CHHMA - EYE ON OUR INDUSTRY
Volume 16, Issue 18, May 11, 2016
Inside This Issue:
• Still Time to Register for Next Week’s CHHMA Quebec Golf Classic
• Join Us at the 47th Annual CHHMA Ontario Golf Tournament on May 31st
• Free Digital Marketing Webinar for CHHMA Members on June 9th or 14th
• CHHMA Scholarship Program – Deadline for Applications July 15
• Canadians Come Together at Maple Leaf Night in Las Vegas
• Quebec to Alter Language Laws to Require French on English Store Signs
• RONA Posts Loss But Higher Revenue in First Quarter Results
• Amazon Hits $1 Billion Milestone on B2B Marketplace; Takes Aim at YouTube
• Wal-Mart Brings Back its Iconic Greeters to Help Deter Theft
• Why We Shop Differently on Mobile Phones
• Economists Downgrading their Outlooks for Canada’s Economy as Alberta Fires Burn
• IMF Urges Canada to Continue Stimulus
• Pace of Canadian Housing Starts Falls in April; Ontario, Quebec Lead Decline
• Canadian Building Permits fall 6.9% in March
• Canada’s Labour Market Stuck in Neutral as Alberta Continues to Bleed Jobs
• U.S. Employment Gains Hit Seven-Month Low, Labour Force Shrinks
Association News
Still Time to Register for Next Week’s CHHMA Quebec Golf Classic
This year’s CHHMA Classique de golf / Golf Classic is is set for next Thursday, May 19 at the Club de golf Le Fontainebleau in Blainville, Quebec.
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.
For full details and to register, click here: French Registration English Registration
This event is always an industry highlight and a great opportunity to spend some quality time with colleagues and customers and get a start on the golf season – we hope you can make it out!
Join Us at the 47th Annual CHHMA Ontario Golf Tournament on May 31st
The 47th Annual Ontario Golf Tournament 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.
The event is open to CHHMA members and their invited customers. It includes breakfast, golf, an executive lunch, awards and prizes.
Proceeds from this year’s tournament will go towards the CHHMA Scholarship Program.
The CHHMA recognizes the importance of education, and therefore encourages children of employees of our association member companies to attend university or college.
To help offset the cost of a post-secondary education, the CHHMA is pleased to offer a Scholarship Program. Successful candidates receive $1,000 per year (CDN) for the first two years of study leading to a degree from an accredited community college or university. Since 2001, 80 scholarships have been awarded, totalling $160,000 to children of member company employees.
To help raise money for the Scholarship Program, we are looking for Hole Sponsors as well as donation items for a Silent Auction to be held during the Tournament. You can click here for PDF file which includes forms for registration, hole sponsorship and the silent auction.
Also, for all the details and to register online, click here.
So make some plans to spend a fun day on the golf course with your industry colleagues and customers.
Free Digital Marketing Webinar for CHHMA Members on June 9th or 14th
CHHMA members are invited to participate in a free educational webinar on Digital Marketing in June presented by Sofie Andreou of Sofie Andreou & Associates.
Sofie recently spoke at the CHHMA Spring Conference & AGM in April and we have now asked her to continue to work with CHHMA and COPA members through her Digital Marketing Education Series which includes webinars and possibly her Video Tutorials, as an added member benefit.
To accommodate your various schedules, we are offering the introductory webinar (approx. 45 minutes) at a morning and afternoon session: June 9th at 9:00 a.m. or June 14th at 1:30 p.m.
This introductory webinar will focus on the basics and a tip in each of Facebook, Twitter and LinkedIn.
Immediately following the webinar, a survey will be sent to you asking which topic you would like us to expand on in future webinars.
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.
CHHMA Scholarship Program – Deadline for Applications July 15
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. Five or six scholarships are awarded each year. 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.
Canadians Come Together at Maple Leaf Night in Las Vegas
Spirits were positive and it was another enjoyable evening at last week’s Maple Leaf Night held on May 4th at the Mirage Hotel & Casino in Las Vegas.
This event is held each year during the National Hardware Show and offers a unique opportunity for CHHMA members to enjoy some “Canadian bonding” over cocktails and hors d’oeuvres with fellow members and Canadian retailers in town for the show.
There was a strong showing of retailers who made it out to the event including Ace Canada, BMR, Canadian Tire, Federated Co-op, Home Hardware, Lowe’s Canada, Patrick Morin, Peavey Industries, RONA and Spancan.
We would like to thank everyone for attending and particularly the co-sponsoring companies (listed below) for making Maple Leaf Night such a success and worthwhile event:
Accent Fairchild Group, Big Time Products, Davidson Sales & Marketing, Garant GP, Henkel Canada Corporation, Honeywell Limited, Imperial Manufacturing Group, King Marketing Ltd., Knape & Vogt Canada Inc., LOCK Search Group, Masco Canada Ltd., RCR International Inc., Recochem Inc., Richelieu Hardware, Rust-Oleum Consumer Brands Canada & Task Tools.
