CHHMA - EYE ON OUR INDUSTRY
Volume 15, Issue 32, September 2, 2015

Inside This Issue:

• Come Out and Support the 14th Annual Industry Memorial Golf Classic on September 30th
• 2016 CHHMA Spring Conference & AGM to be Held on April 12
• As a member of CHHMA, You Are Eligible for Discounted Rates on Your Auto & Home Insurance
• Industry Saddened to Hear of the Passing of David Holden
• Sears Canada Narrows Operating Loss, Halts Store Sales Slide
• Target Canada Spars with Creditors over Debt Claims
• Dollarama’s Price Points Resonating with Shoppers
• Wal-Mart U.S. Cutting Workers’ Hours After Pay Raise Boosts Costs
• Bar Code's Days Numbered as Shoppers Demand More Data
• Retailers Continue to Struggle to Get Consumers to Use their Apps: RetailMeNot Study
• Canada’s Economy in a Technical Recession as Q2 GDP Declines but Worst Appears to be Over
• Economists Cut Canada’s Growth Projection, Casting Cloud on Election Pledges
• Canadian Home Prices Predicted to Rise Despite Economic Uncertainty
• Most Canadian Store Types Hit Sales Peaks In H1 2015, But H2 May Not Be As Good
• Latest U.S.Economic News

Association News

Come Out and Support the 14th Annual Industry Memorial Golf Classic on September 30th

The 14th Annual Industry Memorial Golf Classic is taking place on Wednesday, September 30th at the Blue Springs Golf Club in Acton, Ontario.
The event is held on behalf of the hardware and housewares industry and it honours stalwarts from the industry who have passed away. CHHMA members and non-members are welcome to attend.

This year’s honourees will be: David Fry (Shop-Vac Canada), Ted Kennedy (Rubbermaid Canada, Past CHHMA Chairman 1975-76) & Geoff Somers (Wentworth Corporation, Somerset House)

Past honourees include: Ray Ceolin, Tom Ross, Bruce Webster, Chris Hrushowy, Mike Pullen, Jim Ypma, Bill Caldwell, Brayl Copp, Ed Hardison, Stuart North, Joseph Kuchar, Shelly Lush, Jack Pountney, Christof Vanooteghem, Ian Hay, Trygve Husebye, Bernie Carpenter, Don McDonald, Les Groves, Bob Hilton, Doug Straus, Mel Boshart, George Giles and Ed Barnes.

The day allows family, friends and colleagues to honour these gentlemen while enjoying a fun day out on the golf course followed by a dinner and silent auction.

The event will start off with registration and lunch at 10:30 a.m. with a shotgun start at noon.Dinner will commence at around 6:00 p.m.  

Money raised from hole sponsorships and a silent auction will go towards the CHHMA Scholarship Program which provides support for children of CHHMA member company employees to attend university or college (click here to see this year’s scholarship recipients).  So please consider sponsoring and/or donating an item for the silent auction for this worthwhile cause.

Click here to register online or click here for a: PDF registration form as well as a PDF silent auction pledge form. 


2016 CHHMA Spring Conference & AGM to be Held on April 12

Next year’s CHHMA Spring Conference & Annual General Meeting will be held on Tuesday, April 12, 2016, once again at the International Centre (Conference Facility) in Mississauga, ON.

This marquee event on the CHHMA calendar offers members a value-packed day of education, information exchange and networking opportunities which should not be missed!

If there are any topics that you would like to see be covered at the conference, please contact Maureen Hizaka at mhizaka@chhma.ca, 416-282-0022 ext.23 with your ideas.

In the meantime, please mark the date on your calendar and look for news and details on the event in the coming months.


As a member of CHHMA, You and Your Fellow Employees Are Eligible for Discounted Rates on Your Auto and Home Insurance

The CHHMA has partnered with Aaxel Insurance Brokers Ltd. and Economical Select® to provide our members with exclusive group rates on auto and home insurance, as well as several additional discounts that can result in significant savings to you and your fellow employees.

