CHHMA - EYE ON OUR INDUSTRY
Volume 15, Issue 43, November 18, 2015

Inside This Issue:

• Register Now for the Industry Cocktail (December 10th) in Montreal
• You’re Invited to Save on Your Freight & Distribution Costs... and It Costs Nothing to Find Out How Much It Could Be!
• Target Hikes Earnings Forecast after Profit Rises
• Loblaw’s Profit, Revenue Climb
• Lowe's Sales Exceed Forecasts on Strengthening U.S. Housing Market
• Home Depot Third Quarter Same-Store Sales Beat Estimates
• Wal-Mart Profit Dips But Tops Q3 Estimates as CEO Pursues Sales Turnaround
• Sears Canada Sells More Real Estate, Including $100M Distribution Centre
• Canadian Tire Delivers Strong Third Quarter Results
• Canadian Home Resales in October Hit Second Best Month in Nearly Six Years
• Loonie is 'Carving Out a Bottom' (But it's Not There Yet)
• Bank of Canada Says Soft Landing Still Likely for Housing Sector
• Vancouver, Toronto, Hamilton See Eye-Popping Home Price Increases in Past Year
• Canadian New Home Prices Edge Higher in September
• Canadians Fully Embracing Shopping Season in Spite of Slower Economy, Lower Dollar
• Latest U.S. Economic News

Association News

Register Now for the Industry Cocktail (December 10th) in Montreal

This year’s Industry Cocktail is taking place on Thursday, December 10th from 5:30 p.m. to 8:30 p.m., at the Bar Dame de Coeur at the Casino de Montreal.

The location offers a fun and relaxing atmosphere where you can enjoy some wonderful food, drinks and conversation with friends from the industry while enjoying the festive season together.

Click here for further information and registration.  
 

You’re Invited to Save on Your Freight & Distribution Costs... and It Costs Nothing to Find Out How Great Your Savings Could Be!

Through Logistics Solutions & Services Inc. (LSS), the CHHMA has established a logistics and transportation program that can help our members to reduce freight and distribution costs, improve service, and reduce transit times. Many CHHMA members have already taken advantage of this program. Over the close to 20 years this program has been offered, the combined savings to members is measured in the millions of dollars and growing.

CHHMA members can enjoy the best freight and courier rates available as a benefit of our program through LSS. LSS specializes in Courier, LTL, Truckload and 3PL services, International Ocean and Airfreight throughout North America and abroad and continues to meet the needs of the shipping public through strong, reliable and knowledgeable logistics management consulting.

It all starts with accurate and informative benchmarking.

LSS has provided considerable value to their clients by communicating current and comparative transportation rate structures based on volume, product type, modes and shipper/receiver requirements.

The rates you negotiate (without the wealth of their industry knowledge) may be too high. Without knowing what your competition is paying and what carriers are willing to settle for, you may not have the tools you need to get the best rates and service available...especially in these market conditions.

Change for the sake of change? Never! LSS respect the trust and relationships you have built with your carriers, but at LSS they can determine:

• How your distribution rates compare with what your competition is paying
• The bottom line that carriers will accept for the privilege of being your carrier
• Current capacity requirements with key carriers and how to leverage this knowledge into better rates for you
• Carrier costs and how to use that knowledge to your advantage
• Proper negotiation strategies, and implementation of carrier contracts that will cover all the bases and impact your bottom line in a positive manner

LSS save you money, time and increase efficiencies, while maintaining and improving service level performance.

“We have had a strong relationship with Logistics Solutions since 1996. They have assisted countless members of our association in revamping their distribution processes and minimizing costs.  They continue to provide an innovative approach to the movement of goods throughout the entire supply chain for our members and provide our most valuable member benefit,” Vaughn Crofford, CHHMA President.

Contact LSS now for a no obligation consultation at http://www.LSSaves.com, telephone (905) 896-9080, fax (905) 896-9081 or email LSS Founder & President Paul Publow at pfpublow@LSSaves.com.

Call today to start saving!

Logistics Solutions & Services Inc.
1100 Central Parkway West Unit 28-2
Mississauga (Toronto), Ontario
L5C 4E5

Serving the Canadian Shipping Public Since 1994


Industry News

Target Hikes Earnings Forecast after Profit Rises

Target Corp. on Wednesday reported a bigger-than-expected increase in quarterly profit as revenue got a boost from online sales and strong growth in product categories at the centre of its turnaround plan.

Target, the fourth-largest U.S. retailer, also raised the lower end of its earnings forecast for its fiscal year. It said it expected earnings of $4.65 to $4.75 per share, excluding special items, against its previous outlook of $4.60 to $4.75.

The retailer’s shares were up 2.8% at $74.36 in premarket trading. At Tuesday’s close, they had fallen nearly 4% this year.

Excluding special items, earnings came to 86 cents per share in the third quarter ended on Nov. 1, compared with 79 cents a year earlier.

Net sales rose 2.1% to 17.6 billion.

Analysts on average expected profit of 85.9 cents per share on sales of $17.57-billion, according to Thomson Reuters.

