CHHMA - EYE ON OUR INDUSTRY
Volume 16, Issue 40, October 21, 2016
Inside This Issue:
• Reducing Your Freight Costs Will Improve Your Bottom-Line
• Last Call for the Bernie Owens (TIMBER MART) Breakfast Seminar in Montreal – Oct 26
• The CHHMA Can Help You Improve Your Negotiating & Business Proposal Development Skills
• Hardlines Outstanding Retailer Awards Announced
• Amazon to Build Convenience Stores ; Hiring More Temp Workers for Holiday Season
• Federal Housing Policy is being Created for the Whole Country Based on Markets in Toronto and Vancouver
• Bank of Canada Cuts Growth Outlook Again, Cites Real Estate Decline
• CMHC's ‘Red’ Alert: Surging Home Prices Spread to Suburbs
• Canadian Executives Worried that Protectionism Could Hurt Trade
• Canadian Dollar Link to Oil Price Seen Broken until after U.S. Election, Fed Rate Move
• New Home Prices Rose 0.2% in August
• Latest U.S. Economic News
Association News
Reducing Your Freight Costs Will Improve Your Bottom-Line
Today’s business environment has become the most competitive that we have ever seen. The pressure on achieving bottom-line results has intensified across all industry groups. Your customers are finding new and innovative ways to put additional pressure on you and your company. Margins are being squeezed and you are being asked to answer for this decrease in profitability.
At the CHHMA we recognize that this pressure is intense and have and continue to offer our members an opportunity to improve margins by unlocking savings within their supply chain. Its an area that is often taken for granted and yet it can account for on average about 4-10% of your overall top-line revenue. From the cost of landing your raw materials or products here in Canada, taking them into inventory and processing and shipping the orders to the retailers is a process that consumes significant dollars.
For over 22 years we have been introducing Logistics Solutions & Services Inc. to our members on a consultative basis. They have provided numerous members with advice and knowledge on how they can reduce their distribution and supply chain costs. LSS have proven over time that by creating buying power within our membership, as well as being able to identify the true market cost of transportation they have contributed to many of our members’ bottom line performance.
If you have not used their services, we would like to introduce them to you. Take them up on a “no cost-no obligation” session to explore how they can assist your company. Mr. Paul Publow, President of Logistics Solutions will assist you in maintaining and improving your bottom-line. There is no cost attached to exploring this initiative and we highly endorse his services.
Logistics Solutions & Services Inc.
Paul F. Publow, President
Email: pfpublow@LSSaves.com
Cell: 647-290-0547
Last Call for the Bernie Owens (TIMBER MART) Breakfast Seminar in Montreal – Oct 26
The CHHMA is pleased to be presenting Mr. Bernie Owens, President of TIMBER MART, at a CHHMA Breakfast Seminar next Wednesday, October 26, at the Hôtel Holiday Inn Montréal-Longueuil and you can still register for the event online or contact Pam Winter at 416-282-0022 ext.21, pwinter@chhma.ca.
Mr. Owens will also be accompanied by members of his management team so it is a great opportunity to get some insight on TIMBER MART as well as be able to talk to their top management and ask any pressing questions you may have.
We hope you will join us on Wednesday.
The CHHMA Can Help You Improve Your Negotiating & Business Proposal Development Skills
The CHHMA has organized an information-packed one-day learning program that will provide attendees with proven strategies and tips to help improve your negotiating and business proposal development skills.
Don’t delay – register NOW, attend, and get the expert advice and insights you need to improve business results, profitability, and outcomes!
One-Day Learning Program Divided Into Two Sessions:
Morning Session: Secrets of Power Negotiating® – Key Insights for Improving Negotiating Effectiveness
Afternoon Session: Developing Persuasive Proposals
Note: Members/guests cannot register for only one of the two sessions.This is a one-day program.
Date: November 23, 2016
Venue Location:
Centre for Health & Safety Innovation (CHSI)
5110 Creekbank Road
Mississauga, Ontario
(905) 219-0044
http://www.tchsi.ca
Tuition Fee: $399.00 plus $29.95 for course materials (HST not included)
Program Time Frame: This one-day program will run from 8:30 a.m. until 4:30 p.m. There will be one 15-minute refreshment break
in the morning and afternoon, as well as one 50-minute lunch break.
Why You Need to Attend This Impactful One-Day Program:
Effective negotiating and proposal development skills are essential for everyone.The hardware and housewares industry and retail selling/marketing environment have become increasingly complex and competitive. People who work in this industry need to effectively develop and deliver business and line item reviews, propose new products, and/or make recommendations regarding the category, and then they need to be able to negotiate properly with customers/accounts across a wide range of channels. Also, people are negotiating all the time with their colleagues, co-workers, and senior management.