Economical Select can benefit you by offering:

• A 20% discount on auto insurance and a 20% discount on home insurance, applied in addition to other potential discounts if you are claims-free, conviction-free or bundle more than one policy.
• Second Medical Opinion coverage enhancement, free of charge with an active property policy. This coverage enhancement allows policyholders to get a second medical opinion through a global network of over 20,500 physicians, specialists and sub-specialists organized by WorldCare®.
• A chance to win one of six new vehicles in a Select Sweepstakes or a $100 gas card, just for getting a quote! Find out more at http://www.selectsweepstakes.com.    

IPEX Employee Wins $100 Gas Card

Sam Fok of IPEX Inc. was won of the lucky Select Sweepstakes draw winners last month for a $100 gas card.  Sam received the prize from Aaxel Insurance president Paul Mann last week.

As part of the group auto & home insurance program, we can provide you with marketing materials to help communicate the program to your employees and the potential savings they could achieve.

If you would like more information about the program and/or marketing materials, please contact Michael Jorgenson at 416-282-0022 ext.34 or mjorgenson@chhma.ca.

For a quote, please call 1-855-380-3666 if you reside in Ontario or 1-888-542-4811 if you reside in Quebec.  For other provinces, please call 1-866-247-7700.  Please mention that you are calling from a CHHMA member company in order to receive the group program discounts.

The program is available to employees of CHHMA member companies, their spouses and dependent children residing at home or away at school.

So try a quote yourself and you never know – you could win a new car!!


Industry News

Industry Saddened to Hear of the Passing of David Holden

The CHHMA was saddened to hear of the unexpected passing of David Holden last Sunday, August 30, 2015, at the age of 51.

Dave was the beloved husband of Theresa (nee Cosentino) for 21 years and adored father of Amanda and Vanessa. He worked many years at Hamilton Beach, where he will be fondly remembered by his friends and colleagues. Dave supported and attended many CHHMA events.

He loved spending time with his many friends, travelling to his Deerhurst condo, golfing, playing hockey and following his beloved Toronto Maple Leafs.

Friends may call at the Turner & Porter "Peel" Chapel, 2180 Hurontario St., Mississauga (Hwy. 10, N. of the QEW), on Thursday, September 3, 2015 from 2-4 and 6-9 p.m. A Celebration of David's Life will be held in the Chapel on Friday, September 4, 2015 at 11 a.m. For those who wish, remembrances may be made to the Canadian Mental Health Association.

See more here. 


Sears Canada Narrows Operating Loss, Halts Store Sales Slide

Sears Canada Inc. reported a smaller operating loss on Wednesday, helped by the slowest decline in same-store sales in six quarters and cost cuts.  Same-store sales fell 3.9% in the second quarter ended Aug. 2. Comparable sales fell 6.8% in the same period a year earlier.

The company said it continues to search for a new CEO to replace Ronald Boire, who stepped down at the end of July to take up the top job at struggling U.S. bookstore chain Barnes & Noble Inc.

“I am very pleased with the positive momentum we are now seeing in the business and I am confident that Sears Canada is back on the right track, focused on creating value for our shareholders, instilling a sense of pride in our employees, and providing Canadians with an outstanding retail experience,” Brandon Stranzl, executive chairman, said in a statement.  Stranzl has been running the company since Mr. Boire departed.

“We will continue to study all options for our valuable logistics and other real estate assets, and believe there are additional potential transactions that would enhance the balance sheet even further,” the company said.

Sears Canada, whose largest shareholders include Sears Holdings Corp Chief Executive Eddie Lampert and his hedge fund ESL Investments Inc, said total revenue fell 9% to $768.8-million.

The company has stepped up spending on areas such as its website and profitable merchandise categories, while looking to exit unprofitable product lines.