We look forward to seeing you there next year!
Government & Legislative News
Quebec to Alter Language Laws to Require French on English Store Signs
The Quebec government has proposed a modification to the province's sign rules that would require Quebec businesses to add French to their outdoor signage, without altering registered trademark names.
Hélène David, acting minister responsible for the protection and promotion of the French Language, made the announcement last Tuesday afternoon.
"Thanks to this change, every person, whether driving on a highway, on a sidewalk, in an industrial area or in a commercial parking lot, will know they are in Quebec, because they will see French on the signs," she told a news conference in Montreal.
Under the new rules, businesses with a trademark name that is not in French would be required to add a French word, description or slogan to their outdoor signage. The modification does not apply to trademarks which are names, for example McDonald's or Tim Hortons.
The French words will have to be positioned near the trademark to make them as noticeable as the non-French words. And if the non-French trademark is lit up on the sign, then the French words will also have to be illuminated.The French words do not have to be bigger than the non-French trademark name.
The goal is to have a "sufficient French presence" at every business in Quebec, whether it is a restaurant, factory, shop or hotel.
The government estimates it would cost companies anywhere from $500 to $9,000 to make the necessary sign changes, depending on the size and number of signs.
“If it’s $9,000, I suppose it’s because it’s a very big company,” David said. “I think they can assume the amount. … I don’t think it’s very expensive for the purpose of this (regulation).”
Businesses are welcome to translate their trademarks, she added. However, the provincial government has no authority to force companies to alter the trademarks themselves, David acknowledged. That’s federal and international jurisdiction, she said.
David said 21 businesses, including retailers, were consulted last fall on the changes, which would apply to an estimated 1,860 companies with trade names in English or another language.
However, the government is further looking for public feedback on the new proposed regulations for the next 45 days, ending on June 18.
Following that period, any necessary adjustments will be made and cabinet will make its decision about the modification.
The reaction from business and employers’ groups seemed to be favourable.
“The government decided not to attack trademarks, (so) for us it’s a plus,” said Françoise Paquet, director of governmental relations for the Conseil québécois du commerce de détail, which has 5,000 large and small members, including pharmacies, hardware stores and clothing stores. She added that she’s pleased the government has chosen to target all businesses, and not just stores.
On the downside, Paquet noted the added cost and hassle of changing commercial signs. On the other hand, the OQLF published data a year ago that showed 80% of retail stores already had French wording on their signage, she said.
The regional president at Walmart, Xavier Piesvaux, said the regulation "gives our companies the flexibility to communicate in French while keeping the integrity of our brand," he said.
But nationalist political parties and organizations like Mouvement Québec français say the proposed changes are not enough.
"Too little, too late," said Maka Kotto, the Parti Québécois critic on language.
"Without a change to Law 101, contesting the regulation will always be possible, and its application will depend on the will of companies," he said.
Quebec Community Groups Network director Sylvia Martin-Laforge says her members are, for the most part, unconcerned with the announcement.
The English-language community groups that comprise the network are more worried about signs in hospitals and everyday personal activity in this province, Martin-Laforge said.
In 2014, major retailers such as Walmart, Costco and Best Buy won a court battle with the province over their signage, with the Quebec Superior Court ruling businesses that have storefront signs with their trademark name in a language other than French do not contravene the Charter of the French Language.
The Office québécois de la langue française (OQLF) wanted the companies to change their signs to either give themselves a generic French name or add a slogan or explanation that reflects what they are selling.
But the judge hearing the case ruled in favour of the major retailers — a list including Best Buy, Costco, Gap, Old Navy, Guess, Wal-Mart, Toys "R" Us and Curves.
The decision was later upheld by the Quebec Court of Appeal.
Karl Filion, press secretary for Quebec Language Minister Luc Fortin, says he is confident the revisions announced Tuesday would be legal.
The changes are expected to be adopted in 2016, but there will be a three-year grace period for companies to comply, it said.
Source: CBC News, The Globe and Mail, The Montreal Gazette
Industry News
RONA Posts Loss But Higher Revenue in First Quarter Results
RONA inc. says it lost money in this year’s first quarter but overall revenue increased despite weak sales in the Prairies.
The retailer is slated to become a subsidiary of Lowe’s following a friendly $3.2-billion takeover deal announced in February.
RONA posted a $16.5 million net loss or 15 cents per share for the quarter ended March 27.
The quarter’s loss included $3.5 million or three cents per share of restructuring costs and $4.1 million or four cents per share of acquisition costs.
Revenue was $819.2 million, up 5.2% from $778.8 million a year earlier. Retail segment same-store sales grew 3.1% with strong performance in Ontario, British Columbia and the Reno-Depot banner in Quebec. The company saw a decline in Prairie same-store sales.