Whether you are an experienced senior manager or a sales/marketing professional looking for a few new ideas and strategies – or a novice looking for the fundamentals – this one-day program will provide you with proven strategies you can implement immediately.
Who Should Attend:
This one-day program is designed for senior management, sales management, all levels of sales and account management, and marketing and customer service personnel.Anyone involved in communicating and negotiating with customers/accounts can benefit from attending.
What You Will Learn:
This highly beneficial one-day program will be divided into two separate sessions. The following are some of the key learnings that will be covered during the program:
• Learn a proven and powerful negotiating process and methodology.
• Be able to effectively prepare and plan for all negotiations.
• Understand the three critical stages of every negotiation.
• Learn the three key factors that influence every negotiation.
• Learn how to properly and effectively make concessions.
• Learn valuable techniques on how to deal with difficult objections in negotiations.
• Learn one key negotiating gambit and corresponding countergambit.
• Learn several powerful negotiating tips, questioning techniques, and phrases that will help to improve negotiating effectiveness and help to optimize outcomes.
• Reduce unnecessary compromise and excessive price discounting.
• Learn a proven formula for how to construct your proposals and business reviews.
• Learn how to improve your company’s value proposition in proposals.
• Learn how to shorten the selling cycle and influence faster decision making by customers.
• Learn how to move away from feature-based communication in your proposals and articulate the real benefits for customers.
Meet Negotiating Coach® Michael E. Sloopka:
Michael is a recognized negotiating and sales process transformation expert and a highly rated professional speaker, teacher, and coach who assists organizations and individuals by joining their team for specific negotiating projects or by training their staff to negotiate and manage customers and vendors more effectively on a daily basis. He is adept at helping his clients build, develop, and maintain high-performing sales and marketing teams. He is also a leading expert in diagnosing selling and buying behaviour and the decision-making dynamics that directly affect the outcome of a negotiation.Michael has written articles or contributed to articles for the Globe and Mail newspaper, Investors.com, Forbes.com, AMEX Open Forum for Small Business, and Selling Power and Profit magazines.
Offering more than 30 years of successful negotiating experience in sales, marketing, purchasing, distribution, and consulting – from small business to multinational corporations, from personal transactions to multimillion-dollar extended supply agreements and contracts – Michael has added hundreds of millions of dollars to his clients' collective bottom line through effective education, consulting, coaching, and negotiation facilitation. He has personally taught tens of thousands of individuals a proven process and methodology, as well as strategies and tactics, to optimize their outcomes. Michael has previously delivered high-impact presentations at various CHHMA conferences and educational sessions.
What Each Attendee Will Receive:
With fully paid tuition, each attendee will receive a bound workbook and the MP3 downloadable version of the Power Negotiator Toolkit Audio Learning Program that includes the following:
• Secrets of Power Negotiating® Audio Learning Program: Almost 6 hours of proven content and advanced material containing all the methodology, strategies, and tactics you will need to become a power negotiator.
• Secrets of Power Negotiating® Key Verbal Phrases and Questioning Techniques: Over 106 minutes of Michael Sloopka’s “best practice” phrases, scripts, questioning techniques, insights, and tips – including numerous personal and business application examples.
• Secrets of Power Negotiating® Personality Type and Corresponding Negotiating Style Self-Assessment: A PDF format
printable version of a self-assessment questionnaire and the interpretation information that you need in order to learn more about yourself and how to interact more effectively with different personalities involved in negotiations.
Spots are limited so register now while you still can for this Impactful Professional Development Learning Opportunity
Industry News
Hardlines Outstanding Retailer Awards Announced
The Hardlines’ 2016 Outstanding Retailer Awards (ORAs) were handed out earlier this week at a gala dinner held during the 21st Annual Hardlines Conference in Niagara Falls, Ontario.
Retailers from across the country were honoured in seven categories covering the range of hardware and home improvement retailing formats.
“There is something about each of this year’s winners that impressed the judges, not only for their business acumen and leadership skills, but for their ability to connect with their customers and their communities in a profound way,” said Michael McLarney, Editor and President of Hardlines Inc.
