CHHMA - EYE ON OUR INDUSTRY
Volume 15, Issue 39, October 22, 2015

Inside This Issue:

• Register Now for Industry Cocktail (December 10th) in Montreal
• CHHMA Looking for Volunteers to Join the Business Events Committee
• Target Begins Shipping to Canada through its Website (Oct 21-22)
• Amazon Boosts Holiday Hiring by 25%; Adding 100,000 Jobs
• Why Paying with Your Smartphone Hasn’t Caught On
• Wal-Mart Puts the Squeeze on Suppliers to Share its Pain as Earnings Sag
• Wal-Mart Bribed Officials in India,U.S. Corruption Probe Finds
• Retail Sales Rise for Fourth Straight Month on Auto-Sector Gains
• Bank of Canada Holds Interest Rate at 0.5% as Oil Shock Lingers
• Canadian Home Resales Ease in September
• Canadian Home Prices Extend Climb in September, But Sales Cool
• Latest U.S. Economic News

Association News


Register Now for 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.  
 

CHHMA Looking for Volunteers to Join the Business Events Committee

We are looking for volunteers to join the CHHMA Business Events Committee.This committee meets 2 to 3 times a year in the west-end of the GTA for 2 hours.  It is charged with giving input and recommendations for topics of interest to the membership - from stand alone educational seminars, customer presentations and the annual Spring Conference.

If you would like to join this group please send an e-mail to Maureen Hizaka at mhizaka@chhma.ca or call 416-282-0022 ext 23. 


Industry News

Target Begins Shipping to Canada through its Website

Six months after pulling up stakes in Canada, Target is offering Canadians the opportunity to shop on its international website.

The U.S. discount chic retailer has quietly opened the website that gives Canadian shoppers the option of ordering products that will ship over the border.

But shopping at Target won’t come cheap because online orders face a list of extra charges, including duties and taxes as well as shipping fees.

“It is part of a test and we will have more details to share in the near future,” said spokesman Jamie Bastian in an emailed statement to The Canadian Press.

The international website is being operated by Borderfree, a company that specializes in helping retailers sell products around the world, and will charge local shoppers in Canadian dollars.

Several things have changed in the Canadian retail industry since Target closed its stores here earlier in the year.

A wave of high-end U.S. retailers are in the midst of opening department stores across the country while big chains like Walmart and Best Buy Canada have been expanding product selection on their websites.

Other factors have made cross-border shopping less appealing, including the value of the loonie, which has dropped about 10 cents US to just over 76 cents US since the start of the year.

Target Corp. announced in January that would close its 133 Canadian stores and leave the country after deciding it would take years to turn a profit.

Lawyers for the company are still in Canadian courts ironing out some of the final details of the company’s windup.

Source: The Canadian Press 


Amazon Boosts Holiday Hiring by 25%; Adding 100,000 Jobs

Amazon plans to hire 100,000 people for the holidays, a 25% jump from last year that reveals a shift in the way we shop.

The online retailer said Tuesday that it will be hiring across the country for jobs in its fulfillment and sorting facilities. The Seattle company recently hired more than 25,000 people for regular, full-time positions. It hired 80,000 workers last year for the holidays.

Amazon stands out among retailers, with holiday hiring expected to remain largely unchanged, according to a report from Challenger, Gray & Christmas.

“It used to be that the bulk of holiday hires would be in customer-facing positions on the sales floor and behind the cash register, said CEO said John Challenger.”These extra workers would also help pick up the slack in the backroom, helping to receive and stock increased deliveries. Now, as more and more shopping is completed online, the holiday hiring is shifting away from stores and into the warehouses.“ A mixed hiring picture from retailers is emerging during a dicey period for the U.S.

The Labor Department reported earlier this month that a sharp slowdown in hiring occurred in September in the U.S..  Average hourly wages slipped by a penny and have risen a tepid 2.2% in the past year.

Wal-Mart is hiring 60,000 holiday employees, Target about 70,000 and Macy’s 85,000, which are all about flat compared with last year. Kohl’s, J.C. Penney and Toys R Us are hiring fewer, while GameStop is hiring about 12 per cent more workers.

Amazon.com Inc. has more than 90,000 full-time employees at its more than 50 fulfillment centres and 20 sorting facilities in the U.S.

Source: The Associated Press 


Why Paying with Your Smartphone Hasn’t Caught On

You’re probably texting or browsing Twitter in the checkout line anyway. Why not leave your wallet at home and pay for those groceries through an app on the device that’s already in your hands?

Digital wallets offer consumers the convenience of going cardless in favour of secure in-store mobile payments with the tap of a smartphone.

But early adopters are still waiting for the day when they can load any card from any financial institution onto any device run by any network operator. And for the majority of Canadians, plastic cards just aren’t inconvenient enough to necessitate change.

Canadian Tire last month became one of Canada’s first retailers to enter Canada’s fledgling mobile payment market, where adoption has been limited to specific devices, stores and banks.