Sears Canada has closed stores and cut jobs as it lost market share to aggressive U.S. rivals such as Wal-Mart Stores Inc.

The company said it was looking to cut costs by $100-million to $125-million on an annualized basis from 2014 levels.

The new program will be implemented in the third quarter and the company said it expects to take one-time charges of about $15-million to $20-million.

The company has also launched a couple of programs, including one that allows customers to exchange children’s clothing for the next size.

Sears Canada reported a profit of $13.5-million, or 13 cents per share, in the second quarter, compared with a loss of $21.3-million, or 21 cents per share, a year earlier.

The net income included a pre-tax gain of $67.2-million on a sale and leaseback of three properties in British Columbia and Alberta. Operating loss narrowed to $47.1-million from $64.2-million.

The company’s Toronto-listed shares had fallen more than 44% in the last 12 months through Tuesday’s close.

Debbie Travis Joins Forces with Sears Canada

On Tuesday, Sears Canada announced that it is entering into a strategic relationship with internationally renowned designer Debbie Travis to launch a new line of home products, exclusive to Sears Canada.The Debbie Travis collection is inspired by the places around the world that are a meaningful part of Debbie's life and the people in those places who have had a positive impact on her.

The collection, which will be sold in Sears department stores, online at www.sears.ca and through the catalogue will be available in 2016. The products will include tabletop, home décor, bed and bath, home furnishings and outdoor items, including furniture, tabletop and cushions.

"We are excited to welcome Debbie to Sears Canada and to work with her to bring her new line of high style and quality products to our customers," said executive chairman Brandon Stranzl.  "Launching new lines with designers like Debbie is part of our strategy to make our stores a destination for Canadian shoppers to outfit their lives with brands they love.We blend the expertise of designers and vendors who make great product with our nationwide store network, sears.ca and the catalogue. Together, this partnership forms a unique product distribution network that is, we believe, unmatched anywhere in the country.  We are looking forward to 2016 when Debbie's exclusive line will be available to Sears Canada customers coast to coast."

"I am delighted to join the Sears Canada family to bring my brand to even more Canadian homes," said Debbie Travis."  Sears Canada's legacy of being a trusted retailer and providing quality products at affordable prices to Canadian families matches well with my desire to create designer fashions for the home at exceptional value."

Source: Sears Canada, Reuters, The Financial Post


Target Canada Spars with Creditors over Debt Claims

A new battle is brewing over $1.9-billion of intercompany claims in Target Canada’s collapse as creditors push to free up money for their own debts.

The monitor in the Target Canada insolvency case says the $1.9-billion debt the chain has said it owed its own property company should be reduced to $1.36-billion. However, the monitor, Alvarez & Marsal Canada Inc., acknowledged in a court filing that “a strict reading of the words” of the property agreements shows “drafting errors,” which, the monitor adds, can be overlooked partly because of Target’s “stated intention.”

Now, some creditors are challenging the entire so-called Propco intercompany claim – the largest among a number of other such debts – on the grounds that it is technically flawed.

“In our view, the entire Propco claim is zero,” said Lou Brzezinski, a lawyer at Blaney McMurtry LLP who represents major suppliers such as Universal Studios Canada and Nintendo of Canada “I think it is a big problem for Target.”

Target’s intercompany claims are important to creditors because they are worried the claims could end up in U.S. parent Target Corp.’s coffers and wipe out their own recoveries. In all, creditors have been estimated to be owed more than $2-billion, which could be almost as much as the intercompany claims. Target Canada has so far raised roughly $900-million from selling off properties and inventory.

Target Canada got court protection from creditors on Jan. 15 after less than two years in this country. It closed all 133 of its discount stores by mid-April.

At the start of the insolvency process, an affiliate of the U.S. parent agreed to subordinate to other unsecured creditors $3.1-billion it is owed by Target Canada, allowing other creditors to be paid first. But it has not said it will subordinate other intercompany claims, including the big property debt.