The winners were:
- Best Hardware Store: Brantford Home Hardware, Brantford, ON;
- Best Building Supply/Home Centre under 15,000 sq.ft.: Home Building Centre-Salmon Arm, Salmon Arm, B.C.;
- Best Building Supply/Home Centre over 15,000 sq.ft.: Vanderhoof and Districts Co-op Home Centre, Vanderhoof, B.C.;
- Best Contractor Specialist Store: Sen Western Wholesale Lumber (TIMBER MART) in Vancouver, B.C.;
- Best Large Surface Retailer: RONA Home & Garden, Kelowna, B.C.;
- Young Retailer of the Year: Cindy Caron and Raphaël D’Amours, Quincaillerie Palmarolle (TIMBER MART), Palmarolle, QC;
- Marc Robichaud Memorial Community Leader Award: Orillia Home Hardware Building Centre, Orillia, ON.
The ORAs were founded more than two decades ago as a way to honour and recognize the finest retailers in the hardware/home improvement industry. This year’s winning entries operate their stores, motivate their employees, connect with their customers, and contribute to their local communities in ways that put them ahead of their peers and identified them as truly outstanding to the Hardlines panel of judges.
Source: Hardlines Inc.
Amazon to Build Convenience Stores ; Hiring More Temp Workers for Holiday Season
Amazon.com Inc. is planning to build convenience stores and develop curbside pickup locations for food shoppers in its latest move to expand into groceries, the Wall Street Journal reported.
Amazon’s stores will sell perishable goods including milk and meats, the newspaper said, citing unnamed sources. Customers in the stores can also order other items with longer shelf lives for same-day delivery, the Journal said. The Seattle-based e-commerce giant will also build drive-in locations for consumers in a rush where online grocery orders will be brought to the car. Only subscribers to Amazon’s Fresh service will have access to these stores, known as Project Como.
The grocery stores represent Amazon’s latest move to disrupt brick-and-mortar food shopping that’s still dominated by traditional retailers such as Wal-Mart Stores Inc.
While Amazon has dominated in e-commerce, convincing customers to shop online for everything from toiletries to electronics, it has yet to crack groceries — which most consumers still buy offline. Previously, Amazon had focused on fresh food deliveries rather than establishing a physical presence, but it’s encountering increased competition from Google, Instacart and others.
Wal-Mart, whose main selling point has been its physical reach, started a grocery pickup service more than a year ago and has now expanded it to more than 100 markets. Customers can purchase online, drive to the parking lot of a Wal-Mart store and have their orders delivered to their cars. Even as Amazon uses the Fresh grocery service and Prime membership to keep customers loyal, Wal-Mart is trying to create a better online experience.
Amazon to Hire 120,000 Temporary Workers for Holiday Season
Amazon.com Inc. said it would hire more than 120,000 seasonal workers in the U.S. for the holiday season, 20% more than last year, highlighting the growing threat the e-commerce giant poses to traditional retailers.
U.S. retailers such as Macy’, Target and Kohl’s have said they plan to hire fewer temporary workers or to keep seasonal employment levels little changed this holiday season.
More than 14,000 seasonal positions were transitioned to regular, full-time roles after the holidays last year, and the company expects to increase that number this year, Amazon said.
The U.S. National Retail Federation earlier this month forecast a 3.6% rise in holiday sales this year, with online sales expected to climb 7% to 10%.
U.S. brick-and-mortar retailers’ biggest challenge in recent years has been tackling the growth of online retailers, specially Amazon, which offer the same products at lower prices and have made shopping more convenient.
They are also keeping sales expectations and inventories low – and hiring light – ahead of the holiday season to avoid a repeat of last year, when unusually warm weather hit sales and piled up unsold goods.
Source: Bloomberg News, Reuters
Economic News
Federal Housing Policy is being Created for the Whole Country Based on Markets in Toronto and Vancouver
They are Canada’s two hottest housing markets, and even some in the real industry don’t question the need to cool prices in both Toronto and Vancouver, but that opinion changes once you get beyond the orbit of those two cities.
There is almost a sense of bewilderment in places like Halifax and Edmonton or Montreal, where people wonder what overheated housing market anyone is talking about, because it’s not happening in their jurisdiction. DBRS Inc. said this week that from July 2015, to July 2016 prices across the country are almost flat once British Columbia and Ontario are excluded.
“It’s raining in Vancouver, but first-time home buyers need an umbrella in Alberta,” said Donna Moore, chief executive of the Alberta Home Builders’ Association, who would like the government to consider different areas of the country on their own when it comes to policy. “We’re concerned that this policy is aimed at Canada’s hottest real estate markets.”
That’s not just a view out west. Sherry Donovan, chief executive of the Nova Scotia Home Builders’ Association noted new home construction in Halifax is down to about 450 homes annually after being as high as 1,200 just a few years ago.
“We definitely don’t need any more cooling,” she said.