Target said same-store sales rose 1.9%, beating the market consensus of 1.7%, according to research firm Consensus Metrix.

Digital sales, including online and mobile, increased 20%, contributing 0.4 percentage points to comparable sales growth.

Under chief executive officer Brian Cornell, Target has focused on promoting a narrower set of products, or “signature categories,” that include apparel and items for children, babies and health and wellness.

Source: Reuters


Loblaw’s Profit, Revenue Climb

Loblaw Companies Ltd. says it earned $166-million in its latest quarter, up nearly 17% from a year ago.

The retailer says the profit amounted to 40 cents per share for the quarter ended Oct. 10.

That was up from a profit attributable to common shareholders of $142-million or 34 cents per share a year ago.

Revenue for the 16-week period totalled $13.95-billion, up from $13.60-billion.

On an adjusted basis, the company says it earned $408-million or 99 cents per share in what was its third quarter.

That was up from $371-million or 90 cents per share a year ago.

Same-store sales growth for the company’s food business was 3.1%, excluding its gas bar and the negative impact of a change in distribution model by a tobacco supplier.

Meanwhile, the company’s drug retail same-store sales growth, which includes Shoppers Drug Mart, was 4.9%.  Same-store pharmacy sales increased 3.5%, while front store sales increased 6.2%.

“While the grocery industry remained intensely competitive, and the regulatory environment in healthcare challenging, we maintained a stable trading platform, achieved incremental efficiencies and delivered planned synergies,” Loblaw president and executive chairman Galen Weston said.

“Having reached our deleveraging target during the quarter, we are now in a position to accelerate our focus on returning capital to shareholders.”

Source: The Canadian Press


Lowe's Sales Exceed Forecasts on Strengthening U.S. Housing Market

Lowe’s Cos Inc. reported better-than-expected quarterly profit and same-store sales on Wednesday, as people spent more on home improvement amid a strong recovery in the U.S. housing market.

The U.S. housing recovery has been gaining traction, with home builder sentiment hitting decade highs in July, August and September, according to the National Association of Home Builders.

Consumers spent more on houses, home improvement products, appliances and eating out than on discretionary items such as apparel in the August-October quarter, according to analysts.

Lowe’s reported an increase in both the number of transactions and their average value in the third quarter ended Oct. 30.

That helped same-store sales rise 4.6%, more than the 4.1% growth analysts on average had expected, according to research firm Consensus Metrix.

Same-store sales at its U.S. home improvement business increased 5%.

Lowe’s shares were up 1.2% at $73.75 (U.S.) in premarket trading on Wednesday. The stock had risen 1.7% on Tuesday after Home Depot’s strong results.

Lowe’s net income rose to $736-million, or 80 cents per share, in the quarter from $585-million, or 59 cents per share, a year earlier.

Net sales rose 5% to $14.36-billion.

Analysts on an average were expecting earnings of 78 cents per share on revenue of $14.34-billion, according to Thomson Reuters.

However, while Home Depot had said it expects full-year profit and same-store sales to be at the top end of its forecast, Lowe’s maintained its profit and same-store sales growth forecasts for the year ending January.

It expects profit of $3.29 per share and same-store sales growth of 4.0-4.5% for the year.

Source: Reuters


Home Depot Third Quarter Same-Store Sales Beat Estimates

Home Depot Inc. reported a better-than-expected rise in quarterly same-store sales on Tuesday, helped by strong demand from both retail customers and professional contractors and builders.

The company also said it expected profit and same-store sales for the year ending January to come in at the top end of its forecasts, helping to send its shares up 2.5% in premarket trading on Tuesday.

Consumers spent more on houses, home improvement products, appliances and autos than on discretionary items such as apparel in the August-October quarter, analysts have said.

The housing recovery in the United States has been gaining traction, with homebuilder sentiment hitting decade highs in July, August and September, according to data from the National Association of Home Builders.

Builders’ confidence rose to a near 10-year high in October, according to a survey released last month.

Home Depot overall same-store sales rose 5.1% in the third quarter ended Nov. 1, above the 4.6% growth expected by analysts polled by research firm Consensus Metrix.

Same-store sales at its U.S. stores rose 7.3%, comfortably ahead of analysts’ average estimate of 5.9%.

The company expects overall same-store sales to grow 4.9% in the year ending January.

Home Depot’s net income rose 12.2% to $1.73-billion, or $1.35 per share, in the quarter.

Excluding items, it earned $1.36 per share, above analysts average estimate of $1.32, according to Thomson Reuters.

Net sales rose 6.4% to $21.82-billion.  Analysts on average had expected revenue of $21.83-billion.

The third quarter results included a pre-tax expense of $20 million, or $0.01 per share, related to the company’s 2014 data breach.

The company said it expects full-year earnings of $5.36 per share. Analysts were expecting $5.31 per share.