Until a universal, easy-to-use system is established — be it Apple Pay, rumoured to launch in Canada this fall, or one of its many competitors — the mobile payment market will remain stalled, analysts say.

Just 25% of Canadians have all the components in place to use digital wallets, according to a July report by the Big Six banks. And most Canadians are not interested in making contactless payments that connect smartphones with a merchant’s point-of-sale terminal, recent surveys suggest.

Tech analyst Duncan Stewart now admits his January prediction that 2015 would be the year mobile payments would gain momentum was wrong, largely because the market structure is underdeveloped.

“The fragmentation of the mobile payment ecosystem by carrier, device and bank has been a challenge,” said Stewart, director of technology, media and telecommunications research for Deloitte Canada.

The problems start with the device. None of the Canadian-made mobile payment systems work on an iPhone. That automatically rules out about 40% of smartphone users.

Next, only about 15% of Canada’s 23 million smartphones are enabled with the Near Field Communication technology required to make mobile payments. That eliminates a lot more smartphone users because of their device.

But having the right device isn’t enough.  Canadians’ mobile payment choices depend on whether their bank has forged a relationship with their telecom provider.

Currently, only three banks — TD, CIBC and PC Financial — are accessible across all of Canada’s big three telecom companies. Only one bank, RBC, allows customers to pay through Interac on their phones. And the maximum purchase for any mobile payment is $100.

“All these things are limitations and the market is figuring out how we roll that infrastructure out in a way that is sensible to all players in the market,” said Christie Christelis, founder and president of Technology Strategies International Inc., a payment industry analysis firm.

He believes expectations for mobile payment technology were too high out of the gate and now “we’re entering the trough of disillusionment.”

Structural challenges associated with the nascent mobile payment market are not unique to Canada; every country in the world is struggling with similar fragmentation, Christelis said. Until a workable system is developed, a critical mass of users will remain elusive, he added.

Nearly half of Canadian bank executives surveyed in a recent CenturyLink poll said they don’t think their company has the tech capability to meet customer demands for mobile payments.

Some believe mobile payments in Canada won’t take off without the entry of a major player with the heft of Apple, or other big players eyeing the market now that Apple Pay has raised awareness of mobile pay.

Google’s Android Pay launched in the U.S. in early September after the company’s first attempt, Google Wallet, failed due to a lack of compatible phones and appetite from wireless carriers.

Samsung Pay, which lets users pay on machines with regular card readers, is slated to go mainstream in the U.S. on Sept. 28. Apple and its rivals have been tight-lipped about plans to launch in Canada.

Apple Pay’s entry into Canada will be a turning point, but it is unlikely to be a panacea for the fledgling market, Stewart cautions.

“Even though Apple Pay has helped remove a major set of structural barriers in the States, adoption still lags where we thought it would be,” he said.

“That implies that it isn’t purely the structural barriers, some of it is psychological.”

Apple Pay accounts for just 1% of all retail transactions in the U.S., with wider spread adoption affected by a lack of promotion and a limited number of terminals that accept it, according to a recent survey conducted by Aite Group.

But mobile payments could be better positioned to take off in Canada, than in the U.S thanks to a tap-and-go culture that has already taken hold.

One-in-three point-of-sale terminals carry the chip and contactless payments now represent between 10 and 20% of total transactions — the overwhelming majority are on cards. And some Canadians are already tapping their phones to purchase their morning coffee through Starbucks and Tim Hortons apps.

Christelis believes that growth will rapidly pick up by 2019, but even then, mobile payments will comprise a mere 5% of transactions. It will take 10 years, he says, before mobile payments become mainstream.

“In five years’ time we will have figured out all the stuff about which platform to use [and] who can have what on which wallet and that sort of thing that it will be possible for me to go and enable my phone to make a payment,” he said.

“But getting consumers to do that is the tricky part.”

Click here to read the rest of the article.

Source: Article by Sunny Freeman, The Toronto Star   


Wal-Mart Puts the Squeeze on Suppliers to Share its Pain as Earnings Sag

Suppliers of everything from groceries to sports equipment are already being squeezed for price cuts and cost sharing by Wal-Mart Stores. Now they are bracing for the pressure to ratchet up even more after a shock earnings warning from the retailer last week.

The discount store behemoth has always had a reputation for demanding lower prices from vendors but Reuters has learned from interviews with suppliers and consultants, as well as reviewing some contracts, that even by its standards Wal-Mart has been turning up the heat on them this year.

“The ground is shaking here,” said Cameron Smith, head of Cameron Smith & Associates, a major recruiting firm for suppliers located close to Wal-Mart’s headquarters in Bentonville, Arkansas.  “Suppliers are going to have to help Wal-Mart get back on track.”

For the vendors, dealing with Wal-Mart has always been tough because of its size – despite recent troubles it still generates more than $340-billion (U.S.) of annual sales in the U.S. That accounts for more than 10% of the American retail market, excluding auto and restaurant sales, and the company increasingly sells a lot overseas too. To risk having brands kicked off Wal-Mart’s shelves because of a dispute over pricing can badly hurt a supplier.