It’s clear some markets are already hurting. This month the Calgary Real Estate Board reported prices in the city were actually down 3.78% over the first nine months of the year compared to the same period in 2015, while sales were off 8.3% during the period. Compare that to Toronto, where sales in the region were up 21.5% in September from a year and prices rose 18% over the same stretch.
Economist Will Dunning, who consults for Mortgage Professionals Canada and once worked for Canada Mortgage and Housing Corp., in a 16-page report out this week questioned the broader implications of a housing policy that is sure to hit first-time buyers in markets beyond the two priciest.
Among the key measures in the changes that took affect Monday is a provision that consumers qualify for a mortgage based on the posted rate for a fixed five-year mortgage at the major Canadian banks. That rate is now 4.6%, while the actual lowest rate in the marketplace is 1.95% – meaning consumers will qualify for far less debt.
“(CMHC chief executive) Evan Siddall says this is going to be good for the economy because it will reduce our growth of indebtedness,” Dunning said. “Yeah, that’s good in the long run, but there is a pretty nasty path to get there. You reduce housing demand to get there and you will directly affect the economy, and indirectly. The serious risk is prices start to fall and then this will snowball.”
Using a sales-to-new-listings ratio as measure of the health of the market, Dunning says at 60.6% the country is well above a balanced market threshold of 52%. Suggesting an 8% a drop in sales is the consensus among economists for the impact of the new rules, and he says the SNLR will drop to 55.8% in that scenario. If the drop is 16% in sales, that will take the market to a 50.9 ratio — a buyer’s market.
“The biggest impacts are going to be in the places with the weakest markets,” Dunning said. “That’s what we saw in 2012 (the last time there were major changes to mortgage rules), the biggest impact was not in Toronto but in markets that are soft.”
In Alberta, a balanced market is considered to have a 56% SNLR, but that 8% reduction in sales will drive the province down to 43.8%.
Hélène Bégin, senior economist with Desjardins Group, said the new rules will have a more muted impact on Quebec partially because the province has far fewer foreign buyers — at most 5% of purchases on condo investment in Montreal.
Bu Bégin said the changes to the mortgage rules will affect everyone across the country.
“In Quebec, the average price is close to $300,000,” she says, adding prices are so low the province could avoid any major impact because so many consumers will be able to scrape together a 20% down payment to avoid being impacted by the changes. “But sure it will have an impact on the market. Look, in 2012, when they restricted amortization from 30 years to 25 years, it had an impact (on sales) even if prices didn’t go down.”
David Foster, a senior director of with the Canadian Home Builders’ Association, notes the government itself seems unsure of the impact of the rules and was forced to issue some clarifications last Friday before they went into effect.
Changes included allowing consumers refinancing their loans to be exempted from the new stress-test levels and allowing previous property purchases in progress to be grandfathered until deals close. The government agreed that for another six weeks consumers would be exempt from new rules as long as a deal was funded or closed by May 1.
“We understand why the government is concerned (with debt) but when you monkey with the market, there is always risk,” Foster said. “Some people might think (the changes) are perfect but within a week they had to revise the rules — it shows they missed some stuff. Nobody in finance ever talked to our industry.”
Source: Article by Garry Marr, The Financial Post
Bank of Canada Cuts Growth Outlook Again, Cites Real Estate Decline
The Bank of Canada has downgraded the country’s growth outlook yet again as it released fresh projections Wednesday that pointed to dampened expectations for exports and real estate activity.
The central bank also held its trendsetting interest rate at 0.5%, which was widely expected and where it has been since July 2015.
The bank’s latest monetary policy report blamed exports as a main contributor for the lower forecast, following a weaker-than-anticipated performance and somewhat gloomier prospects for the future.
The report also predicted growth to take a hit from an expected decline in real estate sales activity, which it said will follow the federal government’s recently announced measures intended to stabilize the housing market.
On Wednesday, the bank provided an analysis of those measures, predicting they will lower the country’s level of real GDP by 0.3% by the end of 2018.
The report also reiterated the bank’s position that it expects the changes, which seek to slightly limit borrowing and to cool hot markets, will help ease household vulnerabilities.
The bank is now projecting Canada’s real GDP to expand by just 1.1% this year, down from its July projection of 1.3%. For next year, the bank is forecasting growth of 2%, down from its previous call of 2.2%.
“The outlook for exports remains subject to considerable uncertainty, which has significant implications for the economic projection,” the Bank of Canada said in the monetary policy report.
“The downward revision to exports, including spillovers to domestic demand and imports, lowers real GDP by 0.6% by the end of 2018.”