Source: Reuters


Wal-Mart Profit Dips But Tops Q3 Estimates as CEO Pursues Sales Turnaround; Canadian Division Lures More Customers Away from Supermarkets

Wal-Mart Stores Inc. topped third-quarter profit estimates and increased the low end of its annual forecast, a sign the retailer is making progress reining in costs and revamping its stores.

Earnings were 99 cents (U.S.) a share in the period, excluding some items, the company said on Tuesday.  Analysts had predicted 98 cents on average, according to data compiled by Bloomberg. The company now expects profit of $4.50 to $4.65 a share this year, up from a previous forecast of at least $4.40.

Chief Executive Officer Doug McMillon, who took the reins last year, has invested in e-commerce and smaller-format stores – a bid to cope with online rivals like Amazon.com Inc. But Wal-Mart’s super centers remain key to his turnaround bid, and he’s working to make them more enticing. Same-store sales rose 1.5% in the U.S. last quarter, while traffic grew 1.7%.

“We will grow the company faster,” McMillon said on a conference call. “We will add between $45 and $60-billion in revenue to the company in the next three years. That is a lot of growth – it just happens to be on a big base.”

The outlook brought a dose of good news to investors after a dour profit forecast crushed the shares last month. Wal-Mart suffered its worst stock decline in more than 27 years on Oct. 14 when it said earnings would decrease as much as 12% next year. The strong U.S. dollar also has hurt the value of Wal– Mart’s overseas sales, contributing to a 1.3% revenue decline last quarter.

Shares rose as much as 3.3% to $59.80 in early trading on Tuesday in New York.  Wal-Mart had lost a third of its market value this year through Monday’s close.

Wal-Mart is fixing up its 4,600 U.S. stores after years of customer complaints about out-of-stock items, poor customer service and long waits at the checkout line. As part of an effort to improve operations, McMillon announced plans in February to raise wages for 500,000 workers. The idea is the higher pay will help the company recruit and retain better employees. The retailer bumped its starting level to $9 an hour earlier this year and plans to make it $10 in 2016.

The store-improvement plan is beginning to bear fruit. In February, only 16% of its 4,600 U.S. locations were at the standards the company had set for customer service, cleanliness and convenience. That number has now reached 70%, Wal-Mart said on Tuesday.

But McMillon’s push to modernize Wal-Mart has taken a toll on profit. The wage increase and training programs will add $2.7-billion in expenses over a two-year period, and investments in e-commerce are forecast to total as much as $1.5-billion this year.

Third-quarter net income fell 11% to $3.3-billion, or $1.03 a share, from $3.71-billion, or $1.15, a year earlier.  Revenue dropped to $117.4-billion, missing the $118-billion that analysts had predicted.

While Wal-Mart’s online sales are increasing, their pace is slowed. They rose 10% in the quarter, compared with 16% in the previous three months and 21% a year earlier. The growth was dragged down by slowing demand in China, Brazil and the U.K., Wal-Mart said.

“We still have plenty of work to do,” McMillon said. “There are areas of our business that must perform better.”

Walmart Canada Lures More Customers Away from Supermarkets, It Says

Meanwhile, Canadians are spending more of their weekly food budgets at Walmart Canada stores, the company said Tuesday, as the world’s largest retailer moves to make grocery items a “core” offering at Canadian locations.

Sales across Walmart’s network of about 400 Canadian stores jumped a strong 5.7%, the retailer said, “driven by [a] strong performance in our core grocery business, as well as [a] stronger performance in our general merchandise business.”

Walmart said shoppers bought up more health and wellness and infant products in the latest three-month stretch compared to the same period a year ago, as well.

Walmart has been expanding stores in recent years, converting most to “Supercentres” equipped with food aisles. The retailer also took over 13 former Target Canada locations in recent months.  The expansion into grocery, which has accelerated in recent years, has helped offset slower growth in general merchandise sales, experts say.

Walmart’s success isn’t exactly a state secret – its size advantage over others allows the retail behemoth to sell more products at lower prices compared to rivals, which now include Canadian supermarkets like Loblaw, Sobeys, Safeway and Metro among others.

And that cost advantage is compounding. Lower prices are increasingly difficult for conventional supermarkets to pass on, experts say, as a lower loonie drives up costs which are passed onto their consumers.

Walmart said Tuesday it will look to continue exploiting the lower prices it’s able to offer in Canada. “The team continues to focus on our low cost operating model to drive a sustainable price advantage.”

Source: Bloomberg News, Global News


Sears Canada Sells More Real Estate, Including $100M Distribution Centre

Sears Canada says it’s selling a distribution centre in Vaughan, Ontario for $100-million but will continue to occupy it once the transaction closes next year.

The department store operator also announced last Friday that it has vacated another distribution centre and sold it for $8.5-million in a transaction expected to close by the end of 2015.

These two agreements are in addition to a $18.125-million sale of a distribution centre and the sale-leaseback of a non-mall property for $10-million, both announced in September and both expected to close by year end.

Sears Canada has been undergoing years of downsizing as a result of financial losses and reduced revenue from retailing.

“Sears Canada is taking a proactive approach to its real estate strategy,” Brandon Stranzl, the company’s executive chairman, said in a statement.