Last week, Wal-Mart stunned Wall Street by forecasting that its earnings would decline by as much as 12% in its next fiscal year to January 2017 as it struggles to offset rising costs from increases in the wages of its hourly-paid staff, improvements in its stores, and investments to grow online sales. This at a time when it faces relentless price competition from Amazon.com Inc, dollar stores and regional supermarket chains. Keeping the prices it pays suppliers as low as it can is essential if it is to start to claw back some of this cost hit to its margins.

Helped by investments to spruce up stores and boost worker pay, Wal-Mart believes it can grow sales by 3% to 4% a year over the next three years, or by as much as $60-billion, offering suppliers new opportunities to boost their own revenues.

The squeeze on suppliers was clear to those selling to Wal-Mart’s Sam’s Club warehouse clubs around April this year. Sam’s Club’s buyers summoned major vendors to meetings and told them a “cost gap analysis” showed they should be delivering at a lower price, and demanded millions of dollars in discounts on future purchases, according to emails reviewed by Reuters and interviews with suppliers and consultants involved in the talks.

Unlike in prior talks, which featured give and take, vendors were told they could not ask questions at the meetings, with queries to be handled later via email, according to suppliers and consultants involved in or briefed on the meetings. One food supplier, for example, eventually agreed to cut costs by a few per cent, after being asked for a much larger reduction, people familiar with those talks said.

Sam’s Club said it is continually talking with suppliers in an effort to save costs and lower prices. Spokesman Bill Durling said the company, whose merchant teams are separate from those at the Walmart chain, had recently changed its structure so that one account head now manages the relationship across various products, with the ability to see across the work of multiple buyers. This was done with the aim of improving merchandise and wringing out efficiencies, he said.

“There might be unpleasant conversations but ultimately we want to do right by our suppliers because we want to create strategic relationships,” Durling said. “We want them to be along with us for the ride as we continue to grow.”

In June, vendors to Wal-Mart stores got word of sweeping changes to supplier agreements that seek to extend payment terms in some cases and introduced new fees to warehouse goods and place product in new stores. Then, in recent weeks, Wal-Mart told suppliers producing in China they should share any benefit gained from the decline in the value of the Chinese yuan.

Wal-Mart spokeswoman Deisha Barnett stressed that it sees its relationships with suppliers as critical to the company’s success. “We will work with every supplier to ensure that terms and agreements are mutually agreed upon,” she said.

Wal-Mart has told suppliers the new terms are aimed at helping it keep prices low, applying fees more consistently across vendors and bringing its practices in line with industry norms. The charges to store goods in distribution centers and for delivery to new stores are common at other retailers but had not normally been the case at Wal-Mart.

The moves followed February’s announcement that Wal-Mart would hike the minimum pay rate for its workers to $9 an hour by April, and to $10 by February 2016. The first move is costing $1.2-billion this year and the second an additional $1.5-billion next year, including other labour costs, such as placing more department managers in stores. The additional expense for its workers is accounting for 75% of the projected earnings decline in fiscal 2017.

Chief Executive Doug McMillon, who became CEO 18 months ago, and other executives said they are seeing a payoff in the form of improved customer service.

Greg Foran, head of the U.S. business, said the company has assessed that two-thirds of its 4,500-plus stores now have a “passing grade” in problem areas – cleanliness, checkout speed, and other factors affecting customer satisfaction. That is up from just 16% in February.

With its stores in better shape, Wal-Mart now is redoubling its focus on beating competitors on price. Over the next three years, the company said it would spend several billion dollars on keeping prices low.

Foran said vendors will benefit. “We lower the cost of goods, which in turn generates savings and we invest that in price. Lower prices see an increase in traffic and basket, which in turn grows sales and gains share,” Foran said.

Late last year Wal-Mart broke a stretch of six straight quarters without growth in same-store U.S. sales, and logged a 1.5% gain
in its second quarter ending in July. But that falls short of Target Inc.’s 2.4% growth, and Kroger’s 5.3% increase, excluding results from sales of gasoline.

Last week’s announcement sent ripples through the supplier community in the Bentonville area, where more than 1,000 have offices to stay close to Wal-Mart.

“Now we know why they have been pushing so hard,” said an executive at a major consumer goods supplier to both Walmart and Sam’s Club, adding that his team was shocked by the projected decline in profits. “Maybe they were banking on more suppliers rolling over on the terms.”

Wal-Mart’s success in boosting profits could hinge in large part on the willingness of suppliers to sign on to its new terms and agree to its price demands. Despite signs of resistance, one consumer goods supplier reckons most will eventually give in to Wal-Mart’s market power, though not without a fight.

He pushed back after the retailer asked him for new terms that cut 2% off his annual sales. They settled on 1%, but he fears further demands down the road.

“I just worry that this is a slippery slope of them going in this direction,” he said.

Source: Reuters    


Wal-Mart Bribed Officials in India, U.S. Corruption Probe Finds

A three-year long investigation by the U.S. government found evidence Wal-Mart Stores Inc. paid bribes to local officials in India, the Wall Street Journal reported on Monday. The same probe found less-than-expected signs of corruption in Wal-Mart’s Mexico business, it said.

