CHHMA - EYE ON OUR INDUSTRY
Volume 16, Issue 13, March 30, 2016

Inside This Issue:

• CHHMA Spring Conference & AGM Two Weeks Away – Don’t Miss It!
• Register Now for CHHMA Quebec Golf Classic – May 19
• Early Bird Registration for CHHMA Ontario Golf Tournament Available for Spring Conference Attendees
• Join Your Fellow Canadians at Maple Leaf Night in Las Vegas – May 4
• ÉEQ to Conduct Webinar on April 19th Updating Latest on 2015-2016 Schedule of Contributions
• Larry Rossy Hands Off CEO’s Job at Dollarama to his Son Neil as Retailer Hikes Dividend on Higher Earnings
• Sears Canada Not Likely to Die While It Still Has Real Estate to Sell
• The Not-So-Pleasant Choices Faced by RONA’s Preferred Shareholders
• EBay Aims to Transform Shopping Experience to Compete with Alibaba, Amazon
• How Millennials Make Themselves at Home
• Canada’s Recovery at Risk in ‘Twilight Zone’ of Low Oil and Rising Loonie
• Chinese Are Buying Third of Vancouver Homes, Analyst’s Rough Tally Estimates
• 2016 Off To An Uneven Start For Canadian Retail Sales
• Latest U.S. Economic News

Association News

CHHMA Spring Conference & AGM Two Weeks Away – Don’t Miss It!

The 47th CHHMA Annual General Meeting & Spring Conference is set for Tuesday, April 12, 2016.

We have some great speakers and timely topics to help you with your business including:

- An economic review of the Global, U.S. and Canadian economies over the past year and the key projections moving forward by one of Canada’s top economists.

- Valuable topline advice and practical tips on how to improve your chances of success when managing price increases, as well as improving your understanding of the customer value chain, and the importance of “messaging” when communicating the need for price increases.

- An update on pension developments, with specific focus on recent Ontario Retirement Pension Plan (ORPP) developments and implications for employers with Ontario employees.

- Insight on how to merge digital & social media with traditional marketing; how can you best use your website, retailers, Google and social media to market your company and brands.

It is also an opportunity to network with your fellow CHHMA members and get up to date with the latest association news, plans and programs during the AGM portion of the day.

The Industry Hall of Fame inductions will also take place during the conference luncheon prior to the afternoon program. This year’s inductees are Ms. Laurie O’Halloran Founder/Editor/Publisher of Home Style Magazine; Mr. Bill Calisina, retired (former Vice President & General Manager) of Bissell Canada, and Mr. James Mumby, retired (former President & CEO) of Dynamic Paint Products.

Here is a link providing some further background on this year’s inductees.

Senior retail customers will once again be invited to attend the Hall of Fame luncheon and afternoon speaker presentation.

Click here for full details and to register.

So we hope you can make it out with some of your colleagues on April 12th!

Register Now for CHHMA Quebec Golf Classic – May 19

This year’s CHHMA Classique de golf / Golf Classic is once again being held at the excellent Club de golf Le Fontainebleau in Blainville, Quebec on Thursday, May 19, limit of 144 golfers.

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 full 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 and we hope you can make it to this year’s event.

Early Bird Registration for CHHMA Ontario Golf Tournament Available for Spring Conference Attendees

The 47th Annual Ontario Golf Tournament, in support of the CHHMA Scholarship Program, will take place at the Angus Glen Golf Club in Markham, Ontario on Tuesday, May 31,
7:45 a.m. shotgun start, limit of 144 golfers.

Members attending the CHHMA Spring Conference & AGM on April 12th will be able to register early for the tournament.

The event is open to CHHMA members and their invited customers. It includes breakfast, golf, an executive lunch, awards and prizes.

Click here for an Early Bird registration form if you have registered or will be registering for the conference.

Full registration will commence after the Spring Conference & AGM.

So register soon and we hope you can join us with your colleagues and/or customers at this year’s tournament.

Join Your Fellow Canadians at Maple Leaf Night in Las Vegas – May 4

Maple Leaf Night is taking place this year on the evening of Wednesday, May 4th 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 4-6).

Sponsorship is $775 CDN and entitles companies 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 $125 CDN.

