly a third, reduced holdings in Sears Canada, and spun off the Lands’ End clothing chain.

Its total liabilities stand at $13.19-billion.

In recent years, Sears has placed some of its stores into a real estate investment trust (REIT), sold its Craftsman line of tools, and repeatedly raised debt from billionaire Chief Executive Edward Lampert’s hedge fund.

Lampert owned nearly 10% of the REIT that paid Sears $2.6-billion in 2015 for stores that it purchased, many of which were then leased back to the retailer.

The announcement of Sears’ potential demise is a blow to Lampert, a hedge fund investor who took control of Sears after merging it with Kmart, which he controlled, in 2004.

He soon published a 15-page manifesto, in which he stated that conventional measures of retail success, such as same-store sales, were no longer relevant. Sears would regain its health by closing struggling stores and focusing instead on profitable sales, he wrote.

Sears last turned an annual profit in 2011.

Sears said on Tuesday actions taken during the year to boost liquidity, including the $900-million sale of the Craftsman tool brand to power tool maker Stanley Black & Decker Inc early this year, could satisfy its capital needs for the current fiscal year.

But the filing also makes clear that additional asset sales could prove problematic.

As part of the Craftsman sale, Sears Holdings reached an agreement with the Pension Benefit Guarantee Corp. That puts a claim on some Sears’ assets in an effort to protect pensions of retired employees.

The agreement “contains certain limitations on our ability to sell assets, which could impact our ability to complete asset sale transactions or our ability to use proceeds from those sales to fund our operations,” the company said.

Already, the pension board agreement requires Sears to make a $250-million cash payment to its pension plan by March of 2020, and the pension board has a 15-year lien on revenue owed to Sears from future sales of Craftsman products.

Source: Reuters, The Associated Press

Hudson’s Bay Exposes Saks Customer Info Online

The Hudson’s Bay Company, owner of luxury retailer Saks Fifth Avenue, exposed the personal information of tens of thousands of customers through the company’s websites.

The company posted information including e-mail addresses and phone numbers for customers at Saks as well as identification codes for products that customers signed up for on wait-lists. The private data were taken down after Hudson’s Bay was contacted by BuzzFeed News, which first reported the exposure.

“The security of our customers is of utmost priority and we are moving quickly and aggressively to resolve the situation, which is limited to a low single-digit percentage of e-mail addresses,” a Hudson’s Bay spokeswoman said in an e-mailed statement last Sunday.

“We have resolved any issues related to customer phone numbers, which was an even smaller percent.”

No credit, payment or password information was ever exposed, according to the spokeswoman.

Source: Bloomberg News

Economic News

Nearly Half of Online Purchases in Canada Made at Foreign Retail Sites

Even though Canada’s biggest online retailers are growing faster than their U.S. counterparts, competition is at an all-time high given that close to half of Canadian consumers’ online purchases are made at foreign retail sites, according to a new report.

The report from E-Tail Canada also found that 62% of Canadian retailers surveyed saw the value of their online orders rise between 2015 and 2016, and 71% saw their conversion rate grow — the number of initial customer clicks that result in an actual purchase, as opposed to browsing.

That’s positive news for retailers given that Canadians are expected to spend $39 billion a year online by 2019, accounting for about 9.5% of all retail purchases, according to estimates from Forrester Research.

“With double-digit percentage increases in online sales year on year since 2010, Canadian retailers are having to adapt to remain competitive,” the E-Tail Canada report says.

The agency’s research also illustrates what trends are catching on among retailers who are trying to offer customers easier online shopping experiences, a strategic asset if it can prevent a loss of sales to foreign retail websites.

37% of Canadian retailers surveyed currently offer customers so-called “cross-channel” returns or exchanges, allowing customers to return items in stores that they bought online, while 8% were in the process of implementing the capability and 13% planned to do so in the next two years.

Similarly, 31% of retailers show web customers real-time store inventory online, while 15% were in the process of implementing the technology and 22 were planning to introduce it within the next two years.

“American retailers have been generally ahead of the game in e-commerce compared to Canadian retailers — it’s just a more mature market, about two to four years ahead of where we are,” said Craig Patterson, director of applied research at the University of Alberta’s School of Retailing. Some Canadian retailers still do not sell much, if anything, online. “Holt Renfrew has some e-commerce, but they don’t have a comprehensive fashion offering online.”