The bribing in India comprised thousands of small payments to low-level officials to help move goods through customs or obtain real estate permits, the newspaper reported, citing persons it didn’t identify. The vast majority of the payments were below $200, and some were as low as $5, with the total amounting to millions of dollars, the report said.

Walmart is likely to face charges of violating the U.S. Foreign Corrupt Practices Act (FCPA) due to these payments, the paper said. The Bentonville, Ark.-based retailer is “co-operating fully” with the U.S. government on the matter and can’t comment further, Walmart India spokesman Rajneesh Kumar said when contacted Monday.

Wal-Mart, which last week suffered its worst stock decline in more than 27 years after predicting a drop in annual profit, has seen its Indian operations plagued by botched ventures and sluggish growth.  The world’s largest retailer in 2007 entered a supermarket joint venture with Bharti Enterprises only to see it split up in 2013, and Walmart India has since then focused only on its wholesale business.

The charges in India are unlikely to amount to a large fine as FCPA penalties are connected to profits the alleged misconduct generated, the Journal said. Wal-Mart’s Indian unit has not turned a profit since inception eight years ago, and posted a loss of 2.3 billion rupees ($46 million) on sales of about 30 billion rupees in the year ended December 2014, according to the Economic Times of India, citing registrar filings.

Walmart has been the subject of several Indian government probes in recent years, including an investigation into allegations it lobbied officials which ended 2013 without any conclusions.

Source: Bloomberg News 


Economic News

Retail Sales Rise for Fourth Straight Month on Auto-Sector Gains

Canadian retail sales rose more than expected in August, climbing for the fourth month in a row as sales at motor vehicle and parts dealers increased, data from Statistics Canada showed on Thursday.

Retail sales rose by 0.5% to $43.6 billion, topping economists’ expectations for a gain of 0.1%. But excluding the autos and parts sector, sales were flat. In volume terms, total retail sales rose 0.7%.

Over the past 12 months, retail sales are up 2.8%.

Sales at new car dealers increased 1.7% as more new trucks were sold, particularly in the provinces of Quebec and Ontario.  Used car purchases jumped by 5.5%. Overall sales at motor vehicle and parts dealers rose 2.0% and are up 9.3% year-over-year.

Following relatively flat sales in June and July, sales at food and beverage stores increased 0.5% in August. The main contributors to the gain were beer, wine and liquor stores (+4.6%) and, to a lesser extent, convenience stores (+1.0%). After edging down in June and July, receipts at supermarkets and other grocery stores declined 0.4% in August.  Lower sales were also reported by specialty food stores (-1.9%).

Furniture and home furnishings stores posted a 3.0% gain, following three months of relatively flat sales. Higher sales were reported by both furniture stores (+3.2%) and home furnishings stores (+2.6%). Sales in this segment remain 8.4% higher from a year ago.

Sales at gasoline stations (-0.6%) decreased for the second month in a row and are down 11.1% year-over-year.

Miscellaneous store retailers reported a 2.3% sales decline, offsetting gains made in the previous two months. Stores in this subsector include used merchandise stores, office supplies and stationery stores, and pet and pet supplies stores.

Store types traditionally associated with back-to-school sales registered mixed results in August, when sales may have been affected by later starts to the school year in some jurisdictions.

Higher sales at clothing and clothing accessories stores (+0.3%) were more than offset by lower sales at general merchandise stores (-0.3%), which posted their first decline in four months but remain up 0.8% year-over-year. Electronics and appliance stores (-0.3%; -0.2% y/y) and sporting goods, hobby, book and music stores (-0.3%) also decreased.

Sales for building material and garden equipment and supplies dealers saw a drop of 0.1% from July but are up 3.8% from August 2014.

Retail sales rose in seven provinces in August. Quebec (+1.2%) reported the largest increase in dollar terms, largely as a result of higher sales at new and used car dealers. This was the sixth increase in seven months for the province.

Sales in British Columbia rose 1.4%, the third increase in four months. Gains were widespread across most store types.

Sales in Ontario edged up 0.2% in August, the seventh consecutive monthly increase. Higher sales at new car dealers were partially offset by lower sales at gasoline stations.

Following three months of flat sales, retailers in Saskatchewan reported a 0.8% increase in August.

Retailers in New Brunswick posted their seventh straight monthly sales gain, rising 0.5% in August. This increase was mainly a result of higher sales at new car dealers.

Sales in Nova Scotia declined 1.1%. This decrease did not offset the previous four months of sales gains.

After increasing 2.1% in July, sales in Manitoba edged down 0.2%.

Following four straight monthly gains, sales in Newfoundland and Labrador declined 0.3%.

Source: Statistics Canada, Reuters  


Bank of Canada Holds Interest Rate at 0.5% as Oil Shock Lingers

Bank of Canada Governor Stephen Poloz is warning that the oil price shock could weigh on Canada’s economy for at least another two years.