The bank added that the economy isn’t expected to return to its full capacity until mid-2018, which it called “materially later” than the late-2017 time frame it had anticipated three months ago.
“The Bank of Canada delivered a whiter shade of dove in today’s statement,” Douglas Porter, chief economist with BMO Financial Group, said in a note to clients.
“This is a bank that has precisely zero appetite for rate hikes, and seems to be keeping a flame alive for the possibility of rate cuts, should the need arise. We continue to look for the bank to keep rates unchanged through next year, with the earliest possible move up not until 2018.”
For a couple of years, the bank has been expecting a solid increase in non-commodity exports, helped along by a lower dollar, to offset the negative economic impact of low oil prices.
Bank of Canada governor Stephen Poloz has said the full adjustment should take three to five years, but the shift has been slower than expected — a process that has perplexed the bank.
“It’s our lack of understanding that causes us to say something like ... there’s a level gap between where we thought the economy would be ... and where it actually is,” Poloz said earlier this month.
Despite the downgrades, the bank also offered reassurances that it sees promise ahead.
Thanks to momentum in the global and U.S. economies, the bank still predicts the Canadian economy to rebound over the final half of this year from a second-quarter contraction.
The hoped-for bounce back, however, is expected to come at a slower pace, with an average real GDP growth of about 2.5% over the last two quarters of 2016.
The bank predicts third-quarter growth of 3.2%, down from the July forecast of 3.5%, and fourth-quarter growth of just 1.5%, down from 2.8%.
“The bank expects solid household spending to continue to be the main contributor to growth, with additional support from government spending and exports in 2017,” said the report, which also noted that business investment is expected to provide some help.
The government’s enhanced child-benefit program, which started mailing cheques to families in the summer, is also expected to deliver a boost in the second half of 2016. In addition, Ottawa’s commitment to invest billions in infrastructure will begin having an impact moving forward, the bank said.
Source: The Canadian Press
CMHC's ‘Red’ Alert: Surging Home Prices Spread to Suburbs
Hot markets in Vancouver and Toronto are causing home prices to rise in nearby areas, prompting Canada’s housing agency to issue a red alert about the country’s real estate sector as a whole.
Canada Mortgage and Housing Corporation (CMHC) CEO Evan Siddall said that the agency’s “red” warning means that there is a strong risk of problems on the horizon. Ottawa uses CMHC analyses to guide its policies for the housing industry.
“We’re observing the spillover effects in the central markets of Vancouver and Toronto, affecting nearby markets. In Toronto, it’s affecting Hamilton and Oshawa. Outside of Vancouver, it’s places like Richmond and the Fraser Valley. You’re seeing price acceleration,” Mr. Siddall said. “At the nationwide level, the evidence of problematic conditions has become high – that’s what red means. It’s not predicting a crash.”
The problems include not just rising prices, but overvaluation.
CMHC will boost the risk rating in its overall assessment of the country’s residential market to “strong” from “moderate” when it issues a new report on Oct. 26.
Mr. Siddall first disclosed CMHC’s decision to issue the red alert in an opinion column on Monday in The Globe and Mail. CMHC’s new warning has been months in the making. The agency rates 15 metropolitan markets as weak (green), moderate (yellow) or strong (red) based on risk signals.
Earlier this month, federal Finance Minister Bill Morneau announced measures to tighten mortgage rules, such as a new standard for gauging whether buyers can handle an eventual increase in interest rates.
Those changes took effect on Monday.
“If people can just save a bit more money and have a bit more equity in their homes, that would be safer,” Mr. Siddall said. “A 5% down payment means you don’t have a lot of cushion on the downside.”
The federal government’s decision to tighten lending rules will reduce demand from prospective home buyers, the real estate industry argues. “The government has taken away the punch bowl, the party is coming to an end,” Vancouver real estate agent Steve Saretsky said in an e-mail to his clients.
Matthieu Arseneau, senior economist at National Bank Financial Inc., said the authorized lending limit for certain types of insured mortgages (fixed five-year term, for example) could fall by 17% because of Ottawa’s measures. He estimates that 7% of home sales could be affected by Ottawa’s efforts to curb risk in the housing market.
Mr. Siddall said he understands the concerns that some buyers can no longer take out mortgages as large as in the past, but such consumers will benefit in the long term from Ottawa’s “stress test” that uses the Bank of Canada’s higher posted interest rate to determine who qualifies for an insured mortgage.
“We’re not spiking the punch bowl,” Mr. Siddall said. “If we’re making it easy for people to borrow money to buy a house, we’re creating demand, which is only pushing the price higher.”