In a filing this week, the monitor said the language in the property agreements “presents certain challenges.” (The property firm was set up to handle store real estate lease assignments and operations.)

“The materials provided in support of this claim indicate that the assignment and assumption agreement serve to assign all the subleases and leasebacks entered into by Prop LP prior to the date of the assignment,” the monitor’s report says. (Prop LP was set up to handle store real estate lease assignments and operations.)

“However, Prop LP only assigned all of its right, title, interest and obligations as ‘sublessor.’ Accordingly, on a strict reading of the words of the agreements, only the leasebacks were assigned,” it says. “However, on balance, the monitor has concluded that these are simply drafting errors” given a number of factors, including Target’s “stated intention.”

The monitor also points to the rationale for the assignment of the leasehold arrangements; the conduct of the parties following the assignment, as shown by the information provided by it in support of its claim; and the property company not being in the position to serve “as lessor under the leasebacks without possessing the benefit of the tenancy afforded by the subleases.”

Excluding the $3.1-billion of subordinated debt, Target Canada filed for intercompany debts of more than $2.1-billion, the monitor report suggests. Ultimately, it approved intercompany claims against the retailer of more than $1.5-billion. (The figures are inexact because of currency conversion issues and complex cross-claims among its divisions.)

Among the intercompany claims are $12-million tied to Target’s pharmacies. This week, former franchised pharmacists’ representatives called on Ottawa to change the Companies’ Creditors Arrangement Act – under which Target got court protection – to prevent other foreign companies from using it as a way of going out of business. The pharmacists estimate their claims to be between $150-million and $200-million.

“A fair CCAA process with Target must include a fair claim process with non-Target creditors first,” Dan Dimovski, a former Target pharmacy partner and president of the Pharmacy Franchisee Association of Canada, said in a letter to its members this week.

The franchised pharmacists struggle with debts from having invested in their drugstore rollouts, including hiring their own staff and buying inventory.

Source: Article by Marina Strauss, The Globe and Mail


Dollarama’s Price Points Resonating with Shoppers

Higher price points continue to pay off for Dollarama Inc.

TD Securities analyst Brian Morrison is forecasting another quarter of double-digit top- and bottom-line growth when the Canadian dollar store chain reports second-quarter results on September 10.

The growth is expected to be driven by strong same-store sales growth, as a result of a favourable product mix weighted toward more expensive items, and store productivity improvements.

The company’s management also continues to be active with its share buyback program.

“We believe that Dollarama is well-positioned to deliver attractive growth over the next several years,” Morrison told clients, noting that management will likely introduce one or more new price points within the next year that could further boost the company’s growth prospects.

“In an effort to maintain/improve the value proposition in the face of inflation and currency headwinds, this should be aided by further penetration of $2.50 and $3.00 items and a further shift away from items priced at $1.00,” he added.

A multiple price-point approach seems to be resonating with consumers, despite a lower proportion of items being offered for $1.
Dollarama’s management has indicated it will not increase prices above $3 this year, despite ongoing weakness in the Canadian dollar, Morrison thinks it may introduce $4 products in fiscal 2017.

Citing “ample visibility” in Dollarama’s earnings power, the analyst raised his price target on the stock to $87 from $83.

In addition to its same-store sales growth and the benefits from productivity improvements, Morrison highlighted the opportunity in Dollarama’s store expansion in underpenetrated markets.

Investors certainly agree with this outlook, having driven Dollarama shares up more than 25% so far in 2015 and 62% in the past 12 months.

“From a broader perspective, we feel that in the context of the current macro environment, Dollarama will continue to garner a premium multiple owing to a lack of Canadian names with similar attractive growth profiles, a prolonged low interest rate environment, and ongoing uncertainty within the resource sector,” Morrison said.