Statistics Canada reported that Canadian e-commerce sales were $19.2 billion in 2016, with about 60% of the purchases made from domestic retailers and 40% from foreign retailers.

The Retail Council of Canada has been trying to maintain the so-called “de minimus” threshold on imports of U.S. goods at $20 — the level at which a parcel incurs taxes and duties — arguing that raising the threshold will hurt Canadian retailers.

“It’s a disadvantage to Canadian retailers have to charge the tax when U.S. retailers who do not, and it’s a disadvantage to government entities who would otherwise be collecting sales tax,” Patterson said. “But it’s a challenge, because in there are many products that are not available for sale on Canadian sites that (Canadians consumers) want to buy.”

One of the clearest emerging digital trends in the E-Tail Canada data is digital media’s influence on marketing.

67% of the retailers surveyed said their traditional marketing budgets had shifted to digital marketing; 12% of the companies said their overall marketing budget had shifted to digital by more than 50%, while 19% said digital marketing took up 25% to 50% of their overall marketing costs.

Source: Article by Hollie Shaw, The Financial Post

Canadian Retail Sales Jump More than Expected in January

Signs of strength in the Canadian economy continued to gather momentum as retail sales for January came in better than expected.

Statistics Canada reported on Tuesday that retail sales climbed 2.2% to $46.0 billion in January after declining in December.

Economists had expected a gain of 1.1%, according to Thomson Reuters.

It was the largest gain in nearly seven years as spending rose across most sectors, led by an increase in purchases of cars.

“It’s a bird, it’s a plane, no it’s a superheated Q1 economy for Canada,” wrote CIBC economist Avery Shenfeld.

The economist said this latest data, which is bullish for the Canadian dollar and bearish for bonds, will make if difficult for the Bank of Canada to stick to “its dovish spin.”

The data follows recent stronger-than-expected results for wholesale and manufacturing sales, trade and job creation.

Excluding sales at motor vehicle and parts dealers, retail sales advanced 1.7%.

After removing the effects of price changes, retail sales in volume terms increased 1.3%.

Sales were up in 10 of 11 subsectors in January, representing 98% of retail trade.

The largest increase in dollar terms was a 3.8% advance at motor vehicle and parts dealers, the fourth gain in five months. The increase in this subsector was mainly attributable to new car dealers (+4.2%). Gains were also reported at used car dealers (+4.3%) and other motor vehicle dealers (+4.2%).

Sales at health and personal care stores increased 6.0% in January, more than offsetting the 3.0% decline in December.

Sales at general merchandise stores (+1.8%) rose for the first time in three months.

Receipts at food and beverage stores rose 1.3%. Higher sales were reported at all store types within the subsector. Sales at beer, wine and liquor stores (+3.4%) more than offset December's decline, while sales at supermarkets and other grocery stores (+0.8%) increased for the second month in a row. Sales at convenience stores (+1.2%) rose for the first time in five months.

Sales at gasoline stations (+0.5%) continued their upward trend in January, rising for the seventh time in eight months.

Clothing and clothing accessories store sales increased 1.8% in January, but did not offset the decline in December. Higher sales were reported at all store types within the subsector, as jewellery, luggage and leather goods stores (+17.2%) rebounded from a 13.9% decline in December. Higher sales were also reported at clothing (+0.3%) and shoe (+1.0%) stores.

Following a 3.7% decline in December, sales at electronics and appliance stores (+3.7%) bounced back in January.

Sporting goods, hobby, books and music stores edged down 0.1%, their fourth consecutive monthly sales decline.

Retail sales were up in every province in January.

Ontario (+1.7%) reported the largest increase in dollar terms. January's gain stemmed from higher sales at new car dealers and, to a lesser extent, health and personal care stores.

Quebec recorded a 2.6% increase in retail sales on widespread gains in most subsectors.

Retail sales in British Columbia grew 2.9% in January, primarily on the strength of higher sales at new car dealers.

Alberta retail sales (+2.4%) increased for the fifth time in six months, due in large part to higher sales at motor vehicle and parts dealers.

Retail sales rose for the fourth consecutive month in both Saskatchewan (+3.7%) and Manitoba (+2.5%).

In Newfoundland and Labrador (+2.6%), retail sales were up for the second month in a row.

Following weaker sales in December, receipts were up in each of the maritime provinces as gains were observed in Nova Scotia (+2.1%) and Prince Edward Island (+4.3%), while New Brunswick edged up 0.1%.