Ottawa also closed tax loopholes used by some foreign buyers, effective on Oct. 3.
In July, CMHC increased its warning for Canada as a whole from weak to moderate. The Vancouver region has come under increased scrutiny this year.
The federal Crown Corporation changed its quarterly risk rating on the Vancouver area to moderate in April and to strong in July.
CMHC also saw Calgary, Saskatoon, Regina and Toronto as housing markets that showed strong signs in July of problems looming.
“The housing industry continues to do the heavy lifting for the Canadian economy. I worry that policy makers are looking at what they are doing in isolation. We could end up doing more harm to the most important industry in the country,” said Phil Soper, CEO of Royal LePage.
Some industry observers have been sounding the alarm for more than a year about what they view as overheated housing markets in Canada, and the federal agency is the latest to do so. “CMHC is an important voice. Maybe they are late, but is it that important that they are late? No,” Mr. Soper said. “Where CMHC could do more or be helpful is the collection of information such as the influence of non-Canadian and non-resident home buyers.”
B.C. Finance Minister Mike de Jong said “others will have to decide” whether CMHC’s warning shows his government took too long to cool the housing market in British Columbia. Mr. de Jong said B.C. enacted a tax on foreign buyers after it began collecting data that showed they were involved in about one in every 10 Metro Vancouver home sales earlier this summer.
“I think the average citizen would say, ‘Well, why the hell weren’t you collecting this basic data for some time?’ Fair enough, we weren’t. It stopped in the 1990s some time,” he told The Globe and Mail’s editorial board on Monday. “We proceeded to begin collecting that data and when we were in the position to make decisions on the basis of at least a subset of information that was reliable, we did so.”
The B.C. government announced a 15% tax on purchases by foreign home buyers in the Vancouver area, effective Aug. 2.
“Low affordability and the likely reduction of international capital inflows in the wake of the transfer tax finally end the steep appreciation that started in 2013,” economic forecaster Moody’s Analytics said in a new report, predicting that prices will fall next year for detached houses in the Vancouver region.
Moody’s, which uses data from the Brookfield RPS House Price Indices, envisages a price drop in 2017 of less than 3% for detached houses but cautions a steeper decline is possible.
Rating agency DBRS Ltd. said low interest rates, steady immigration and limited housing supply are among the numerous influences over real estate prices, and there aren’t any simple solutions to improve affordability. “The stream of new government measures introduced this year are expected to contribute to cooling down the market and reducing risks to taxpayers, lenders, investors and to households themselves, although they might be detrimental to economic expansion,” DBRS cautions.
Source: The Globe and Mail
Canadian Executives Worried that Protectionism Could Hurt Trade
Canadian executives are worried that the protectionist political environment emerging in North America and Europe could damage trade agreements that help boost the economy.
The latest quarterly C-Suite Survey of corporate leaders shows that more than 80% say they are concerned that isolationist politics will slow the shift to freer trade and hinder the creation of new trade deals.
And many think the situation will deteriorate further. About four out of 10 executives say the political environment for business in North America and Europe will be worse in the next five years than it has been in the past half-decade. Only 12% think it will get better.
Nolan Watson, chief executive officer of gold mine financing company Sandstorm Gold Ltd., is among those who are uneasy about the more inward-looking policies promoted by some global leaders.
“As a concerned citizen and as a business person who understands the implications of these policies, I am very worried about the direction the world is headed, with respect to protectionism,” Mr. Watson said.
Currently, Asia appears to be more open to globalization than North America or Europe, he said. The increasingly protectionist view in the west may be partly due to the rise of China’s economic power, particularly in manufacturing, he added. “That has caused a lot of people to be very angry, and that anger is spilling over into policy implications that are just bad for people.”
In the United States, both presidential candidates have tapped into this sentiment by saying they don’t like the Trans-Pacific Partnership trade deal. Donald Trump has also said he would renegotiate, or even rip up, the North American free-trade agreement (NAFTA).
In Europe, there are additional pressures caused by large refugee movements and the economic disparity that has grown between nations, Mr. Watson said. There is also increasing resentment of central control within the European Union, he added. “Politicians are feeding off the anger of people … taking advantage of the situation.”
The Brexit vote in June, in which Britain opted to leave the EU, was the most obvious manifestation of this anger. But now the Canada-Europe free-trade deal, known as the Comprehensive Economic and Trade Agreement (CETA), is also in trouble after a key regional parliament in Belgium rejected the accord last week.