After excluding restructuring and other items, RONA’s adjusted loss was $9 million or eight cents per share.
By comparison, RONA’s net loss in the first quarter of 2015 was $11.7 million or 11 cents per share including minimal restructuring costs. Its adjusted loss was $11.2 million or 10 cents per share.
“The same-store sales in our retail network grew 3.1%. This seventh consecutive quarter of growth reflects the excellent performance of our stores in Ontario and British Columbia, as well as sustained growth in the Réno-Dépôt banner in Quebec. RONA has pursued its strategy of simplifying its business model and improving the products and services it offers. As we did successfully with Réno-Dépôt, we have begun redefining our big-box stores experience to offer our customers a revitalized image and a unique shopping experience through the introduction of new product lines. The new image will soon be unveiled at our Anjou store, in the Montreal area. RONA remains focused on executing its business plan and continuing its disciplined capital management in order to achieve the Corporation’s sales growth and profitability objectives,” said Robert Sawyer, President and Chief Executive Officer of RONA, in a press release.
Source: RONA inc., The Canadian Press
Amazon Hits $1 Billion Milestone on B2B Marketplace; Takes Aim at YouTube
Amazon.com Inc. sold $1 billion (US) in goods on its new business-to-business marketplace begun last year, and customer purchases are growing about 20% each month, suggesting the company that changed the way people shop for household goods is starting to change the way offices stock up on paperclips.
The Seattle company’s Amazon Business offers tractor parts, latex gloves, file folders and millions of other products needed in factories, hospitals, schools and offices. Businesses are shifting their supply shopping online from less-efficient methods such as browsing print catalogues, faxing orders and telephoning sales representatives, said Andy Hoar, an analyst at Forrester Research Inc.
“Amazon has created a more efficient way for business buyers to get the lowest prices on what they need and find willing and able distributors,” Hoar said.
It highlights the latest way Amazon converts existing investments into new lines of business, similar to how its cloud-computing division Amazon Web Services was born out of Amazon’s own data centres. Amazon Business inventory largely overlaps with what is sold to consumers, and orders are packed and shipped from its network of warehouses built to serve the consumer market.
Amazon’s foray into the business-to-business market challenges Staples Inc. and Costco Wholesale Corp., as well as smaller specialty distributors. Online business-to-business spending is expected to reach US$855 billion this year, or 9.9% of the US$8.6 trillion market, Forrester estimates. By 2020, 12.1% of the US$9.39 trillion business-to-business market will be online, according to the research company.
More than 300,000 businesses have registered accounts in the first year of the Amazon program and thousands more are added each week, said Prentis Wilson, a vice president who oversees Amazon Business. Business accounts get bulk discounts on more than five million items.
The marketplace appeals to businesses that want a streamlined place for supplies rather than dealing with orders and bills from multiple vendors, Wilson said.
“We manage the complexity for them,” he said.
Amazon Takes Aim at YouTube with New Video Service
Amazon.com Inc. launched a service on Tuesday that allows users to post videos and earn royalties from them, setting up the world’s biggest online retailer to compete directly with Alphabet Inc.’s YouTube.
The service, called Amazon Video Direct, will make the uploaded videos available to rent or own, to view free with ads, or be packaged together and offered as an add-on subscription.
Amazon will pay content creators 50% of the revenue earned from rental receipts or sale of the videos, according to the company’s license agreement. For ad-supported videos, the creators will get half of the net ad receipts.
Amazon’s fast-growing Prime loyalty program already offers original TV programming and access to digital entertainment products such as Prime Music and Prime Video, as well as one-hour delivery of purchases, for an annual fee of $99.
YouTube offers a free, ad-supported service as well as a $10-per-month subscription option called YouTube Red.
Amazon, though, has a long way to go to catch up with YouTube, the go-to venue for video on the internet since 2005.
“I don’t see 50 million Prime users making a huge dent in the 2 billion YouTube user ecosystem,” Wedbush Securities analyst Michael Pachter said in an e-mail to Reuters.
Ivan Feinseth, at Tigress Financial Partners, said Amazon had the technological wherewithal and financial resources to be a contender in any business, but was similarly cautious.
“I don’t know if it’s going to totally disrupt YouTube, or even some of the other services, but for those that are heavy Amazon users, it will have an appeal,” he told Reuters.
Amazon’s shares, already up about 57% in the past 12 months, rose 3.2% to an intraday record of $701.40.
Users of Amazon’s service will be able to make their videos available in United States, Germany, Austria, the United Kingdom and Japan.
The company has also signed up several partners for the service, including Conde Nast Entertainment, the Guardian, tech blog Mashable and toy maker Mattel Inc.
Amazon has been making a concentrated push into video.
In a client note issued earlier on Tuesday, Bernstein analyst Carlos Kirjner estimated that the company will spend about $2.9-billion on video content for Amazon Prime this year.