The central bank kept its key overnight lending rate unchanged at 0.5% on Wednesday, after cutting it twice this year.

But the bank downgraded its economic outlook for next year and 2017, citing a “complex” transition away from the once-booming resource sector.

After flirting with a recession earlier this year, the Canadian economy will grow just 2% in 2016 and 2.5% in 2017, the bank said in its latest monetary policy report. That’s down from previous forecasts of 2.3% and 2.6%, respectively.

Low oil prices are continuing to sap business investment and put a dent in the value of Canadian exports, overwhelming some of the improvements elsewhere in the economy. The bank now expects spending in the energy sector to drop another 20% in 2016, after a 40% drop this year.

Over all, lower business investment will knock 0.2 percentage points off growth in 2016, according to the bank.

“The complex adjustments to the decline in Canada’s terms of trade will continue to play out over the projection horizon,” the bank said in a statement. That horizon now extends to 2017.

Mr. Poloz said it will take up to two years for the recent rate cuts to work their way through the economy. “We need to be patient and let monetary policy do its work,” Mr. Poloz told reporters in Ottawa.

And he pointed out that the non-energy side of the Canadian economy is gaining steam, buoyed by those lower interest rates and the cheaper Canadian dollar.

Vast swaths of non-energy exports are in full recovery mode, according to a separate analysis of more than 4,000 exports, also released Wednesday by the bank. Exports of hundreds of items, including building products, aerospace and fabricated metal, have grown by at least 10% a year since the recession.

“These findings suggest that the export recovery is taking hold and the Canadian export sector is showing some rebuild since the Great Recession,” the report said.

Mr. Poloz, who was appointed by the Conservatives in 2013, also said he looks forward to working with the incoming Liberal government. But he deflected questions about the impact of prime-minister-designate Justin Trudeau’s promise of three years of deficits to fund a mix of infrastructure spending and tax cuts.

“We’ll just have to just wait and see,” he said. “Stay tuned.”

The bank’s more sober outlook could delay eventual interest-rate hikes in Canada, just as the U.S. Federal Reserve appears poised to start raising rates. This could push the Canadian dollar even lower as investors seek higher returns in the United States.  The Canadian dollar fell sharply following the release of Wednesday’s downgraded forecast, closing down 0.91 (U.S.) of a cent to 76.24 cents.

In July, the bank lowered its forecast for GDP growth this year to 1.1% from 2% after the first-half stall.

More worryingly, the Bank of Canada warned that the potential growth rate of the economy may be weaker than expected because of “capacity destruction,” some of which may never come back. The result is that the potential growth of the economy is “likely to be in the lower part … of estimates” this year and next.

The price of crude had started to recover in recent months, but has since retreated again, hovering at around $45 a barrel.

The bank also acknowledged that economic “slack” has increased this year, delaying a return to full capacity – an indicator of when the central bank may need to push up interest rates. It now estimates that the economy won’t reach full capacity until “around mid-2017.”

TD Bank economist Leslie Preston now expects the Bank of Canada to stay “comfortably on the sidelines” until the second half of 2017.

Over the past year, the bank has steadily pushed back the target date for when the economy will be firing on all cylinders – from early 2016 to mid-2017 now.

Source: Article by Barrie McKenna, The Globe and Mail 


Canadian Home Resales Ease in September

According to statistics released last Thursday by the Canadian Real Estate Association (CREA), national home sales activity eased in September 2015 from the month before.

The number of homes sold via MLS® Systems of Canadian real estate Boards and Associations fell by 2.1% in September 2015 compared to August.

Sales were down in more than half of all local markets in September, led by declines in Greater Vancouver, Calgary and the Greater Toronto Area (GTA).

“Sales are off the peak reached earlier this year but are still running strong, particularly in British Columbia and Ontario,” said CREA president Pauline Aunger.

“Although national sales activity was not as strong in September as it was earlier this year, a lack of supply in some parts of the country is likely keeping a lid on transactions,” said Gregory Klump, CREA’s chief economist. “The GTA and Greater Vancouver made sizeable contributions to the monthly decline in national sales activity. They also rank among the tightest urban housing markets in the country due to a shortage of inventory and supply of land on which to build, which is why prices there continue to grow strongly.”

Phil Soper, chief executive of Royal LePage Residential, said there is no question inventory levels are having an impact on housing sales currently. “It is the single biggest variable in the market,” he said. “People forget you are talking about an actual product and you can only build them so fast. When you have a strong year in home sales there isn’t enough on the market to meet demand.”

With so much demand, it has helped put pressure on existing home prices in Canada’s two priciest cities and Soper says people are turning to the renovation market to try and spruce up their homes instead of moving. The Conference Board of Canada reported Monday that 2014 saw the largest annual increase in renovation spending since 2007.

“The problem is if you put your home up for sale in the city, you need to find one too. People just get frustrated and say let’s reno instead,” said Soper.

At the same time, he says sales continue to fall in Alberta because consumers there are not willing to lower their prices in what has become a stagnant market. Existing home sales were down 34% in September in Calgary from a year ago.