On an unadjusted basis, retail e-commerce sales were $1.0 billion in January, accounting for 2.7% of total retail trade. On a year-over-year basis, retail e-commerce increased 17.2%, while total retail trade rose 3.4%.

Source: Statistics Canada, The Canadian Press

Toronto House Prices May Jump 25% this Year

Toronto’s housing market is likely to stay strong for the rest of the year, with home prices jumping as much as 25%, amid hints that speculators are fuelling demand and posing a potential risk to the economy, TD Economics chief economist Beata Caranci said.

A “strong Toronto home-price forecast is not a vote of confidence in market fundamentals,” Caranci wrote Monday in a note to clients.

“It’s getting harder to ignore warning signs that market demand pressures are increasingly reflecting speculative forces.”

Residential prices in Canada’s largest metropolitan region are forecast to grow 20% to 25% this year, up from a previous estimate of 10% to 15%, according to the report by TD Economics.

Toronto-area prices have climbed 19% in the past 12 months, the fastest clip since the 1980s, when a frenzied housing market resulted in year-over-year increases of 55%, Caranci said.

“Evidence is building that speculative forces are growing deeper roots, which raises the risk that prices will move closer to the top end of that forecast in the absence of policy measures,” Caranci wrote.

As for next year, higher mortgage rates and fewer affordable properties will likely cut the growth rate to 3% to 5%, though a lack of clarity on housing speculation makes predictions difficult, Caranci said. A housing market driven by speculators seeking a quick profit boosts the risk of rapidly unwinding price gains at the same time homebuyers are contending with larger debt burdens, she said.

“The risk is that if you were to have any interruption in income or a downturn in the economy, your landing in the housing market is harder,” Caranci said in an interview.

A possible foreign buyer’s tax, which has been the focus of policy debate on how to cool the market, has been effective in other cities worldwide in the short-term, but also can trigger unintended consequences, Caranci wrote. A tax imposed in Vancouver last year pushed foreign investment into other areas, including Toronto. And a tax focused solely on foreign investors wouldn’t discourage speculators from Canada, she said.

Bank of Montreal chief economist Doug Porter said earlier that Toronto is clearly in the midst of a housing “bubble.” Caranci called the bubble debate a distraction because it’s usually not clear what’s happening in an economy until the cycle ends.

“What we can say is that when comparing this housing cycle to previous ones that lack a happy ending, Toronto appears to be moving in that direction,” she said.

Source: Bloomberg News

Latest U.S. Economic News

U.S. Retail Sales Weakest in Six Months, Inflation Firming
U.S. retail sales recorded their smallest gain in six months in February amid delays in tax refunds, but the biggest rise in the annual inflation rate in nearly five years pointed to rising price pressures that could support further interest rate hikes.

The marginal increase in retail sales reported by the Commerce Department last Wednesday was the latest sign the U.S. economy lost further momentum in the first quarter. Firming inflation and a tight labour market encouraged the Federal Reserve to raise rates on Wednesday for the second time in three months.

"Should inflation continue to firm and consumer spending remain solid, we expect the Fed will hike again in June, and at least three times this year," said Michael Hanson, chief economist at TD Securities in New York.

The Commerce Department said U.S. retail sales edged up 0.1% last month, the weakest reading since August, amid declines in purchases of automobiles and discretionary spending.

January's retail sales were, however, revised up to show a 0.6% rise instead of the previously reported 0.4% advance. That left retail sales rising 5.7% in 12 months through February, underscoring the strength in domestic demand.

Excluding automobiles, gasoline, building materials and food services, retail sales rose 0.1% after an upwardly revised 0.8% jump in January. These so-called core retail sales, which correspond most closely with the consumer spending component of GDP, were previously reported to have increased 0.4% in January.

The government delayed the issuing of tax refunds this year as part of efforts to combat fraud.

"The later-than-usual processing of income tax refunds may have hampered consumer spending. However, the IRS has now caught up to last year's pace, and so spending could get a bump up in March," said Gus Faucher, deputy chief economist at PNC Financial in Pittsburgh.

Tightening labour market conditions, which are steadily lifting wages, continue to underpin consumer spending. Even with retail sales softening in February, domestic demand remains strong enough to generate more inflation in the economy. In a separate report, the Labor Department said its Consumer Price Index ticked up 0.1% last month as a drop in gasoline prices offset increases in the cost of food and rental accommodation. That was the weakest reading in the CPI since July and followed a 0.6% jump in January.