Source: Article by Jonathan Ratner, The Financial Post


Wal-Mart U.S. Cutting Workers’ Hours After Pay Raise Boosts Costs

Wal-Mart Stores Inc., in the midst of spending US$1 billion to raise employees’ wages and give them extra training, has been cutting the number of hours some of them work in a bid to keep costs in check.

Regional executives told store managers at the retailer’s annual holiday planning meeting last month to rein in expenses by cutting worker hours they’ve added beyond those allocated to them based on sales projections.

The request has resulted in some stores trimming hours from their schedules, asking employees to leave shifts early or telling them to take longer lunches, according to more than three dozen employees from around the U.S. The reductions started in the past several weeks, even as many stores enter the busy back-to-school shopping period.

Chief Executive Officer Doug McMillon is trying to balance a desire to improve service — partly through increased spending on his workforce — against investors’ pressure to keep profit growing.  Labour costs, which rose after Wal-Mart increased its minimum wage to US$9 an hour in April, have weighed on earnings, which missed analysts’ expectations last quarter. At the same time, Wal-Mart is trying to maintain low prices to fend off rivals.

The reduction in hours is taking place only in locations where managers have overscheduled workers, staffing the store for more time than they’ve been alloted, said Kory Lundberg, a spokesman for Bentonville, Arkansas-based Wal-Mart. The reductions won’t affect efforts to better staff stores, shorten checkout lines, and improve cleanliness and stocking, he said.

Greg Foran, the head of Wal-Mart’s U.S. operations, has said the retailer has dual goals of containing expenses and spending more to improve its stores.

“Amid the investment, we’re focused on growing sales and controlling costs, as you would expect from Wal-Mart,” Foran said last month after the company announced disappointing earnings. “We are staying true to our roots. However, we are committed to improving the customer experience and we will protect the investments necessary to achieve this goal.”

Striking that right balance is proving challenging for the world’s biggest retailer, according to accounts from some employees.

A Wal-Mart employee at a location near Houston, who asked not to be identified because she didn’t have permission to talk to the media, said her store had to cut more than 200 hours a week. To make the adjustment, the employee’s store manager started asking people to go home early two weeks ago, she said. On Aug. 19, at least eight people had been sent home by late afternoon, including sales-floor associates and department managers.

The employee said she’s covering an area once staffed by multiple people at one of the busiest times of the year — the back-to-school season. On a recent weekday, she had a customer who had to wait 30 minutes for an employee to unlock a product the shopper wanted to purchase, she said. In e-mails, interviews and social-media posts, employees in a range of positions across the country shared similar stories of hours being cut.

The staff at a location in Fort Worth, Texas, were told that the store needed to cut 1,500 hours, according to a worker who asked not to be named for fear of being reprimanded. After being asked to stay late to help with extra work earlier in the week, some were told to take two-hour lunch breaks to make up for the additional hours they’d clocked, the employee said.

McMillon’s move to raise Wal-Mart’s minimum wage to US$9 an hour in April has stirred other frustrations. Some of the chain’s more senior employees have criticized the increase, saying it mostly benefited newer workers and that more experienced staff shouldn’t be making at or near what new hires are paid.

Wal-Mart has said it anticipated some employees being disappointed about not getting raises and is trying to create more opportunities for workers to advance within the company. It also has a new scheduling system.

By cutting hours, Wal-Mart now risks losing some of its best employees to competitors that can provide more stable schedules, said Burt Flickinger, managing director at Strategic Resource Group LLC. The company also may alienate customers if the staffing levels result in poorer customer service and products not getting on store shelves, he said.

Wal-Mart has made strides during the past year in addressing customers’ complaints of barren shelves, dirty stores and long check-out lines, Flickinger said. But some locations still aren’t staffed well enough during peak times, he said.

“Wal-Mart risks a talent drain at a time when McMillon has made meaningful improvements in the company,” Flickinger said.  “All these competitors will take Wal-Mart workers to make themselves strong and help make a major competitor weaker.”