Regular individual tickets are $185 CDN or $225 CDN at the door.

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

To register and/or sign up as a sponsor, click here.

Stewardship News

ÉEQ to Conduct Webinar on April 19th Updating Latest on 2015-2016 Schedule of Contributions

While waiting for the Schedule of Contributions to be approved, Éco Entreprises Québec (ÉEQ) will open a preliminary reporting on portal ECO-D on May 1, so stewards may begin entering data on materials generated between January 1 and December 31, 2014.

Also, ÉEQ will be holding an information webinar on April 19 to provide the latest developments regarding the 2015-2016 Schedule of Contributions since the consultations meeting.

Further details will be provided later but for the time being, please mark the date on your calendar.

Finally, a reminder that the deadline for applying for voluntary contributor status is today - March 30, 2016. Note that, in order to align with our Canadian stewardship counterparts, the deadline for such applications will be February 1 in future years.

For more information, go to: http://www.ecoentreprises.qc.ca/home or contact our CHHMA Stewardship Program Consultants:

Al Marks, 416-282-0022 ext.24, steward@chhma.ca
Duncan Deans, 416-282-0022 ext.22, ddeans@chhma.ca

Source: Éco Entreprises Québec (ÉEQ)

Industry News

Larry Rossy Hands Off CEO’s Job at Dollarama to his Son Neil as Retailer Hikes Dividend on Higher Earnings

There’s going to be a change at the top of the Dollarama discount retail chain as its founding chief executive steps back and his son takes on the top job.

Larry Rossy will continue as executive chairman, but his son Neil Rossy becomes Dollarama’s president and CEO on May 1.

Neil Rossy, 46, is currently Dollarama’s chief merchandising officer. He’s been with the company since its inception in 1992 and has been a member of its board of directors since 2004.

“Succession planning has been an important focus for the board over the past several years and we believe this is the right time for an orderly leadership transition,” said Stephen Gunn, lead director of Dollarama’s board of directors.

“Neil has shown strong leadership as one of the key architects of Dollarama’s success. He is an experienced retail executive with an intimate knowledge of all company operations, and is respected by his colleagues.”

The announcement came as Dollarama better than expected revenue and profit for its fourth quarter and raised its quarterly dividend by a penny to 10 cents per share.

For the quarter ended Jan. 31, sales were 766.5 million, up 14.6% from $669.1 million a year earlier. Same-store sales were up 7.9% from the same period in fiscal 2015.

Dollarama’s net income in the fourth quarter was $124.8 million or $1 per diluted share, up from $100.27 million or 76 cents per share a year earlier. The per-share profit was assisted by a decline in the number of shares outstanding.

Analysts had expected a profit of 93 cents per share and $751 million of revenue for the quarter, which spanned the busy year-end holiday period.

The company also raised is estimates for the current financial year, with its gross margin range rising by one percentage point to between 37 and 38% and its earnings margin rising by one a percentage point to between 20.5 and 22%. Capital spending was also increased by $60 million to between $160 million and $170 million.

For its full financial year, Dollarama reported sales of $2.65 billion, up 13.7% from $2.33 billion in the financial year ended Feb. 1, 2015.

Its profit increased to $385.1 million or $3 per diluted common share for the financial year ended Jan. 31, up from $295.4 million or $2.21 per share a year earlier.

Source: The Canadian Press

Sears Canada Not Likely to Die While It Still Has Real Estate to Sell

As long as Sears Canada has viable real estate to sell — and management is able to keep shaving costs — the struggling retailer will likely stay alive despite posting years of declining sales and substantial operating losses.

That’s the view of a new report from Desjardins Securities, which notes the department store’s management has not been able to reduce its fixed and variable costs quickly enough to compensate for the company’s lower revenue productivity, even as it has closed unproductive locations and rebuilt some key product categories.

“As long as Sears Canada continues to operate its retail business, it keeps alive the potential of selling additional under-market leases back to its landlords,” said the report from analyst Keith Howlett, who maintained his sell rating on the shares but slashed his price target on the stock to $4.75 from $8.50.