He said the sale of non-core real estate will improve the company’s balance sheet and help ongoing efforts to re-establish Sears Canada as a major retailer in a changing marketplace.

Despite selling many of its largest stores in major cities, Sears Canada continues to have a national retail network of 166 corporate stores, 177 Hometown stores and more than 1,200 pickup locations for catalogue and online sales.

Source: The Canadian Press


Canadian Tire Delivers Strong Third Quarter Results

Canadian Tire Corp. reported solid growth in the third quarter last Thursday as the retailer reaped benefits from improvements made to its network of stores.

Overall revenue was flat, though, as the retailer felt the pinch of falling oil prices on its petroleum sales.

Profit in the period ended Oct. 3 rose 20.5% to $2.62, or $199.7-million, helped by a 33 cent per share boost from a real estate gain, compared with earnings of $172.2-million ($2.15) in the same period a year ago.

Revenue rose 0.1% to $2.8 billion from $2.7 billion in the same period of 2014. Revenue in the retailer’s petroleum division fell to $476.1-million from $552.4-million.

Sales at Canadian Tire’s banner stores rose 1.5% and were up 3.4% on a same-store basis. FGL Sports continued a streak of strong growth, with sales and same-store sales up 6.5% and 7% respectively.  Mark’s sales rose 2.7% and same-store sales fell 0.2%.

“Our solid top and bottom line performance demonstrates the strength of the company’s operations and retail fundamentals, especially at our core Canadian Tire stores,” chief executive Michael Medline said in a statement.

Canadian Tire said it expects to spend an average of $600 million to $625 million annually in operating capital expenditures between fiscal 2015 and 2017 as it extends and upgrades its store network and digital capabilities.

The retailer also declared a dividend of 58 cents per share to be distributed next March to shareholders of record as of January 31, 2016.

Medline told analysts last Thursday that strength in Ontario, Quebec and British Columbia is overshadowing the impact from trouble in Canada’s oil patch.

“Alberta is going to be weak for a while,” he said, adding: “What we're seeing is great strength in other places.”

He pointed to “extraordinary results out of Ontario that I haven’t seen - and I don’t remember ever seeing.”

Medline also noted the company’s strong focus on attracting a “new, younger demographic” has been paying off with strong sales in everything from its Outbound and Woods outdoor product lines to Canadian Tire’s no-name Frank brand, which has discounted k-cup pods, chips and garbage bags.

He said the company is looking to increase its digital presence with mobile apps to bring in a new generation of shoppers to the sturdy 93-year-old retailer that started out simply selling tires and fixing vehicles.

“We consider the quarter to be positive,” said analyst Peter Sklar of BMO Nesbitt Burns in a research note.

However he said investors “will remain concerned about the pressures on the Canadian consumer, the weakness in Alberta and the decline in the Canadian dollar.”

The Alberta slowdown in particular has resulted in Mark’s shifting from high-margin industrial wear to lower margin casual wear, Sklar said.

The company said that the decline in gross margin at Mark’s was partially offset by strong productivity and operational improvements at the core Canadian Tire retail banner, which also helped offset the impact of the weaker Canadian dollar.

Source: Canadian Tire, The Financial Post, The Toronto Star       


Economic News

Canadian Home Resales in October Hit Second Best Month in Nearly Six Years

Sales of existing homes in Canada rose in October from September led by strength in Vancouver and Toronto despite signs of slack in the condo market, a report from the Canadian Real Estate Association (CREA) showed on Monday.

The number of homes trading hands via MLS® Systems of Canadian real estate Boards and Associations rose by 1.8% in October compared to September. As a result, national activity stood near the peak recorded earlier this year and reached the second-highest monthly level in almost six years.

There was an even split between the number of markets where sales posted a monthly increase and those where sales declined.The national increase was driven by monthly sales gains in the Lower Mainland of British Columbia together with the Greater Toronto Area and surrounding areas, led by the York Region, Central Toronto, and Hamilton-Burlington.

“The continuation of low interest rates is supporting home sales activity,” said CREA president Pauline Aunger.

“October extended resale housing market trends of recent months,” said Gregory Klump, CREA’s chief economist. “Single detached homes continue to be in short supply while demand for them remains strong in a number of active and populous housing markets in British Columbia and Ontario.  Meanwhile, an ample supply of condo apartments remains. The balance between supply and demand is generally tighter for single detached homes than it is for condo apartments and that’s unlikely to change any time soon. For that reason, price gains for single detached homes should continue to outstrip those for condo apartment units for some time.”

Actual (not seasonally adjusted) sales in October were little changed (+0.1%) from activity one year ago, when it reached the second-highest level on record for the month.

Actual (not seasonally adjusted) sales were up from year-ago levels in half of all local markets, led by the Lower Mainland region of British Columbia, the GTA and Montreal. Gains there were largely offset by a drop in activity in the Calgary region, where sales were down considerably from the record set last year for transactions during the month of October.