Amazon recently launched a monthly subscription to its video program for $10.99 and plans to offer its video streaming service as a standalone service for a monthly fee of $8.99.
Source: Bloomberg News, Reuters
Wal-Mart Brings Back its Iconic Greeters to Help Deter Theft
Wal-Mart Stores Inc. will begin deploying employees to all its entrances and exits in a move to deter shoplifters and improve customer service, reviving a door-greeter program that had languished in recent years.
Greeters will return to Wal-Mart’s U.S. superstores in multiple forms, the company said last week. At two-thirds of locations, a standard greeter will be stationed at the entrance. Many of these stores had relocated the workers to other areas, such as the main shopping aisle.
The remaining stores, which the company has identified as having more theft, will get an employee focused on preventing shoplifting who will periodically check receipts. These workers, called customer hosts, will be younger than traditional greeters and better able to deal with an encounter that could turn hostile. They will be designated with a bright yellow vest and a radio.
Wal-Mart began testing a program last year to see how effective it would be to add more staff at the door. The results were positive. At two stores in Arlington, Texas, having employees check receipts helped reduce calls to police by about 40% over six months, said Kevin Kolbye, assistant chief of the Arlington police. Wal-Mart also put in place eye-level security monitors and other theft-prevention technology, and a program for first-time offenders so they don’t have to be arrested, he said.
The changes, announced to employees last Wednesday, will be rolled out over the summer, the company said. Wal-Mart will also create a new position to have an employee oversee the self-checkouts, an area prone to theft.
Theft has been an increasing problem for Wal-Mart, with the company saying it contributed to lower earnings last year. At some stores, police are called four times a day to arrest shoplifters stealing everything from a $2 pack of gum to a cart full of televisions. While Wal-Mart doesn’t break out how much merchandise disappears from its stores, retailers typically lose 1.4% of their sales to theft and administrative errors, according to the National Retail Federation.
The store greeter was a hallmark of Wal-Mart under founder Sam Walton, who believed having a friendly face at the door could give a neighbourhood feel to the company’s massive supercenters. This time around, Wal-Mart hopes the greeters and customer hosts will not only deter theft but also help improve customer service — a key focus for the company as it tries to reignite sluggish store traffic growth.
Wal-Mart expects to fill the new staffing with existing employees, so headcount probably won’t increase.
Source: Bloomberg News
Marketplace Stats & Trends
Why We Shop Differently on Mobile Phones
Science is trying to decode how we make decisions when we use our mobile phones to shop.
Tucked into a commercial park in Mississauga, Ontario, the consumer research lab at The Central Group marketing agency is where retailers come to test new ideas.
It looks like someone took a slice out of a grocery or drug store and transported it on a pallet into a warehouse, except all is not as it seems.
The cash register and shelves are on wheels, so the 4,000 square-foot space can be shaped and reshaped. This is to test things such as what impact a narrow aisle has on shoppers and which packaging draws their gaze.
The walls are magnetized so the life-sized images affixed to them can be swapped out to transform the space into different kinds of stores. The room can be used to test scents and music. The freezer section hides a one-way mirror.
It’s in this lab that neuromarketer Diana Lucaci, founder and CEO of True Impact, conducts studies for retailers bent on discovering as much as they can about why people buy and don’t buy.
Paid participants wear electroencephalography (EEG) headsets and eye tracking glasses [as pictured above] that measure their level of interest and how persuaded they are by what they are seeing.
Increased activity in the frontal left sphere of the brain indicates that shoppers like what they see. Involvement of the frontal right hemisphere means they want to avoid whatever it is they’re looking at.
“It’s not dissimilar to the fight-or-flight response,” says Lucaci.
Focus groups used to be the go-to tool for measuring what people think of products, but the problem with focus groups is that people very often don’t say what they are thinking.
“People act on how they feel, not on what they say,” Lucaci says.
Many retailers are shifting their marketing spending from traditional places like television ads, to in-store pitches, including packaging, displays and product placement, says Domenic Cecol, chief design officer at The Central Group.
They want to know as much as possible about what works and doesn’t work.
“There is this whole other behavioural level — how are you actually interacting with the store environment when you’re in the store,” says Cecol.
While focus groups can still be useful, big retailers like Procter and Gamble and Kraft are increasingly looking to neuroscience to uncover what is going on in the minds of consumers when they shop, says Denise Lee Yohn, author of the book What Great Brands Do.
“We are not even aware of the influences that shape our decisions. Neuroscience gives everyone a peek behind the curtain,” says Yohn.
The headsets used by Lucaci’s team measure cognitive load — how hard the brain is working to process what is happening. For example, says Lucaci, the brain experiences pain when it has to think about numbers, especially at the end of the day.
“We’ve had to make so many decisions throughout the day that at the end of the day, you’re done with decisions,” says Lucaci. Consumers presented with too many options at the end of the day take longer to choose what they buy, which translates into a smaller basket size for retailers, says Lucaci.