Sears Canada, which has for years raised cash by selling off plum leases to its landlords, needs to sustain its retail business “for an extended number of years into the future” if it is to encourage more landlords to pay the retailer to exit its most desirable leases, those that trade below current shopping mall lease rates.

“Once it ceases to operate, the likelihood is that the leases will return to being liabilities, and will be taken back by the landlords, either contractually or pursuant to creditor proceedings,” Howlett said.

“In our view, the objective is for Sears Canada to achieve cash breakeven, or close thereto, creating the appearance that it will be able to continue to operate for many years to come.
This would, in our view, elicit more lease buyout offers from landlords.”

Howlett estimates that the company’s residual owned real estate is worth more than $350 million.

The company’s balance sheet is in good shape, strengthened by large cash holdings from real estate sales and a termination payout from a former joint venture credit card business with JPMorgan. Sears Canada had $314 million in cash at the end of fiscal 2015 and will collect an additional $220.5 million this year from previously announced asset sales. The company has no outstanding long-term or short-term debt, beyond $24.2 million of financial lease obligations.

Still, to be productive, Howlett says, Sears Canada will have to further pare back fixed and variable operating costs due to its declining revenue per square foot, which fell to $185 in 2015 from $263 in 2009.

The analyst increased his forecast operating loss for fiscal 2016 to 66 cents per share from a prior projection of a loss of 25 cents per share. He also predicts an operating loss of 31 cents per share in fiscal 2017. Achieving that forecast for fiscal 2017 requires further sales, general and administrative cost reductions during fiscal 2017 on top of management’s stated $100 million to $127 million cost reduction target for 2016.

Source: Article by Hollie Shaw, The Financial Post

The Not-So-Pleasant Choices Faced by RONA’s Preferred Shareholders

Shareholders of RONA gather in Montreal Thursday to vote on the $3.2 billion takeover by Lowe’s.

For common shareholders, the situation seems a no-brainer. There is no real alternative to tendering to the $24 a share offer, a price that represents a healthy premium to the shares’ recent trading price. And the price is almost $10 higher than the offer the same buyer made about three and a half years back.

For preferred shareholders — and RONA has 6.9 million outstanding for a face value of $172.5 million — the situation would also seem clear: tendering isn’t an option given they are being offered $20 a share, or a $5 a share haircut to the original purchase price.

According to some holders, agreeing to that low price would set a bad precedent given that there are a slew of rate-reset prefs which are trading at a substantial discount to their purchase price. If one issuer gets away with such a deal, others will follow suit.

Accordingly, it is not in the interests of pref share holders, who put up $25 when the issue came to market in the expectation they would get $25 of value when the time rolled around for the rates to be reset, to encourage such behaviour. So Lowe’s bid $20 – which represented a premium to the recent trading price but a total acquisition savings of $34.5 million – knowing that if it’s rejected it will be required to remain a reporting issuer.

James Hymas, of Hymas Investment Management, has a different take, arguing RONA pref shareholders could tender and redeploy the proceeds in other rate reset prefs that generate about the same cash flow.

Hymas, who does not own RONA preferreds either personally or through the funds he manages, argues that if the $20 a share offer is turned down, the price of the RONA prefs will fall below $20. In other words: make the trade.

On Monday, RONA reported the results of the conversion options taken by pref shareholders: holders of about two thirds of them opted for the floating rate option with the rest opting for the fixed rate pref that will see them receiving 3.324% a year for the next five years.

For RONA’s pref shareholders, it’s been rather traumatic since the acquisition was announced in early February. After recovering from the shock of the $20 a share offer, they have had to deal with two lots of comments made by London-based The Stirling Funds. But there has been no public follow-up, a case of over-promising and under-delivering. (Maybe it’s keeping its powder dry until Thursday.)

One month back, it said Lowe’s bid was “opportunistic and an egregious attempt by them to circumvent the proper takeover provisions of the preferred shares,” and said it would “seek out other preferred shareholders to garner adequate remedies for all shareholders.” It followed those statements with an “open letter” to Lowe’s and termed the $20 a share bid “oppressive.”

Numerous attempts have been made to reach Stirling and its Swedish-based advisor ÖstVäst Advisory to find out its next steps. The first call elicited the response that it had received numerous responses from holders. Since then nothing.