Three-quarters of C-Suite respondents said the Brexit vote will have a negative impact on the European economy and 57% said they think it is likely that more states will leave the EU in the near future. However, fewer than half of the executives said Europe will be an important market for their companies over the next five years.
China, on the other hand, is increasing in importance, and almost 60% of business leaders said it will be a key market for their organization in the coming years.
China is the “economic giant” of Asia and will certainly be crucial for Canadian trade going forward, said Rupert Duchesne, group chief executive of Montreal-based Aimia Inc., the company that runs the Aeroplan points system and other international loyalty programs.
Mr. Duchesne described the apparent backlash against trade deals as “very troubling.” These deals “are being blamed for things they didn’t cause. But it is so easy to draw that correlation that you can see why it becomes a political football,” he said. “In Canada, we cannot survive without trade deals that help us get better access for products and resources in other markets.”
Our participation in trade – and two-way tourism – with China will also help encourage improved human rights in that country, Mr. Duchesne said.
He characterized the federal government’s efforts to open trade with China as a “good start” after years of neglect. “We are making good progress, and it is appropriate to do so after a decade of very little discussion.”
The vast majority of C-Suite respondents – 83% – said Prime Minister Justin Trudeau’s recent trip to China was important to Canada and its economy.
Indeed, the efforts by the Liberal government, which has promised to double trade with China by 2025, appear to be paying off. A group of wealthy Chinese entrepreneurs is currently in Canada scouting out possible investment opportunities here.
But the C-Suite leaders – who are overwhelmingly enthusiastic about the negotiation of a free-trade deal with China – have some reservations about Chinese investments in Canada. 70% of survey respondents said they support placing limits on the ability of Chinese state-owned enterprises to invest in strategic Canadian industries such as the oil sands.
Willy Kruh, global chair of consumer markets at KPMG, said the relative enthusiasm about trade with China shows executives want Canada to spread risk when it comes to trade. “The C-Suite rightfully is looking at the global environment and saying: We see issues in the U.S., we see issues in Europe … and we need to diversify our risk, but let’s go slow.”
Mr. Kruh said China and India will be key trading partners for Canada. “These are countries that we cannot ignore if we are going to play on the global stage and improve our economy.”
One year after the election of Justin Trudeau’s Liberals, a slim majority of corporate executives feel his government has met or exceeded expectations, while about 45% say it has fallen short.
Regionally, the Prime Minister has left executives more satisfied in the East than in Western Canada, where about 52% say he hasn’t met expectations.
The new government’s performance also gets different ratings depending on the sector the executives work in. More than half of oil and gas executives disapprove of the Liberals’ overall actions in their first year in office, while only one quarter of bank and financial bosses feel that way.
Source: Article by Richard Blackwell, The Globe and Mail
Canadian Dollar Link to Oil Price Seen Broken until after U.S. Election, Fed Rate Move
The Canadian dollar’s normally tight link with the price of oil, which broke down in September, likely will not reassert itself until after the U.S. election and a potential interest rate hike by the Federal Reserve, currency strategists say.
Oil is a major Canadian export and the currency often tracks its price. But the Canadian dollar weakened to a six-month low of $1.3315 against the U.S. dollar last Friday despite a deal by the Organization of the Petroleum Exporting Countries to limit output which lifted oil above US$50 a barrel.
The currency was around $1.2700 when oil climbed above US$50 a barrel in early June.
“Other fundamentals have taken over. The interest rate differential is part of that and I think the Trump premium is part of that,” said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets.
Republican presidential candidate Donald Trump has said he would renegotiate or scrap the North American Free Trade Agreement if elected, posing a risk to the Canadian economy.
The weaker relationship between the Canadian dollar and oil will continue until after the U.S. election and until the Federal Reserve raises interest rates, said Jack Spitz, managing director of foreign exchange at National Bank Financial.
Markets have priced in about a 70% chance of a Fed hike in December, helping to push the U.S. dollar last week to a seven-month high against a basket of major currencies.
The Bank of Canada is seen on hold until 2018.
The three-month rolling correlation between the Canadian dollar and oil reached 0.8 in early September, according to Reuters data, indicating that the currency and the commodity move mostly in the same direction. It plunged to less than 0.1 last Thursday.
RBC Capital Markets expects firmer oil prices heading into 2017, but sees the Canadian dollar at $1.3400 by the end of the first quarter, said Mark Chandler, head of Canadian fixed income and currency strategy at the investment bank.
To be sure, the strong positive correlation between oil and the Canadian dollar has broken down before. It briefly turned negative after a wildfire in Alberta in May boosted oil prices but hurt Canada’s growth outlook.