The number of newly listed homes edged up 0.9% in October compared to September, led by the Lower Mainland, Victoria and the GTA. These gains were balanced by a pullback in new supply in the Okanagan Region, Edmonton and Ottawa.

The national sales-to-new listings ratio was 57.9% in October, remaining near the top end of a range that CREA considers to be a balanced market. A sales-to-new listings ratio between 40 and 60% is generally consistent with balanced housing market conditions, with readings below and above this range indicating buyers’ and sellers’ markets respectively.

There were 5.5 months of inventory on a national basis at the end of October, down from the 5.7 months recorded in September.

As with the sales-to-new listings ratio, the October reading for months of inventory points to the tightest housing market conditions at the national level in almost six years.

The Aggregate Composite MLS® HPI rose by 6.70% on a year-over-year basis in October, marking a slightly more modest increase compared to the increase in September (6.90%).

Year-over-year price growth slowed in October for one and two-storey single family homes, but picked up for townhouse/row and apartment units.

Two-storey single family homes continue to post the biggest year-over-year price gains (+8.67%), followed by one-storey single family homes (+6.02%), townhouse/row units (+4.88%) and apartment units (+4.39%).

Year-over-year price growth varied among housing markets tracked by the index. Greater Vancouver (+15.33%) and Greater Toronto (+10.33%) continue to post double-digit year-over-year price increases.  Meanwhile, price gains in the Fraser Valley have accelerated to 10.51%.

By comparison, Victoria and Vancouver Island prices saw year-over-year gains that ranged between 5% and 7% in October.

Prices in Calgary edged down by about 1% on a year-over-year basis in October and slipped lower by about 1.5% in Saskatoon.  Prices also fell by a little over 4% in Regina, extending year-over-year price declines there that began in 2013.

Prices in Ottawa remained stable compared to those one year ago and were up from October 2014 levels in Greater Montreal (+1.42%) and Greater Moncton (+3.84%).

The MLS® Home Price Index (MLS® HPI) provides a better gauge of price trends than is possible using averages because it is not affected by changes in the mix of sales activity the way that average price is.

The actual (not seasonally adjusted) national average price for homes sold in October was $454,976, up 8.3% on a year-over-year basis.

The national average price continues to be pulled upward by sales activity in Greater Vancouver and Greater Toronto, which are among Canada’s most active and expensive housing markets. If these two markets are excluded from calculations, the average is a more modest $339,059 and the year-over-year gain is reduced to 2.5%.

Source: CREA


Loonie is 'Carving Out a Bottom' (But it's Not There Yet)

The Bank of Montreal believes the Canadian dollar is nearing its bottom.

It’s not there yet, according to BMO and others, but it’s getting close.

So much depends on what happens with oil prices and the diverging monetary policies of the U.S. Federal Reserve and the Bank of Canada.

From where BMO sits, the loonie will fall “modestly further” to about 74 cents (U.S.) when the Fed finally launches its first interest rate hike.

Observers see that possibly happening next month or early next year.

“Much like oil prices, the Canadian dollar is carving out a bottom,” said BMO senior economist Sal Guatieri, who expects the loonie to perk up to 78 cents by the end of 2016.

That’s good news for some, like exporters, and bad news for others, like Canadian snowbirds.

“So long as the currency stays below purchasing power parity (estimated by Statistics Canada at around 85 cents U.S.), it will provide a competitive lift to the economy,” Mr. Guatieri said in a new report.

“And, unless Canadian companies raise their productivity game or resource prices take flight again, the economy will need this booster shot.”

Source: The Globe and Mail


Bank of Canada Says Soft Landing Still Likely for Housing Sector

The Bank of Canada’s number-two policy maker said the central bank remains confident that Canada’s housing sector will achieve a soft landing, just days after a leading global economic body warned of rising risks in overheated pockets of the Canadian market.

“Our base case, and one that we outlined in the [October Monetary Policy Report], is that the housing market and household debt are going to evolve in a constructive way,” said Carolyn Wilkins, senior deputy governor at the Bank of Canada, in an interview with The Globe and Mail last week. “We don’t see the risk as part of our base case at all.”

Earlier last week, the Paris-based Organization for Economic Co-operation and Development (OECD) warned in its twice-yearly global Economic Outlook that the risk of “a sharp market correction” is rising in Toronto, Canada’s biggest regional housing market. It pointed to a glut of new and unoccupied housing units in the city as a danger sign. It also noted that Canada’s new-home construction starts, which have been trending above a 200,000 annualized rate in recent months, “are running at the higher end of demographic requirements.”

However, the OECD also said that the Toronto and Ontario markets are being supported by “relatively buoyant” economic growth and solid demand from foreign buyers, aided by a weaker Canadian dollar.

Ms. Wilkins argued that Canada’s improving economic momentum will provide a solid base for the housing market, as well as the country’s record levels of household debt, to moderate.

“We see strengthening growth in Canada that’s coming from the U.S., from past monetary policy easing, and also from the lower dollar,” she said from the Bank of Canada’s regional office in Toronto.