But there may be another twist given that as of the end of 2015, Fidelity Investments owned more than 10% of the issue — more than three times what it owned at the end of the first quarter of 2015. We couldn’t reach Fidelity for a comment.

Source: Article by Barry Critchley, The Financial Post

EBay Aims to Transform Shopping Experience to Compete with Alibaba, Amazon

EBay, regarded in its early days as an endless repository for Beanie babies and baseball trading cards, has transformed far beyond being a reliable place for collectables and gently used goods.

But though 80% of what’s sold nowadays on eBay Canada is new, its relationship with the remaining 20% is what makes the site special, according to Andrea Stairs, eBay Canada’s managing director. It also presents one of the online marketplace’s more bedeviling sticking points.

“The inventory on eBay covers a spectrum of value, everything from new and in-season to end-of-runs, used, refurbished or vintage,” Stairs said in a recent interview from the company’s Toronto headquarters. “That mix — that is exactly eBay’s secret sauce. That is why consumers come to eBay.”

Open for 16 years, eBay is an e-commerce grandparent in Canada, where it has long capitalized on the reluctance of the country’s biggest retailers to get into digital retail. As such, Canada has been one of eBay’s most successful global markets, with Canadians spending more than $1 billion buying goods from the site each year, the No. 2 online retailer in Canada behind Amazon.

But critics note eBay can still present a frustrating user experience for people as they wade through disparate listings on the site looking for deals or discrete pieces of out-of-season merchandise. And in a digitally-driven shopping universe in which consumers frequently turn to Google first to find links to sites selling the merchandise they want, eBay’s search results are often pushed down below that of Amazon, to detriment of the business.

Making listings more uniform and Google-friendly is part of a multi-year project for eBay, Stairs said, but it is a process of some complexity given that eBay’s sellers — from single consumers to the small retailers who use eBay as an online selling channel — create the listings themselves.

A pair of identical Gascan model sunglasses from Oakley, for example, might be listed dozens of times on the site in different ways: some pairs might be listed as simply “Oakley sunglasses” and others might have “Gascan” as a product descriptor, while still other listings will go into great detail, offering the model name, the manufacturer’s item number and multiple other attributes. Their pictures might look alike … or not.

“The hardest part of e-commerce is dealing with the tremendous amount of SKUs and pictures and prices,” said Alex Arifuzzaman, a partner in the Toronto-based retail and real estate specialists InterStratics Consultants.

“Consumers are kind of used to that inconsistency with eBay, but if they can improve it, so much the better.”

After the global operation last year spun off PayPal, its powerhouse secure payments processing business, eBay has been looking at ways to drive up the performance of its marketplace as it faces Amazon, Alibaba and the ever-growing web operations of traditional retailers such as Wal-Mart and Costco.

Revenue for the fourth quarter, reported in January, was US$2.32 billion, flat on a year-over-year basis, and a forecast for the current quarter of US$2.05 billion to US$2.1 billion fell below average analyst revenue estimates of US$2.16 billion.

“It’s not just about facing Amazon, it’s about Alibaba, which is very similar to eBay and is going everywhere,” Alan Middleton, a marketing professor at York University, said of the Chinese e-commerce giant, which has annual revenue of about US$12.5 billion and has been expanding into the U.S. and Europe.

“Unlike Amazon and much like eBay, Alibaba has no inventory or warehouses to support, and it does not compete with its merchants,” Middleton said, noting the latter businesses benefit from avoiding those overhead and supply-chain costs. “But Alibaba is still a threat to eBay, because unlike eBay, it offers a financing option for buyers who want to buy but don’t really have the money.”

Stairs said one of eBay’s biggest priorities is using structured data to move from a listings-based Internet business into one that looks and operates more like a catalogue.

“It will allow us to be more effective at merchandising,” she said. “We can say, ‘Here are a thousand of the same laptops from a thousand different sellers,’ and (show buyers) a range of new to used, which generation it is, and at different price points. And we can serve that up in a single box for buyers, as opposed to it being more up to a buyer to figure out which (laptops) are the same through a search.”

But it’s a challenge, a “massive undertaking,” to harmonize discrete, identical listings when in Canada alone, eBay presents 200 million ever-changing live listings at any given time.