Oil is unlikely to reassert as the dominant driver until after a Bank of Canada interest rate decision in January, said BMO’s Anderson, who thinks the central bank’s more dovish tone has played a part in the weaker correlation.
Source: Reuters
New Home Prices Rose 0.2% in August
Statistics Canada’s New Housing Price Index (NHPI) rose 0.2% in August compared with July the agency reported last Thursday, driven by gains in the combined region of Toronto and Oshawa.
Toronto and Oshawa (+0.7%) was the top contributor to the national increase in August, recording the largest monthly price advance among the census metropolitan areas covered by the survey. Builders reported market conditions and higher costs for materials as reasons for the gain.
Prices also increased significantly in Kitchener–Cambridge–Waterloo (+0.5%) and the combined region of Greater Sudbury and Thunder Bay (+0.4%). Builders in Kitchener–Cambridge–Waterloo cited higher new list prices as the main reason for the gain. In the combined region of Greater Sudbury and Thunder Bay, higher costs for materials and building permits were the primary reasons for the rise in prices.
New housing prices rose 0.2% in Saint John, Fredericton and Moncton, after being unchanged for six consecutive months.
In August, prices were unchanged in 7 of the 21 metropolitan areas surveyed.
New housing prices decreased 0.5% in Regina, as a result of new promotional packages to encourage sales. Prices in Saskatoon were down 0.2% for the third month in a row, with builders reporting market conditions as the reason for the decline in August.
New Housing Price Index, 12-month change
The NHPI increased 2.7% over the 12-month period ending in August.
The combined metropolitan region of Toronto and Oshawa (+7.0%) was the top contributor to the gain, posting the largest 12-month price increase in August.
Other notable year-over-year gains were observed in Vancouver (+5.4%), St. Catharines–Niagara (+4.3%) and Victoria (+3.8%). Prices have increased in Victoria for the last seven months.
Among the 21 metropolitan areas surveyed, 5 recorded year-over-year price declines in August. Saskatoon (-3.4%) and Calgary (-0.7%) posted the largest decreases for the fourth consecutive month.
Source: Statistics Canada
Latest U.S. Economic News
U.S. Single-Family Housing Starts Surge; Multi-Family Segment Falters
U.S. single-family starts surged in September, pointing to sustained housing market strength even as a drop in the construction of multi-family dwellings pushed overall home building activity to a 1-1/2-year low.
Ground breaking on single-family housing projects, which accounts for the largest share of the residential housing market, jumped 8.1% to a 783,000-unit pace last month, the Commerce Department said on Wednesday. That was the highest level since February.
A tightening labour market, which is steadily pushing wages higher, as well as low mortgage rates are underpinning demand for housing. Single-family starts are also getting a boost from a chronic shortage of previously owned homes available for sale.
Overall ground breaking activity, however, declined 9.0% to a seasonally adjusted annual pace of 1.05 million units last month, the lowest level since March 2015. It was dragged down by starts for the volatile multi-family segment, which plunged 38.0% to a 264,000-unit pace in September.
But with rents rising at their fastest pace in 10 years, last month’s drop in multi-family starts is likely to be temporary.
Economists polled by Reuters had forecast overall U.S. housing starts rising to a 1.18 million-unit pace in September. Last month’s decline left overall housing starts in the third quarter well below their average for the second quarter.
That suggests residential construction remained a drag on U.S. GDP in the third quarter after subtracting from output in the April-June period.
Overall home building activity is likely to rebound in the coming months, as permits for future construction surged 6.3% in September to their highest level since last November. Single-family permits rose 0.4% last month; approvals for multi-family units soared 16.8%.
Last month, single-family home construction jumped 20% in the Northeast. Starts in the South, which accounts for the bulk of home building, vaulted 12.1%.
Ground breaking on single-family housing projects shot up 6.3% in the Midwest, but fell 2.2% in the West.
Source: Reuters
U.S. Home Builder Sentiment Rises in October as Sales Improve
U.S. home builders’ confidence eased this month after surging to the highest level in nearly a year in September.
Even so, builders remain optimistic overall about sales growth in months ahead, a reflection of how steady job gains are leading more Americans to buy newly built homes.
The National Association of Home Builders/Wells Fargo builder sentiment index released Tuesday fell two points this month to 63 following a reading of 65 in September.
Readings above 50 indicate more builders view sales conditions as good rather than poor. The index has held above 60 the past two months after hovering at 58 earlier this year.
Builders’ view of current sales and a gauge of traffic by prospective buyers declined. Their outlook for sales over the next six months increased.
Source: The Associated Press
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