Lucaci’s research on mobile phone purchases indicate that a mobile app experience is like a first dateys. “You don’t build trust by bombarding customers with 1,000 questions at the beginning.” Retailers should ask for a bare minimum of information during the check-out sequence, to prevent consumers from ditching their shopping carts.
The last steps in a mobile-shop should be memorable for customers — in a good way. “If the end is not impactful on the brain, it won’t be as memorable,” says Lucaci. An app interaction that ends well resonates more positively with consumers.
A poor app experience can leave consumers with a lower opinion of the brand overall. In the case of a hotel chain with a complicated mobile app, Lucaci found that customers who originally identified the brand with the words “classy, comfort and luxury,” identified the brand with the words “luxury, expensive, complicated and pretentious,” after using the app.
Source: Article by Francine Kopun, The Toronto Star
Economic News
Economists Downgrading their Outlooks for Canada’s Economy as Alberta Fires Burn
A number of economists are cutting their second quarter outlooks for Canada’s economy due to the wildfires in Alberta.
The Bank of Canada had forecast that GDP would expand by 1% in the second quarter, but now economists at TD Bank and Bank of Montreal suggest that growth will be flat or even potentially negative.
Economists at BMO Capital Markets estimate that as oil operations remain offline, cutting one million barrels a day from distribution, the Canadian economy is seeing 0.05 percentage points shaved from monthly growth.
“At this point we’ve assumed that production will be down for a week, but given the massive uncertainty, we’ll be evaluating the impact on a weekly basis and our current call is really just a placeholder for now,” said Benjamin Reitzes, economist for BMO Capital Markets.
Reitzes estimates that Canada’s economy will post no growth for the quarter, down from BMO’s original forecast of 1.5% for the quarter.
The wildfires, which began burning outside Fort McMurray, Alta. and are now creeping toward the Saskatchewan border, have affected several oil sands operations and disrupted others by displacing a large part of the workforce.
Syncrude Canada Ltd. decided last week to shut down all its facilities near the city — comprising the largest single-source producing operation in Canada — as smoke from the fire drifted to the site.
Economists at TD Securities noted that prior to the fires, GDP growth was tracking at roughly 1.3% for the second quarter. The economy was already facing downward pressure from a weak March trade report that raised questions about the non-energy segment of the economy.
“Holding the rest of the forecast constant and introducing the shock to May industry-level real GDP followed by a rebound that is delayed into Q3 translates to an annualized quarterly growth rate between a flat print and a 0.5% annualized decline,” said TD Securities analysts in a note to clients.
RBC notes that the economy will face added pressure not just from reduced oil output, but also a dip in consumer spending. Economists there cut their outlook for Q2 growth to 0.5%.
Diana Petramala, economist at TD, said that housing starts will also see volatility in the second quarter, with a larger-than-normal decline expected in May starts.
There is a silver lining, however, especially if past natural disasters are any indication. Economists expect a flurry of rebuilding in the wake of the fires to result in a rebounding growth in the third quarter.
TD Securities forecast that the economy will bounce back with three per cent growth in Q3. RBC economists also forecast that Q3 growth will come in at 3%, compared to their pre-fire call of 2%.
“Longer-term an offset will be provided by the rebuilding of destroyed assets in the Fort McMurray area,” said RBC economists in a note.
Source: Article by John Shmuel, The Financial Post
IMF Urges Canada to Continue Stimulus
The International Monetary Fund (IMF) said Canada’s economy is “coping well” with the fallout from the oil shock, but cautioned that both fiscal and monetary policy should keep their foot on the gas as the fallout from oil’s collapse and, now, the devastating Alberta wildfires continue to cloud the country’s economic fortunes.
“The Canadian economy and financial system overall are coping well,” considering the depth of the impact of the oil slump on business investment, said the IMF’s mission chief to Canada, Cheng Hoon Lim. The IMF estimated that oil-sector spending will decline about 30% this year, on top of a 40% plunge in 2015 – about in line with the latest estimates from the Bank of Canada.
Ms. Lim made her remarks in a conference call with media on Monday, in conjunction with the international financial institution’s release of its report on its annual consultation with Canada. The report included new forecasts that the Canadian economy will grow by 1.75% in 2016 and 2.25% in 2017 – similar to the Bank of Canada’s most recent projections, issued last month, of 1.7% and 2.3%, respectively.
The growth projections were produced before the Alberta wildfires that have forced mass evacuations and ground large portions of the province’s huge oil sands region to a halt. Some economists have offered quick estimates of how deep the impact will be on Canada’s economic growth; Royal Bank of Canada cut its second-quarter GDP growth estimate to 1.5% annualized, from 2%, citing the fire impact on May’s economic activity alone.