Still, it’s an important transformation, not just for consumers searching on the site, but for eBay’s core business performance as it seeks to serve up higher-ranked listings on Google and further differentiate itself from local online classified businesses such as Kijiji and Craigslist.

Studies have shown consumers tend to click on the top few Google search listings, with a negligible amount moving on to lower links or the second page of search results.

“Moving to more structured data will allow us to put up millions of pages that are product pages to connect buyers with actual listings from different sellers, but those also can be product pages that Google can index,” Stairs said.

“The more that we can structure those 200 million listings into a catalogue that is usable for algorithms, the better we are able to do that.”

To remedy some of its platform’s legacy issues, eBay has created the eBay Feed, a version of its home page that shows returning consumers new inventory that corresponds with their interests.

It also began the eBay Collections program, internal and user-generated groupings of themed merchandise such as prom dresses, sporting goods and electronics in order to help customers find sales deals and shopping ideas. eBay also markets goods in themed events tied to holidays, seasons, product categories or manufacturers such as Dyson, which uses eBay as an outlet site for its prior season and returned inventory.

Stairs said the company has gained traction from a deals hub it launched three years ago to group deals from highly trusted sellers in a single place on the site. It makes sense given that consumers make 85% of purchases on eBay at a fixed price, using the “Buy it now” selector, rather than in an auction.

EBay has also worked to give users tips on product photos and listings information to improve their listings as it moves towards looking like more of an online catalogue for consumers.

“We are managing an ecosystem,” she explained. “You always want to be careful about what you mandate versus what you recommend (to sellers). You don’t want to make it so difficult for a consumer seller to sell that they don’t want to come to eBay, because in fact that inventory is gold.”

Disorganized listings, while viewed by some as eBay’s Achilles’ heel, might not bother its regular users, said Jim Danahy, CEO at Toronto-based retail consultancy Customer Lab.

“People on eBay are looking for value, so it’s about scoring that before anyone else does,” he said.

“Even if eBay were able to group these items with heterogeneous identifiers, to some degree that undermines the treasure hunt element of (the site). They would have to have very sophisticated category management. Replenishment isn’t their game — offering something unique every day is.”

Source: Article by Hollie Shaw, The Financial Post

Marketplace Stats & Trends

How Millennials Make Themselves at Home

There’s no question Millennials are making their presence known in the marketplace.

New research from Home Furnishings News (HFN) on how Millennials make themselves at home was shared during the recent 2016 International Home + Housewares Show in Chicago.The keynote presentation was followed by a panel discussion on what it all means and why business will never be the same again.

HFN chief brand officer Maureen Azzato opened the session, “How Millennials Make Themselves at Home,” with key findings from HFN’s “2016 The Housewares Consumer Speaks” report.

“There are now more Millennials than Baby Boomers in the home and housewares market, and their buying intentions are strong,” said Azzato. As a whole, “they love to entertain, eat out less, crave unique experiences and authenticity, are environmentally aware and socially conscious.Health and wellness is integral to their lives.”

Among the specific findings were:

• 70% of Millennials prefer lifestyle furniture stores to traditional ones.
• They are unafraid to combine decorating styles, with rustic contemporary being a favourite.
• 33% plan to buy a blender in 2016 (more than twice the amount of Gen Xers or Baby Boomers).
• One-pot cooking is extremely popular, with slow cookers being a favourite solution.
• A majority of Millennials reported vacuuming every day.
• When it comes to glassware, design is the most important feature…with contemporary looks the most popular.
• In cookware, durability is the most important feature, and Millennials appear more willing to spend more in this category.

Following the presentation, HFN editorial director Warren Shoulberg led a panel discussion on what this all means for housewares manufacturers and retailers. Panelists included retailers Kecia T. Hielscher, vice president/EMM, Nordstromrack.com/HauteLook and KC Lapiana, owner of In the Kitchen and president of HTT Buying Group; and manufacturers Jeffrey Kruskall, vice president business development, Meyer Corp., and Julie Owens, director of marketing, Blendtec.