“Overall, September’s housing markets stats are consistent with a continued hot housing market – it just doesn’t appear to be getting any hotter. This underscores our view that the highly stimulative impact of lower mortgage rates at the start of this year would wear out by September/October,” said Diana Petramata, an economist with TD Bank

She said existing home prices will be “held back” as people shift to more affordable types of housing like condominiums.

Actual (not seasonally adjusted) activity in September was up 0.7% from a year ago. Sales in September reached the second-highest on record for the month, standing just 0.3% (130 transactions) below the record set in September 2009.

Actual (not seasonally adjusted) sales were up from year-ago levels in a little over half of all local markets, led by the Lower Mainland region of British Columbia. Calgary posted the largest year-over-year decline in activity compared to the record set last year.

In line with sales activity, the number of newly listed homes also declined by 2.1% in September compared to August led by the Lower Mainland, Victoria, the GTA, Hamilton-Burlington and Montreal.

The national sales-to-new listings ratio was 56.8% in September. With sales and new listings having posted monthly declines of equal magnitude in September, the sales-to-new listings ratio held steady compared to August.

There were 5.7 months of inventory on a national basis at the end of September 2015, up slightly from the 5.6 months recorded in each of the previous four months.

The Aggregate Composite MLS® Home Price Index (HPI) rose by 6.90% on a year-over-year basis in September, accelerating from 6.43% in August, 5.90% in July, and 5.43% in June. The recent acceleration in year-over-year growth follows about a year-and-a-half of gains that held steady within a range of between 5% and 5.5%.

Year-over-year price growth picked up in September for all Benchmark home types tracked by the index, particularly for apartment units.

Two-storey single family homes continue to post the biggest year-over-year price gains (+9.07%), followed by one-storey single family homes (+6.48%), townhouse/row units (+4.40%) and apartment units (+4.22%).

Year-over-year price growth varied among housing markets tracked by the index. Greater Vancouver (+13.72%) and Greater Toronto (+10.46%) continue to post by far the biggest year-over-year price increases. Meanwhile, price gains in the Fraser Valley have accelerated to almost nine per cent.

By comparison, Victoria and Vancouver Island prices logged year-over-year gains between 5% and 6% in September.

For the second consecutive month, prices in Calgary were flat on a year-over-year basis. Prices in Saskatoon and Ottawa also ran roughly even with year-ago levels.

Elsewhere, home prices were up from September 2014 levels by about 1.5% in Greater Montreal and by about 2.5% in Greater Moncton. Prices fell by 4% in Regina, extending year-over-year price declines there that began in 2013.

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 September 2015 was $433,649, up 6.1% 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 $334,705 and the year-over-year gain is reduced to 2.9%.

Source: CREA, The Financial Post  


Canadian Home Prices Extend Climb in September, But Sales Cool

A prolonged housing boom in Canada showed signs of slowing in September as home resales fell from a month earlier, especially in the energy capital of Calgary, even as low interest rates lifted national house prices.

Canadian home prices rose 0.6% in September from August, the ninth straight monthly increase, and were up a hefty 5.6% from a year earlier, the Teranet-National Bank Composite House Price Index showed last Thursday.

Canada’s housing market has been booming since 2009, driven by historically low interest rates and tight supply in the two largest markets, Toronto and Vancouver. But there have been signs of a slowdown in some places, particularly the oil-producing province of Alberta, and analysts have long called for a correction in prices.

The Teranet index, which measures price changes for repeat sales of single-family homes, once again showed a two-track housing market, with prices up in six of 11 markets, namely Toronto, Vancouver, Victoria, Hamilton, Calgary and Halifax.

Prices declined from August in Quebec City, Winnipeg, Ottawa and Montreal, and were flat in Edmonton.

Source: Reuters    


Latest U.S. Economic News       

Demand for Rental Apartments Boosts U.S. Housing Starts
U.S. housing starts rose solidly in September on soaring demand for rental apartments, a sign that the housing market continues to steadily improve even as economic growth has slowed.

The Commerce Department said on Tuesday ground breaking increased 6.5% to a seasonally adjusted annual pace of 1.21 million units. It was the sixth straight month that starts were above 1 million units, pointing to a sustainable housing recovery.

Economists polled by Reuters had forecast ground breaking on new homes rising to a 1.15 million-unit pace last month.

Housing is one of the few bright spots in the U.S. economy, which has been slammed by softening global demand and a strong dollar, which have undercut exports. Efforts by businesses to reduce an inventory bulge and weak capital spending in the energy sector have also been a drag.

Economic activity has braked sharply, with third-quarter growth estimates running below a 1.5% annualized rate. The U.S. economy grew at a 3.9% rate in the second quarter.

Although residential construction accounts for less than 3% of GDP, housing has a broader impact on the U.S. economy, with rising home prices boosting household wealth and therefore supporting consumer spending.

Starts for multi-family projects surged 18.3% to a 466,000 unit pace, the highest level since June. Multi-family construction is being driven by demand for rentals, especially by millennials, who cannot afford to buy their own homes because of higher prices and debt burdens.