“What we are seeing is the rebound in the second half [of 2015] that we were looking for. We’re seeing signs that the exports that you would expect to lead the recovery, that would also be sensitive to changes in the exchange rate, are picking up.”

She reiterated the bank’s outlook that Canada’s output gap – the gap between the economy’s actual output and its full capacity, a key indicator of whether the central bank needs to raise interest rates – should close “some time around mid-2017.”

Ms. Wilkins spoke to The Globe while visiting Toronto for a speaking engagement at the University of Toronto’s Rotman School of Management.  Her speech, focused on the Bank of Canada’s efforts to innovate its operations on many fronts, to meet the fast-evolving nature of central banking and global finance. In her role as second-in-command to governor Stephen Poloz, Mr. Wilkins oversees the bank’s strategic planning.

The speech outlined the bank’s new medium-term plan covering its operations over the next three years – a plan that was released in June, but had received little fanfare as the central bank kept a low profile during the lengthy federal election campaign. One key element to the plan is to better incorporate financial stability risks – such as housing bubbles and household debt levels – into its framework for determining interest-rate policy, something Mr. Poloz and his team have increasingly talked about over the past year.

Source: Article by David Parkinson, The Globe and Mail     


Vancouver, Toronto, Hamilton See Eye-Popping Home Price Increases in Past Year

If you needed more evidence of where the action is, the latest reading of Canadian home prices spells it out.

Values rose in Vancouver by 0.6% in October from September, and in Toronto by 0.3%, according to the Teranet-National Bank home price index released last Thursday.

But it’s the year-over-year figures that are eye-popping: 9.8% in Vancouver and 9.3% in Toronto and nearby Hamilton.

Those are the three cities that have seen prices surge repeatedly, and in the case of Vancouver and Toronto have led to warnings about the froth in the markets. But in the remaining eight metropolitan areas, prices were flat on average.

Moreover, just five areas saw year-over-year price gains, the lowest numbers in six years.

“The regional dichotomy in the Canadian housing market is more obvious than ever,” said National Bank senior economist Marc Pinsonneault.

“The 12-month composite price increase, the largest since May 2012 ... was driven by only four markets (Toronto, Hamilton, Vancouver and Victoria) where home resale market conditions are known to be rather tight.”

Across Canada, prices rose 0.1% from September, marking the 10th consecutive month of gains. On a yearly basis, prices climbed 5.6%.

The Calgary market, which has been hit by the oil shock, saw an annual decline of 1%, though a monthly rise of 1.7%.

Source: The Globe and Mail 


Canadian New Home Prices Edge Higher in September

Statistics Canada’s New Housing Price Index (NHPI) edged up 0.1% in September from August, pushed higher by strength in the major regions of Toronto and Vancouver, the agency reported last Thursday.

Market analysts polled by Reuters had expected a 0.2% increase.

The census metropolitan area (CMA) of Vancouver (+0.4%) and the combined region of Toronto and Oshawa (+0.2%) were the top contributors to the national increase. Builders in both areas reported market conditions as the main reason for the advance. This was the eighth straight monthly price increase in Toronto and Oshawa, and the largest gain in Vancouver since April.

Prices rose 0.2% in the CMA of Ottawa–Gatineau, following four months of no change. Builders reported higher material and labour costs as the main reasons for the increase, the first in the CMA since August 2014.

New housing prices also rose 0.2% in the CMAs of Montréal, Kitchener–Cambridge–Waterloo, London and Regina.  Builders in Montréal and Kitchener–Cambridge–Waterloo attributed the rise to market conditions, while builders in London and Regina reported higher land costs.

Prices were unchanged in 8 of the 21 metropolitan areas surveyed.

The CMAs of Charlottetown (-1.1%) and Saskatoon (-0.7%) recorded the largest price decreases in September. Builders in both CMAs reported price reductions to stimulate sales and lower negotiated selling prices. This was the largest decrease in Charlottetown since January 2006, and the largest decline in Saskatoon since May 2009.

New home prices declined 0.1% in both St. Catharines–Niagara and Windsor.  In St. Catharines–Niagara, builders reported higher material and labour costs; however, these were offset by lower negotiated selling prices. Builders in Windsor reported lower selling prices in September, the first monthly decrease in the CMA since October 2014.

New Housing Price Index, 12-month change

The NHPI increased 1.3% over the 12-month period ending in September. The national index has shown identical year-over-year price movements for the past four months.

The combined metropolitan region of Toronto and Oshawa was the top contributor to the 12-month increase in September, with prices up 3.6% over the same month last year.

The CMA of Hamilton recorded the largest increase, with prices up 3.7% year over year. Other notable increases were observed in Vancouver (+1.8%), Winnipeg (+1.6%), Kitchener–Cambridge–Waterloo (+1.5%) and London (+1.1%). This was the smallest year-over-year increase in London since October 2012, and the largest rise in Vancouver since October 2010.