Millennials have “raised the bar for manufacturers and for retailers as well.It’s important that we all listen to and learn from them,” said Kruskall.“This consumer group’s biggest concern is that they want to be heard.At the same time, it’s not ‘one size fits all’ within this age group.”

In general terms, panelists agreed Millennials like to do their own research, which has affected their marketing and merchandising.Both packaging and online copy needs to be bite-sized or bulleted, simple, and in priority order.

“Because they’re already so well-educated, we’ve found that when they come into the store, it’s beneficial for our sales associates to step back a little,” said Lapiana. “If vendors can provide us with video or other elements (Millennial shoppers) can interact with themselves on the sales floor, that’s helpful. They don’t like to be talked to unless they’re ready to be talked to.”

“Millennials trust their parents, they trust bloggers, and they trust online reviews,” added Owens, not necessarily salespeople.

“Brand for us is key,” said Hielscher. “Brands incite credibility. That being said, if we find a product that doesn’t have a strong brand but hits our other criteria, we can build a story around it.”With Millennials in mind, her team evaluates products for function, tech-savviness, trendiness, customizability, and quality.

The panel also agreed that social media and a strong online presence is important, though there may not be any single golden platform or approach.

A lot of people still ask Owens about Blendtec’s wildly popular “Will It Blend?” viral campaign. “There’s no secret sauce for digital strategy,” explained Owens. “What happened is we shared a story. And then someone shared that story and someone else liked that story and passed it on. While you can’t always have that magical strategy, you can always tell a compelling story.”

Those stories can help cut through the clutter.“(Millennials) think quickly – they want it yesterday – and they’re multi-taskers,” said Kruskall. “They could be watching ‘House of Cards’ and researching cookware on their phone at the same time.”

As far as the push and pull between online sites and bricks and mortar stores, the panel had different experiences with Millennials’ preferences.“It appears that with higher priced items, the more likely they are to come in and try it out in-store,” said Owens.

“We’ve found Millennials prefer to come into bricks and mortar stores,” said Lapiana. “They still want an experience.They like to be engaged.” Yet Hielscher shared that 50% of her (multi-channel) company’s sales during the recent holiday shopping season were from purchases made on mobile devices.

At the end of the day, Millennials are “completely comfortable with who they are,” said Owens.“And I think that’s one of the coolest things about them.”

Source: International Housewares Show

Economic News

Canada’s Recovery at Risk in ‘Twilight Zone’ of Low Oil and Rising Loonie

Following the recent crude oil price rally, economists say Canada’s economy risks getting caught in a bind where oil prices are not quite high enough but the loonie is not quite low enough.

Canada’s dollar has had a strong rebound in the past month, rising from about 68 cents against the U.S. dollar to 76 cents as of Monday. Oil prices have also rebounded nearly 50% in that time.

The Canadian economy has been feeling the pressure of low oil prices for two years now, causing recession in provinces such as Alberta and mass layoffs in the energy sector. But recent data suggests that oil’s pain has been the manufacturing sector’s gain, as cheaper gasoline prices and a weak loonie have helped the country’s non-energy industry’s become more profitable.

Unfortunately, the recent moves in oil and the loonie could halt that shift.

“Only recently have we started to see some positive signs coming from non-energy investment and production as corporate Canada started to response to the dollar depreciation,” said Benjamin Tal, deputy chief economist at CIBC World Markets. “This fragile recovery might be at risk as higher oil prices lead to a stronger loonie. Simply put, we suffer the pain of a higher dollar without the gain of rising oil prices.”

Oil prices have rallied from slightly below US$30 at their low this year to more than $40 as of Monday, but Tal notes that the price gain is not enough to make a meaningful impact on Canada’s energy sector. Most companies will not even consider increasing capital spending or hiring unless prices move significantly higher.

At the same time, the gains in the loonie could have very real impacts on investment and job creation for manufacturing firms.

Canada’s manufacturers have been burned by the loonie before, especially in the years following the financial crisis, where the loonie crashed from parity with the U.S. dollar down to below 80 cents — only to rebound to parity two years later.

“The 6-cent appreciation in the value of the dollar can make a difference in the decision making process for some (or many) manufacturing firms,” said Tal.