Ground breaking for single-family homes, the largest segment of the market, rose 0.3% to a 740,000 unit pace. Economists say single-family building is being constrained by land and labour shortages.

Starts in the South, where most of the home construction takes place, rose 0.6% to their highest level since October 2007.  Ground breaking on housing projects in the West was the highest since July 2007.

Though building permits fell 5.0% to a 1.10 million-unit rate last month, a six-month low, the weakness is likely to be temporary amid strong confidence levels among home builders.

A survey on Monday showed builders’ confidence rose to a near 10-year high in October, with builders upbeat about current sales conditions and expectations over the next six months.

Single-family building permits slipped 0.3% last month. Multi-family building permits dropped 12.1%, with permits for buildings with five units or more falling to their lowest level since December 2014.

Permits for single-family homes in the South rose to their highest level since January 2008.

Source: Reuters

U.S. Home Builder Confidence, Sales Expectations Surge in October
U.S. home builders are feeling more optimistic about the housing market, lifting their confidence this month to the highest level in 10 years.

The National Association of Home Builders/Wells Fargo builder sentiment index released Monday rose this month to 64, up from 61 in September. The last time the reading was higher was October 2005 at 68.

Readings above 50 indicate more builders view sales conditions as good rather than poor. The index has been consistently above 50 since July last year.

Builders’ improved optimism bodes well for a pickup in new home construction, which could help give the U.S. economy a boost. The supply of new homes has been scarce, so greater construction could result in more sales.

The latest builder index reflects a gradual, but consistent strengthening in the market for new homes, said David Crowe, the NAHB’s chief economist.

“With firm job creation, economic growth and the release of pent-up demand, we expect housing to keep moving forward as we start to close out 2015,” he said.

Builders’ view of current sales conditions and their outlook for sales over the next six months surged. A measure of traffic by prospective buyers held steady.

Healthy hiring and smaller price increases for new homes have begun pushing up sales, which were hammered during the Great Recession and recovered slowly even after the downturn ended in 2009. New-home sales have soared nearly 22% in the past year. They hit a seasonally adjusted annual rate of 552,000 homes in August, the strongest pace since February 2008.  September’s sales data are due out next week.

This month’s builder index was based on 384 respondents.

Builders’ view of current sales conditions for single-family homes rose three points to 70, the highest reading since October 2005.

Builders’ outlook for sales over the next six months surged seven points to 75. That’s the highest reading since August 2005.  A measure of traffic by prospective buyers held steady at 47.

Though new homes represent only a fraction of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to NAHB data.

Source: The Associated Press

U.S. Retailers Ramping Up for Holiday Shipping Demands
Christmas won’t come early this year, but the gifts might.

Just in time for the winter holiday shopping season, Amazon, Walmart, Macy’s and other retailers are working behind the scenes to make sure they can deliver online orders to shoppers faster.

Retailers are building bigger warehouses — some the size of 20 football fields — to handle shipments. They’re also sending orders to shoppers directly from their stores and using sophisticated software that tells them the quickest, cheapest way to get orders shipped. And Amazon is cutting the time it takes to process an order from hours to minutes by using robots to pull items for shipment in its warehouses.

It’s a race for time by retailers as more people shop online. U.S. online sales are expected to increase 12% to $371 billion ($479 billion Canadian) this year, accounting for 10% of overall retail sales, says Forrester Research. But as online shopping grows, so does the impatience of shoppers who want their orders fast.

Traditional brick-and-mortar stores are trying to catch up to Amazon.com, which set the standard for speed with its two-day delivery for members of its Prime loyalty program who pay $99 a year.  But even Amazon feels pressure to please customers who have little tolerance for lengthy delivery waits.

“I would like to plan ahead, but I’ve been able to wait until the last minute to get things done,” said Keri Early, a Clyde, Illinois, resident who orders from Amazon frequently.

For many retailers, the goal to meet the demands of shoppers like Early for speedy service is to make two-day delivery standard.

That’s half the average for standard delivery for the top 40 online retailers, according to data company StellaService. But most are stopping short of guaranteeing customers faster deliveries.

Walmart says it aims to get packages to shoppers who get standard shipping within two days for a majority of the U.S. this holiday season. The retailer now uses 83 of its more than 4,500 U.S. stores to ship to customers.

The world’s largest retailer also is spending $1.2 billion to $1.5 billion in online investments this year and $1.1 billion next year. That’s up from last year’s $1 billion. The investments are squeezing profit: Walmart stock tumbled Wednesday after it warned earnings would be down as much as 12% next year in part because of its heavy spending on e-commerce.

Still, Walmart is spending to stay competitive with online rivals. Since last year, the world’s largest retailer has opened five warehouses across the country in Bethlehem, Pennsylvania; Fort Worth, Texas; Plainfield, Indiana; and Atlanta to handle online orders. Next year, Walmart plans to open another centre in Southern California, one in Dallas and two more in Florida.