But Ms. Lim said “I think it’s still a little early to have a definitive assessment” of the impact of the fires on Alberta’s and Canada’s economies. She added that any growth lost now could be offset by increased activity later in the year as the fire-affected region around Fort McMurray rebuilds from the disaster.
She also argued that added that if it turns out that the Alberta fires pose a deep and lasting hit to the economic outlook, “clearly there is room” in both Bank of Canada interest rates and in the federal government’s budget to provide additional economic stimulus.
Indeed, the IMF’s new report stresses that monetary policy “should stay accommodative” and fiscal policy “should be pro-growth” – advocating continued stimulation of the economy from both the central bank and the federal government. In both cases, the IMF indicated, Canadian policy makers have room for further stimulation “if downside risks materialize and the economy falters.”
However, it cautioned that the central bank’s interest rates “should not … solely bear the burden of supporting the economy, given potential financial stability risks associated with a low interest rate environment.” The statement indicates that the agency is comfortable with Ottawa running budget deficits to help re-energize the economy, along with continued low interest rates from the central bank.
“The federal government’s pro-growth 2016 budget is appropriate,” the report said.
The IMF’s forecast includes its estimate that the stimulus measures in Ottawa’s recent deficit budget will boost real GDP growth by 0.5 percentage point in each of 2016 and 2017, “based on a conservative fiscal multiplier.” That’s about in line with estimates from both the Bank of Canada and the federal government – which some economists have criticized as overly optimistic.
“If the economy takes a turn for the worse, additional fiscal easing should be considered, for which there is room,” the report argued. “The additional fiscal easing should be temporary, and could be achieved by bringing forward planned infrastructure spending or by temporarily cutting personal and corporate income taxes.”
“A more active role for fiscal policy will strengthen the overall policy mix, by reducing the need for further monetary easing and thus limit the scope for excessive risk taking in a low interest rate environment,” the report said.
To that end, the IMF said it remains concerned about the risks posed by Canada’s high debt levels tied to the housing market – especially if the Canadian economy were to take a sharp turn for the worse.
“A severe recession that triggers a sharp rise in the unemployment rate could destabilize housing markets, setting off adverse feedback loops in the economy and leading to greater financial stability risks. Given extensive government-backed mortgage insurance, the impact of a severe housing downturn on the federal fiscal position could be considerable and potentially limit the room for fiscal stimulus down the road,” it said.
The agency said that the macroprudential measures Canada has taken to cool housing-related debt have “been broadly effective in alleviating financial stability risks and reducing taxpayer exposure to mortgage finance.” But it did caution that “financial vulnerabilities have become more apparent” because of the oil shock, and warned that the country’s banks will have to increase their provisions for bad loans related to the energy sector.
The IMF also said that it believes that the Canadian dollar, which has been recovering in recent months after a deep decline, is now “modestly overvalued, relative to medium-term fundamentals and desirable policy settings.” But in the conference call, Ms. Lim clarified that the agency estimates this overvaluation to be quite small, “from 0% to 5%,” suggesting that she considered it a non-issue.
“I wouldn’t emphasize that,” she said.
Source: The Globe and Mail
Pace of Canadian Housing Starts Falls in April; Ontario, Quebec Lead Decline
The pace of Canadian housing starts slowed in April to the lowest level in three months.
Most regions of the country saw increases in urban areas on a seasonally adjusted basis but there were declines in Ontario and Quebec.
The Canada Mortgage and Housing Corporation (CMHC) said on Monday that the seasonally adjusted annual rate (SAAR) for housing starts last month was 191,512 units – down 5.4% from 202,375 units in March and 9.9% from 212,594 units in February.
The trend measure of housing starts in Canada was 195,064 units in April compared to 196,103 in March, according to CMHC’s six-month moving average.
“While the trend for Canada remained stable in April, there were off-setting differences at the local level, notably in Vancouver and Montréal,” said Bob Dugan, CMHC chief economist. “Condo construction is slowing down in Montreal as builders are managing inventories by channelling demand to units that have been completed but remain unsold.”
The SAAR of urban starts decreased by 4.6% in April to 174,810 units. Multiple urban starts decreased by 4.0% to 117,851 units in April and the single-detached urban starts decreased by 5.8% to 56,959 units.
In April, the seasonally adjusted annual rate of urban starts increased in the Prairies, British Columbia, Atlantic Canada, but decreased in Ontario and Québec.
Ontario's seasonally adjusted rate for urban starts fell 26.7% to 62,672 starts in April, down from 85,518 in March while Quebec's urban starts fell 7.7% to 27,423 from 29,696.
Rural starts were estimated at a seasonally adjusted annual rate of 16,702 units down 12.5% from 19,098 units in March.
Source: CMHC, The Canadian Press
Canadian Building Permits fall 6.9% in March
The value of Canadian building permits issued in March fell by 6.9% to $6.9 billion as construction intentions in oil-producing Alberta dropped following a big jump in February, Statistics Canada reported last Thursday.