The developments leave Canada’s economy at risk of getting stuck in an “oil twilight zone” until oil prices either rebound to a level where energy firms start spending again or manufacturers and exporters see a clearer sign that the loonie won’t be moving much higher.

That will make for an interesting Bank of Canada rate announcement next month. It is likely Governor Stephen Poloz will include comments about the loonie if it stays at this level or moves even higher before the April 13 meeting.

Source: Financial Post

Chinese Are Buying Third of Vancouver Homes, Analyst’s Rough Tally Estimates

Buyers from China comprised about one-third of purchases of Vancouver’s hot housing market in 2015, according to “back of the envelope calculations” by National Bank of Canada.

Chinese investors spent about $12.7 billion on real estate in the city in 2015, or 33% of its $38.5 billion in total sales, according to a note by financial analyst Peter Routledge last Wednesday. In Toronto, they made up 14% of purchases, or about $9 billion of the $63 billion in deals. Routledge compiled the data by extrapolating from a Financial Times survey of 77 high-end buyers and data from the U.S. National Association of Realtors.

National Bank’s analysis follows the federal government’s budget announcement last week that it will spend $500,000 to find ways of tracking foreign homebuyers. Finance Minister Bill Morneau promised the funds to Statistics Canada this year. Some said the money wasn’t enough for a proper search and analysis.

“Investing only 25.7% of the cost of an average price of a detached home in Vancouver is, at the very least, a touch on the low side,” Routledge said in the note. He cautioned that his analysis was a hypothetical approach to gauge capital flows, but that it pointed to the need for reliable numbers.

Vancouver has long been a target for housing critics who say offshore buyers, many of whom purchase homes as investments and leave them empty, are pushing prices beyond levels locals can afford and creating ghost towns in neighbourhoods. The government housing agency, Canada Mortgage & Housing Corp., is currently studying ways to determine numbers of offshore buyers.

The average price of a detached home in the city skyrocketed 30% to $1.8 million in February from the prior year as sales jumped 37%, according the local real estate board. The price is much higher in certain neighbourhoods, such as Vancouver West, where the average detached home will set a buyer back $3 million.

Source: Bloomberg News

2016 Off To An Uneven Start For Canadian Retail Sales

Total Canadian retail sales were up 3.6% on a not seasonally adjusted basis in January 2016 versus a year ago, according to the latest numbers from Statistics Canada. The 3 month growth trend has now pulled slightly ahead of the underlying 12 month trend for the first time in over a year. Normally, this would indicate a recovery from the decelerating growth of 2015.

But all is not as good as it seems. Much of January's uptick in total retail is due to a double digit sales increase at automobile dealers, coupled with a markedly "less bad" decline at gasoline stations.

Store Retail
The Store Retail sector excludes all things automotive and consists of food plus drugs plus merchandise stores. And the picture here is not one of recovery, but of further decline.

The underlying 12 month trend peaked in Q1 of last year and has been slowing ever since. The 3 month trend is tracking even lower, implying further softness ahead. For the 3 months ending January 2016, Store Retail was up only 1.9% year-over-year, the lowest it's been since early 2014.

Food & Drug
Food & Drug started 2015 with a bang, but is now starting 2016 with a whimper. In January 2016 alone, sales were down 0.4% year-over-year. The 3 month growth trend was up just 0.7%, the lowest in almost 3 years.

The main problem is at supermarkets & other grocery stores, where retail sales were down 3.6% in January 2016 versus a year ago. This is contrary to expectations of higher prices due to the low Canadian dollar, so it seems consumers have made other plans in how they're buying their food.

Health & personal care stores however continued to move ahead, with a 5.0% sales increase in January. Pharmacies and drug stores appear to be one of the steadiest sectors in Canadian retail.

Store Merchandise
The Store Merchandise sector is also slowing down, although by not as much as Food & Drug. The underlying 12 month trend peaked in early 2015 and is continuing to decline, and the 3 month trend is softening even more as 2016 starts off.

Performance is mixed in this sector. For January 2016, the biggest gainers were shoe stores at up 14.6% year-over-year, and furniture stores with 11.0% sales growth. Electronics & appliance stores however were down 7.8% and sales at jewellery, luggage & leather goods stores declined 0.1%.