Among the 21 metropolitan areas surveyed, 7 posted year-over-year price declines in September: Regina (-1.4%), Victoria (-0.8%), Ottawa–Gatineau (-0.7%), Saskatoon (-0.6%), Québec (-0.6%), Calgary (-0.5%) and Charlottetown (-0.1%). This was the smallest 12-month decrease in Ottawa–Gatineau since October 2013, and the first decline in Charlottetown in six months. The year-over-year price decrease in Calgary was the second in as many months, following steadily slowing year-over-year price increases since the start of this year.

Source: Statistics Canada, Reuters    


Canadians Fully Embracing Shopping Season in Spite of Slower Economy, Lower Dollar

According to a recent poll by Ebates.ca, the vast majority of Canadians (79%) plan on spending the same or even more over the holiday season as they did last year, but they will be smart about it.  Around half of Canadians plan to stretch their holiday budgets and take advantage of the deals during the biggest shopping days of the year: 45% will shop on Black Friday; 40% on Cyber Monday and 53% on Boxing Day – which in Canada is still viewed as the day with the best deals.

"While the economy may not be predictable, Canadian shopping habits are," said Adrienne Down Coulson, General Manager, Ebates.ca. "Our survey demonstrates that shoppers employ a range of clever strategies when it comes to shopping smart and stretching their budget during the holiday season."

The overwhelming majority of Canadians (76%) say they will do some holiday shopping online this year, with 27% claiming to do more online than last year.Convenience, the ability to find things not available in stores and better prices are cited as the top reasons that make online shopping appealing.

It might be surprising, but shoppers are more likely to buy for themselves than others on the three big holiday shopping days. About one in three are only buying for themselves on Black Friday, Cyber Monday and Boxing Day, however it is worth noting that more than half of people are buying for both.

The top items that Canadians are shopping for this holiday season, in-person or online, include clothing and accessories (67%), electronics (55%), books (54%), toys (46%), health and beauty (43%) and sports and exercise gear (21%). On average Canadians plan to spend around $420 on holiday shopping this year.

The survey indicates that many Canadian shoppers already have smart savings tactics in place around their holiday spending, such as shopping early and monitoring online for deals and cash back offers. About a quarter of Canadians have their shopping completed before the winter season begins giving them plenty of time to take full advantage of incentives such as cash back offers (42%), loyalty program points to purchase gifts (58%) and shopping with retailers that offer loyalty points (56%). About half of shoppers are making a point of finding retailers that offer coupons, while many people are using social media (35%) to find deals.

Source: Ebates Canada      


Latest U.S. Economic News
       
U.S. Housing Starts Fall to 7-Month Low, Permits Rise
U.S. housing starts in October fell to a seven-month low as single-family home construction in the South tumbled, but a surge in building permits suggested the housing market remained on solid ground.

Groundbreaking dropped 11% to a seasonally adjusted annual pace of 1.06 million units, the lowest level since March, the Commerce Department said on Wednesday.

Still, October marked the seventh straight month that starts remained above 1 million units, the longest stretch since 2007. That suggested a sustainable housing market recovery.

“We’re confident that the broader housing market recovery will continue,” said Tom Wind, executive vice-president of home lending at EverBank in New York.

Rapidly rising household formation, mostly driven by young adults leaving their parental homes and a strengthening labour market, is supporting the housing sector.

Although residential construction accounts for just over 3% of U.S. GDP, housing has a broader reach in the economy, with rising home prices boosting household wealth and, as a result, supporting consumer spending.

Housing has contributed to GDP growth in each of the last six quarters and is absorbing some of the slack from a weak manufacturing sector.

Economists polled by Reuters had forecast housing starts falling to a 1.16 million-unit pace last month.

Groundbreaking on single-family home projects, the largest segment of the market, fell 2.4% to a 722,000-unit pace.
Single-family starts tumbled 6.9% in the South, where most home building takes place. Single-family starts, however, rose in the Northeast, the Midwest and the West.

Starts for the volatile multi-family segment plunged 25.1% to a 338,000-unit pace.

Building permits increased 4.1% to a 1.15 million-unit rate last month. Single-family building permits rose 2.4% last month to their highest level since December 2007. Single-family permits in the South also hit their highest level since December 2007.

Multi-family building permits increased 6.8%.

A survey on Tuesday showed home builders’ confidence slipped in November from a 10-year high, but remained at levels consistent with a sustained housing market recovery. Builders said land and labour shortages were constraining activity.

Even as builders were worried about sales conditions now and over the next six months, the measure of buyer traffic touched its highest level since October 2005.

Source: Reuters

Rising U.S Inflation Further Supports Rate Hike Views
U.S. consumer prices increased in October after two straight months of declines as the cost of goods and services rose, signs of firming inflation that further support expectations that the Federal Reserve will raise interest rates next month.

The Labor Department said on Tuesday its Consumer Price Index increased 0.2% last month, reversing September’s 0.2% drop. In the 12 months through October, the CPI advanced 0.2% after being unchanged in September.

The modest increase in prices was in line with expectations and suggests that the drag on inflation from a strong U.S. dollar and lower oil prices was starting to ease.