The decline – the second in three months – was greater than the 5% retreat forecast by analysts in a Reuters poll.
The value of permits issued in Alberta – hard hit by a slump in crude prices – fell by 41.3%. This followed a 43.3% increase in February on the back of a big commercial project in the city of Edmonton.
The value of residential permits rose 4.8% to $4.4 billion in March, a second consecutive monthly increase. Gains were posted in seven provinces, led by Ontario, British Columbia and Nova Scotia. The largest decline in residential construction intentions was reported in Alberta.
Construction intentions for multi-family dwellings rose 12.1% to $2.0 billion in March. Gains were reported in every province, except Alberta. Ontario posted the largest advance, followed by British Columbia and Nova Scotia.
The value of permits for single-family dwellings edged down 0.5% to $2.4 billion, following a 10.0% increase in February. Declines were spread among five provinces, led by British Columbia. Ontario recorded the most notable increase.
Municipalities approved the construction of 15,674 new dwellings in March, down 1.4% from the previous month. The decline resulted from single-family dwellings, which fell 7.9% to 5,623 new units. Conversely, multi-family dwellings were up 2.6% to 10,051 new units.
In the non-residential sector, the value of building permits was down 22.8% to $2.4 billion in March, following a 32.6% increase the previous month. Declines were reported in half the provinces, with Alberta responsible for most of the drop, followed by British Columbia and Ontario.
All three components of the non-residential sector decreased in March, led by commercial buildings.
The value of permits for commercial buildings was down 27.7% to $1.5 billion in March, partially offsetting the 56.6% increase in February. At the national level, the decline was mainly the result of lower construction intentions for recreational facilities and retail complexes, which recorded large increases the previous month. Decreases were posted in five provinces, led by Alberta, followed distantly by Ontario and British Columbia.
In the institutional component, the value of permits was down 12.2% to $591 million in March, after posting an increase of 17.5% the previous month. The decrease resulted mostly from lower construction intentions for secondary schools, other government buildings and health clinics. Declines were posted in five provinces, most notably Alberta, Quebec and Saskatchewan. Ontario registered the largest advance in the component.
The value of industrial building permits was down 17.1% to $395 million in March, a second consecutive monthly decline. Lower construction intentions for maintenance-related buildings, utilities buildings and manufacturing plants were responsible for much of the decrease. The decline was spread among five provinces, led by Manitoba. The biggest increase was recorded in Alberta.
Regionally, the total value of building permits was down in four provinces in March, with Alberta posting the largest decrease, followed by British Columbia and Saskatchewan.
In Alberta, the value of building permits dropped 41.3% to $931 million, following a 43.3% increase in February. Construction intentions declined in every component, except industrial buildings. Commercial buildings and multi-family dwellings accounted for most of the decrease.
The value of building permits in British Columbia was down 5.2% to $1.1 billion in March, registering a third consecutive monthly decline. The drop was the result of lower construction intentions in every component, with the exception of multi-family dwellings. Commercial structures accounted for the majority of the decrease.
In Saskatchewan, the value of building permits fell 27.8% to $127 million, a third consecutive monthly decline. The decrease came from a drop in construction intentions for institutional buildings, which were at their lowest level since October 2014, and single-family dwellings.
Source: Statistics Canada, Reuters
Canada’s Labour Market Stuck in Neutral as Alberta Continues to Bleed Jobs
Job growth came to a virtual halt last month, leaving Canada’s unemployment rate unchanged from March at 7.1% and offering little impetus for interest rate movements any time soon.
Hiring was basically flat across the country in April, with little movement in full-time and part-time positions, Statistics Canada reported last Friday. There was also only marginal change in the level of private and public job activity.
Canada’s employment declined by 2,100 positions in April. The jobs loss follows a gain of 40,600 in March, Statistics Canada said. Economists surveyed by Bloomberg News projected a 1,000 job increase and a jobless rate of 7.2%.
It was a similar story across most provinces, with only Alberta — still struggling for growth following the global collapse in oil prices — seeing any significant change in employment levels.
Alberta lost 20,800 jobs, including 8,400 in the natural resource sector. The province’s unemployment rate edged up above the national average to 7.2%, even as Albertans dropped out of the labour force.
The province has been hit hard by low oil prices and it’s now contending with a monstrous wildfire that has forced the shutdown of economically critical oil sands facilities and the evacuation of Fort McMurray.
Other provinces — such as Ontario, British Columbia, New Brunswick, and Newfoundland and Labrador — had limited job-market movement.
Overall, the private sector created 14,400 jobs while the public sector added 8,400 positions. Self-employment declined by 24,900 spots and employers added 22,800 jobs.
There were fewer people working in Canada’s manufacturing sector in April. Other sector declines came in natural resources, building activity and agriculture. ”These losses were offset by gains in wholesale and retail trade, as well as accommodation and food services,” Statistics Canada said.