The new warehouses each will ship hundreds of thousands of orders daily, four to five times its dozens of existing smaller warehouses. Each new warehouse has several million items, five times the network of older warehouses. That will enable Walmart to offer more consolidated orders arriving in fewer boxes.

“This is going to allow us to be more efficient, to do it faster, to do it cheaper and be more accurate with the orders, which is important with the customers,” said Greg Foran, CEO of Wal-Mart’s U.S. business.

One of Wal-Mart’s two Bethlehem warehouses opened in July and is considered the retailer’s crown jewel. It has two towers with four stories of the fastest moving items of the season that can be retrieved through a computerized chute. For example, for the holidays, that would include iPads and swimsuits for the summer

“By mid-November, this place will be humming,” said Justen Traweek, Wal-Mart’s vice-president of e-commerce operations and fulfillment.

Other retailers also have built new warehouses to meet demand:

• Home Depot opened its third and largest warehouse in Troy, Ohio, in September to handle online orders. They will allow Home Depot to ship to 90% of shoppers within two days.
• Macy’s new facility, which recently opened in Tulsa, Oklahoma, will enable the retailer to send 90% of packages in central western states within two days and by year’s end will be able to deliver packages within two days overall.
• Target opened two new warehouses this year. It also is now shipping products from 462 of its 1,800 stores, up from 150 a year ago. Target said online shoppers are likely to get deliveries within two days if the product is delivered from the store, compared with four days from the warehouse.
• Nordstrom opened a third warehouse in Elizabethtown, Pennsylvania, to handle online orders. That will eventually allow the chain to deliver orders to half of its customers in two days.

“You know our friends in Seattle continue to set the standard,” Mike Koppel, Nordstrom’s chief financial officer, told investors in September, referring to Amazon. “In order to be an exemplar in that, you’re going to have to invest in that because that’s what people are going to expect.”

For its part, Amazon, which has 50 U.S. warehouses that typically house millions of products, is building a facility in Kent, Washington that will house 20% more items.

Amazon also acquired Boston-based robotics company Kiva in 2012 for $775 million. The robots pull shelves of goods out of storage areas and bring them to workers. Amazon now has more than 30,000 robots in 13 warehouses.

“We’re using software and algorithms to make decisions rather than people, which we think is more efficient and scales better and will be more accurate,” said Brian Olsavsky, Amazon’s chief financial officer in July.

Source: The Associated Press

U.S. Consumer Prices Fall on Cheaper Gasoline
U.S. consumer prices recorded their biggest drop in eight months in September as the cost of gasoline fell, but a steady pick-up in the prices of other goods and services suggested inflation was starting to firm.

The Labor Department said last Thursday that its Consumer Price Index fell 0.2% last month after slipping 0.1% in August. In the 12 months through September, the CPI was unchanged for the first time in four months after rising 0.2% in August.

The so-called core CPI, which strips out food and energy costs, rose 0.2% after ticking up 0.1% in August. In the 12 months through September, the core CPI increased 1.9%, the largest gain since July 2014, after rising 1.8% in August.

The Fed tracks the personal consumption expenditures price index, excluding food and energy, which is running well below the core CPI. Low inflation, which has persistently run below the Federal Reserve’s 2% target, is a major hurdle to an interest rate hike this year.

Fed officials who are divided on when to tighten monetary policy could take comfort in last month’s increase in core inflation.

Expectations of a lift-off in the U.S. central bank’s short-term interest rate have been dealt a blow by an abrupt slowdown in job growth in the last two months and softening economic activity because of a strong dollar, lower oil prices and a weakening global economy.

“Although the case for a December hike took a hit ... this more-interesting-than-usual core CPI figure will give the hawks something to talk about,” said Jennifer Lee, an economist at BMO Capital Markets in Toronto.

In a second report, the Labor Department said initial claims for state unemployment benefits fell 7,000 to a seasonally adjusted 255,000 for the week ended Oct. 10. Claims were last at this level in July, which was the lowest since November 1973.

The low level of layoffs is in sharp contrast with the recent cool-off in employment growth. Nonfarm payrolls growth in August and September averaged 139,000, the weakest two-month rise since January last year.

The slowdown is puzzling given job openings are at record highs. Some economists say the step-down in hiring is because employers cannot find qualified workers for the open jobs.

“Claims continue to show no sign of an uptrend, reinforcing our view that the sudden slowing in payrolls in the last two months mainly reflects volatility rather than a fundamental change in the trend,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, New York.

The four-week moving average of claims, considered a better measure of labour market trends as it irons out week-to-week volatility, fell 2,250 to 265,000 last week, the lowest level since December 1973.

The inflation report showed gasoline prices fell 9.0%, the biggest drop since January, after declining 4.1% in August. Food prices increased 0.4%, the largest increase since May 2014, after rising 0.2% the prior month.

The rental index increased 0.4%, after rising 0.3% in August. There were increases in the cost of medical care, household furnishings and personal care products. However, apparel prices fell as did the cost of new vehicles and used cars and trucks. Airline fares also declined.

Source:  Reuters  

  

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