Signs of stabilization in prices after a recent downward spiral are likely to be welcomed by Fed officials and give them some confidence that inflation will gradually move toward the central bank’s 2.0% target. Inflation has persistently run below target.

In the wake of a robust October employment report, the U.S. central bank is expected to raise its benchmark overnight interest rate from near zero at its Dec. 15-16 meeting.

There is hope tightening labour market conditions, characterized by a jobless rate now in a range that some Fed officials view as consistent with full employment, will put upward pressure on wages and drive inflation toward its target.

The so-called core CPI, which strips out food and energy costs, gained 0.2% after a similar rise the prior month. Rents and medical costs accounted for much of the increase in the core CPI last month.

In the 12 months through October, the core CPI increased 1.9% after rising by the same margin in September.

The Fed tracks the personal consumption expenditures price index, excluding food and energy, which is running below the core CPI.

The dollar’s 18% rise against the currencies of the United States’ main trading partners since June 2014 has made imported goods less expensive, weighing on prices of goods such as apparel and automobiles.

Last month, gasoline prices rose 0.4% after falling 9.0% in September. There were also increases in the cost of electricity.

Food prices edged up 0.1% after rising 0.4% the prior month. Four of the six major grocery store food group indexes rose last month, with cereals and bakery products posting the largest increase since August 2011.

The rental index increased 0.3% after rising 0.4% in September. Medical care costs rose 0.7%, the largest increase since April. Hospital costs increased 2.0%. Airline fares rose 1.5%, ending a string of three consecutive declines.

There were also increases in recreation costs, but apparel prices recorded their biggest decline since December. Prices for used cars and trucks fell for a sixth straight month.

Source: Reuters

U.S. Retail Sales Barely Rise as Auto Purchases Fall
U.S. retail sales rose less than expected in October amid a surprise decline in automobile purchases, suggesting a slowdown in consumer spending that could temper expectations of a strong pickup in fourth-quarter economic growth.

The Commerce Department said last Friday that U.S. retail sales edged up 0.1% last month after being unchanged in September.

Economists polled by Reuters had forecast U.S. retail sales increasing 0.3% in October after a previously reported 0.1% increase in September.

Sales at auto dealerships fell 0.5% last month after rising 1.4% in September. The decline is surprising given that motor vehicle manufacturers reported strong sales for October.

Retail sales excluding automobiles, gasoline, building materials and food services rose 0.2% after an upwardly revised 0.1% gain in September. These so-called core retail sales correspond most closely with the consumer spending component of GDP.

Core retail sales previously were reported to have dipped 0.1% in September. Economists had forecast core retail sales rising 0.4% last month.

The lackluster report suggests that savings from cheaper gasoline are being used to pay rents, which have increased substantially over the past year.

Still, the weak spending tone is unlikely to significantly shift expectations that the Federal Reserve will raise interest rates next month in the wake of October’s robust employment report. The U.S. central bank has kept its benchmark overnight interest rate near zero since December 2008.

U.S. economic growth slowed to a 1.5% annual pace in the third quarter as businesses worked through an inventory glut and energy companies continued to cut back spending in response to lower oil prices.

Retail sales also were held back by a 0.9% drop in the value of sales at service stations, which reflected lower gasoline prices. Service station receipts fell 4.0% in September.

Clothing store sales were flat last month.  Receipts at building materials and garden equipment stores rose 0.9%, while sales at furniture stores increased 0.4%.

Receipts at sporting goods and hobby stores gained 0.4% and sales at restaurants and bars rose 0.5%. Sales at electronics and appliance stores fell 0.4%. Sales at online stores increased 1.4%.     

Source:  Reuters  

  

 Upcoming CHHMA Events 

Industry Cocktail
Thursday, December 10, 2015
Casino de Montreal, Montreal, Quebec

Canada Night
Held in Conjunction with the International Home+Housewares Show
Sunday, March 6, 2016
InterContinental Hotel, Chicago, Illinois

CHHMA Spring Conference & AGM
Tuesday, April 12, 2016
International Centre (Conference Facility), Mississauga, Ontario

CHHMA Maple Leaf Night
Held in Conjunction with the National Hardware Show
Wednesday, May 4, 2016
The Mirage Hotel & Casino, Las Vegas, Nevada

CHHMA Quebec Golf Classic
Thursday, May 19, 2016
Club de golf Le Fontainebleau, Blainville, Quebec

CHHMA Ontario Golf Tournament
Tuesday, May 31, 2016
Angus Glen Golf Club, Markham, Ontario        
       

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To register for all events visit our website at www.chhma.ca or call Pam Winter at (416) 282-0022 ext.21.

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"Eye On Our Industry" is published by the CHHMA as an information resource for our members. Member input regarding content and format is welcomed. Please contact Michael Jorgenson by email: mjorgenson@chhma.ca, or call at (416) 282-0022, ext. 34. CHHMA is located at 1335 Morningside Ave., Suite 101, Scarborough, ON, M1B 5M4 www.chhma.ca

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