Economists have been looking to Canada’s manufacturing industry to pick up the slack from Canada’s hobbled resources sector, which has struggled amid low commodity prices.Natural resources shed 7,800 jobs during April.
But in April, goods-producing work across Canada fell by 37,100 positions, led by a drop of 16,500 manufacturing jobs.
Between December and April, the country lost 51,700 manufacturing jobs — with 23,200 of them in Alberta, including 3,000 last month. Manufacturing work in the Prairie province was down 17.7% compared to the year before.
With the wildfire continuing to rage in Alberta, it’s unclear how significant the economic fallout will be in the province.
Last month, the Canadian economy added 35,000 services jobs, which was largely due to surges of 26,800 positions in wholesale and retail trade and 21,900 in accommodation and food services.
Services also saw losses of 16,000 positions in the category of business, building and other support services and a drop of 11,900 jobs in other services.
While Canadian jobs “surged in March, so the labour market could be forgiven for taking a breather in April,” said economist Nick Exarhos at CIBC World Markets.
Over the past 12 months, employment across Canada has increased by 144,000 positions or 0.8%, with gains in both full-time and part-time work. Over the same period, the number of hours worked rose by 0.9%.
Friday’s employment report will provide little direction for the Bank of Canada, which will announce its next interest rate decision on May 25. The accompanying statement from governor Stephen Poloz will not include any new economic forecasts. For those, analysts will have to wait until July 13, when policymakers release their next quarterly Monetary Policy Report.
That document will include forecasts for growth, something the federal government is expected to support through its multi-billion-dollar fiscal stimulus program.
According to a new survey also released last Friday by the Chartered Professional Accountants of Canada, about 35% of those surveyed expected job growth in their company. That’s up from 31% in the previous quarter.
36% of the respondents anticipated no change, while 27% anticipated a decline and the others did not know.
Source: Statistics Canada, The Canadian Press, The Financial Post
U.S. Employment Gains Hit Seven-Month Low, Labour Force Shrinks
The U.S. economy added the fewest number of jobs in seven months in April and Americans dropped out of the labour force in droves, signs of weakness that cast doubts on whether the Federal Reserve will raise interest rates before the end of the year.
Non-farm payrolls increased by 160,000 jobs last month as construction employment barely rose and the retail sector shed jobs, the Labor Department said last Friday. That was the smallest gain since September and below the first-quarter average job growth of 200,000.
Adding to the report’s weak tone, employers added 19,000 fewer jobs in February and March than previously reported. While the unemployment rate held at 5.0% that was because people dropped out of the labour force.
“For those who had thought a June rate hike was in play, this was a nail in the coffin. This raises questions about a September rate hike. I would like to think the economy is in a better place at the end of the year,” said Phil Orlando, chief equity market strategist at Federated Investors in New York.
The stepdown in job gains could temper expectations of a strong rebound in economic activity in the second quarter after growth nearly stalled in the first three months of the year.
Economists polled by Reuters had forecast payrolls rising 202,000 last month and the jobless rate unchanged at 5%.
Average hourly earnings were the only bright spot in the employment report, rising eight cents or 0.3% last month.
That took the year-on-year increase to 2.5% from 2.3% in March, still below the 3.0% advance that economists say is needed for inflation to rise to the Fed’s 2.0% target.
The U.S. central bank last month offered a fairly upbeat assessment of the labour market, saying that conditions had “improved further.” The Fed raised its benchmark overnight interest rate in December for the first time in nearly a decade. Fed officials have forecast two more rate hikes for this year.
Market-based measures of Fed policy expectations have virtually priced out an interest rate increase at the Fed’s June 14-15 meeting, according to CME Group’s FedWatch. They see a less than 40% probability of rate hikes in September and November, with a 48% chance at the December meeting.
The labour 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 62.8%. It had increased 0.6 percentage point since dipping to 62.4% in September.
The labour force fell by 362,000 as people dropped out in April. The employment-to-population ratio fell to 59.7% from a seven-year high of 59.9%.
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 slipped one-tenth of a percentage point to 9.7% last month. The vast private services sector dominated employment gains in April, adding 174,000 jobs. Retail payrolls fell 3,100 after hefty gains in the first quarter, despite sluggish sales.
While information employment was unchanged last month, a Labor Department official said there was no sign that a strike by about 40,000 Verizon workers had impacted the data.
Manufacturing added 4,000 jobs last month after shedding 29,000 in March, the biggest loss for the sector since December 2009.
There were further job losses in mining as the energy sector adjusts to weak profits from a recent prolonged plunge in oil prices. Mining payrolls fell 8,000 last month. Mining employment has decreased by 191,000 jobs since peaking in September 2014, with 75% of the losses in support activities.
Gains in construction employment slowed sharply, with the sector adding 1,000 jobs in April, after home building showed some signs of fatigue last month.
Source: Reuters
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