Automotive & Related
Things appear to be perking up in the Automotive & Related sector, with retail sales growth on its way back up from the lows of early 2015. This is a result of two offsetting trends.

In January 2016, automobile dealer sales were up a strong 14.2% year-over-year, which was just a continuation of a string of record highs in place since 2013. Auto dealers account for about 22% of total Canadian retail sales, so strong growth here pulls up the average for overall retail.

At the same time, gasoline stations were down only 2.7% in January, significantly less than the decline of 14.0% for 2015. This "less bad" performance means that gas station sales are becoming less of a drag on total Canadian retail sales.

To read the full report, click here.

Source: Article by Ed Strapagiel, Consultant

Latest U.S. Economic News

U.S. Home Prices Rise in January, But Shy of Expectations
Annualized U.S. single-family home prices rose less than expected in January, a closely watched survey showed on Tuesday.

The S&P/Case Shiller composite index of 20 metropolitan areas rose 5.7% in January on a year-over-year basis, matching the increase the month before. That was just below the 5.8% estimate from a Reuters poll of economists.

“Home prices continue to climb at more than twice the rate of inflation,” said David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices.

“While low inventories and short supply are boosting prices, financing continues to be a concern for some potential purchasers, particularly young adults and first time home buyers.

Home prices in three U.S. cities, San Francisco, Seattle and Portland, Oregon, reported the highest year-over-year gains, the survey showed.

Source: Reuters

U.S. Consumer Spending Tepid, Inflation Moderates
U.S. consumer spending rose marginally in February and overall inflation retreated, suggesting the Federal Reserve could take its time in raising interest rates this year despite a tightening labour market.

The Commerce Department said on Monday that consumer spending edged up 0.1% as households cut back on goods purchases after a downwardly revised 0.1% gain in January. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, was previously reported to have increased 0.5% in January.

Last month’s increase was in line with economists’ expectations. When adjusted for inflation, consumer spending rose 0.2%. Inflation-adjusted consumer spending for January was revised down to show it unchanged rather than the 0.4% rise that was previously reported.

That points to some cooling in consumer spending and poses a risk to first-quarter U.S. GDP growth estimates, currently at around a 1.5% annualized rate. The U.S. economy grew at a 1.4% pace in the fourth quarter.

Inflation moderated last month, with a price index for consumer spending dipping 0.1% after nudging up 0.1% in January. In the 12 months through February, the personal consumption expenditures (PCE) price index increased 1.0% after rising 1.2% in January.

Excluding food and energy, prices gained 0.1% after advancing 0.3% in January. In the 12 months through February, the so-called core PCE price index increased 1.7% after a similar increase in January.

The core PCE is the Fed’s preferred inflation measure and is running below its 2% target. The slowdown in the monthly core PCE reading comes after Fed Chair Janet Yellen recently expressed skepticism over the sustainability of the gains in core inflation measures.

Yellen told reporters this month “there may be some transitory factors” behind the run-up in prices.

The relatively soft inflation suggests the U.S. central bank will continue to gradually raise interest rates this year even as the labour market tightens. The Fed hiked its benchmark overnight interest rate in December for the first time in nearly a decade.

Consumer spending last month was held back by a 0.7% drop in purchases of goods. Spending on services rose 0.4%.

Personal income rose 0.2% after rising 0.5% in January. The slowdown in income growth is likely temporary amid anecdotal evidence that the tightening jobs market, marked by pockets of skills shortages, is driving up wages.

With spending lagging income growth, savings rose to their highest level in more than three years.

Source: Reuters

U.S. Pending Home Sales Hit Seven-Month High in February
Contracts to buy previously owned U.S. homes rose sharply in February, reversing the previous month’s deep decline, as the volatility of the data continues to make it difficult to parse the strength of the housing market.

The National Association of Realtors (NAR) said its pending home sales index rose 3.5% to 109.1 last month, the highest level in seven months. January’s reading was revised to show a 3.0% decline, which was deeper than initially reported.

Economists polled by Reuters had forecast contracts rising 1.2% last month.

Pending home contracts become sales after a month or two. Contracts were up 0.7% from a year ago.

Source: Reuters

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