In the 12 months through February, the CPI accelerated 2.7%, the biggest year-on-year gain since March 2012. The CPI rose 2.5% in the year to January. Inflation is firming in part as the 2015 drop, which was driven by lower oil prices, fades from the calculation.

The so-called core CPI, which strips out food and energy costs, increased 0.2% last month as new motor vehicle prices fell and apparel prices moderated after spiking in January. The core CPI increased 0.3% in January.

In the 12 months through February, the core CPI increased 2.2% after advancing 2.3% in January. It was the 15th straight month the year-on-year core CPI remained in the 2.1% to 2.3% range.

The Fed has a 2% inflation target and tracks an inflation measure which is currently at 1.7%. The U.S. central bank raised its overnight benchmark interest rate by 25 basis points to a range of 0.75% to 1.00%.

The Fed's policy-setting committee, however, did not flag any plan to accelerate the pace of monetary tightening this year, with officials sticking to their outlook for two more rate hikes. The Fed lifted rates once in 2016.

February's retail sales added to January's weak reports on trade, construction and business spending in suggesting sluggish economic growth in the first quarter. The Atlanta Fed is forecasting GDP rising at a 0.9% annualized rate in the first quarter.

With the labour market near full employment, slowing growth probably understates the health of the economy and GDP tends to be weaker in the first quarter because of calculation issues that the government has acknowledged and is working to resolve.

In February, motor vehicle sales fell 0.2% and receipts at service stations slipped 0.6%, reflecting lower gasoline prices. Americans also cut back on dining out and spent less on hobbies and sporting goods.

Sales at electronics and appliances recorded their biggest decline since December 2011. Sales at clothing stores saw their largest drop in nearly a year. Retailers including J.C. Penney Co Inc., Abercrombie & Fitch and Macy's Inc. are scaling back on brick-and-mortar operations amid increased competition from online retailers, led by Amazon.com.

Online retail sales jumped 1.2% last month. Receipts at building material stores increased 1.8%.

Source: Reuters

U.S. Federal Reserve Raises Rate a Quarter Point, Signals Further Hikes Will Be Gradual
The U.S. Federal Reserve raised interest rates last Wednesday for the second time in three months, a move spurred by steady economic growth, strong job gains and confidence that inflation is rising to the central bank’s target.

The decision to lift the target overnight interest rate by 25 basis points to a range of 0.75% to 1.00% marked one of the Fed’s most convincing steps yet in the effort to return monetary policy to a more normal footing.

However, the Fed’s policy-setting committee did not flag any plan to accelerate the pace of monetary tightening. Although inflation is “close” to the Fed’s 2% target, it noted that goal was “symmetric,” indicating a possible willingness to allow prices to rise at a slightly faster pace.

Further rate increases would only be “gradual,” the Fed said in its policy statement, with officials sticking to their outlook for two more rate hikes this year and three more in 2018. The Fed lifted rates once in 2016.

Business investment “appears to have firmed somewhat,” the Fed said in language that reflected a stronger sense of the U.S. economy’s momentum.

Fresh economic forecasts released with the statement showed little change from those of the December policy meeting and gave little indication the Fed has a clear view of how the policies of Donald Trump’s administration may impact the economy in 2017 and beyond.

“With gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace,” the Fed said, maintaining language it has used in previous statements.

“It relieves some of the fears we’ve had that perhaps the Fed was going to raise rates faster in the future. They’ve chosen not to signal that,” said Brad McMillan, Chief Investment Officer at Commonwealth Financial.

The Fed’s projections showed the U.S. economy growing by 2.1% in 2017, unchanged from the December forecast. The median estimate of the long-run interest rate, where monetary policy would be judged as having a neutral effect on the economy, held steady at 3.0%.

The unemployment rate Fed officials expect by the end of the year was unchanged at 4.5%, while core inflation was seen as slightly higher at 1.9% versus the previous 1.8% forecast.

The rate increase comes amid a broad improvement in the world economic outlook and a sense among Fed policymakers that the U.S. economy is close to the central bank’s employment and inflation goals.

According to the policy statement, risks to the outlook remained “roughly balanced,” the Fed said.

Minneapolis Fed President Neel Kashkari was the only official to dissent in last Wednesday’s decision, saying he preferred to leave rates unchanged.

Source: Reuters

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