Source: Bloomberg News


Bar Code's Days Numbered as Shoppers Demand More Data

Growing demand for more information about the products we buy could mean the end of the simple bar code - the blocks of black and white stripes that adorn most objects for sale and are scanned five billion times a day.

First used on a pack of Wrigley’s Juicy Fruit chewing gum in 1974 in a store in Ohio, bar codes have revolutionized the retail world, allowing cashiers to ring up products much faster and more accurately, while also streamlining logistics.

But shoppers are now demanding far greater transparency about products, and store owners need more information to help with stock taking, product recalls and to fight fakes. The basic bar code is just not up to the job.

That could mean a costly upheaval for retailers and brands to change packaging and invest in new systems and scanners. But it should also bring benefits as more data helps them manage the flow of goods better.

“The bar code did a great job, but it is now time for succession,” said Capgemini consultant Kees Jacobs, who is working with the world’s top retailers and food manufacturers to try to agree new global standards for labels and product data.

“The current bar code is not sufficient to be the carrier of much more granular information that is needed,” Jacobs said.

The most ubiquitous bar codes allow an eight to 14 digit number to be read by a laser scanner. For example, bar code 4-003994-111000 identifies a box as being a 375 gram pack of Kellogg’s Corn Flakes.

However, that number does not directly capture any other information that might interest a shopper - such as ingredients, allergens or country of origin - nor does it provide a retailer with useful details such as the batch number or sell-by date.

That data is usually printed on the pack, but consumers increasingly want to read it online, or with a smartphone app such as one that measures calories. Retailers want data that can be scanned for tasks such as quickly locating faulty goods for recall or about-to-expire products for mark downs.

GS1, the non-profit organization that assigns the unique numbers in bar codes, has developed a double-layered bar code it calls the “data bar” which can carry some extra details such as expiry date, quantity, batch or lot number.

That has allowed German retailer Metro to launch PRO Trace, a smartphone app that shows, for example, that a filet of salmon on sale at a store in Berlin on Aug. 25 was caught at the Bremnes Seashore fish farm off the coast of Norway on Aug. 17 and processed in Germany on Aug. 21.

The app also displays a map highlighting the fishing area of the catch and a detailed description of the Atlantic salmon.

Metro says the app helps customers at its cash-and-carry stores such as professional chefs from hotels and restaurants, as they can now embellish their menus with information about the exact origin of pricey delicacies such as wagyu beef.

“We are the only ones in Germany that can do this for fresh fish. It’s about trust. Our customers challenge us to offer sustainable and safe products,” said Lena vom Stein, a corporate responsibility project manager at Metro.

Metro set up the tracking scheme to help it comply with European Union regulations aimed at stemming overfishing and started making the data available to customers in 2012. It now extends to meat, and fresh fruit and vegetables will follow.

Other retailers are also opening up, often supplementing the bar code with a pixilated square known as a quick response (QR) code. It can store dozens more data points and can be scanned by a smartphone camera to lead to a web page, but can still not be read by the majority of store scanners.

Dutch retailer Albert Heijn recently introduced “Check Origin” QR labels on locally-grown radishes and blueberries.  Scan the sticker on a mobile phone and it plays a film that rewinds to show the journey from the shelf back to the packing factory, then back to the farmer’s field.

Such tools are likely to fuel demands for more transparency. A GS1 survey found consumers are most interested in nutritional and ingredient information, details on allergens, organic certification, environmental impact and ethical standards.

Making such a wealth of data accessible via codes that can be scanned is only part of the problem. A bigger challenge is gathering, storing and standardizing the information in the first place.

Fiona Wheatley, sustainable development manager at British retailer Marks and Spencer, says keeping tabs on all the company’s suppliers can be a daunting task.

“Your ability to give your customers more confidence that they can rely upon is proving to be increasingly challenging,” she said, adding that M&S relies on certification schemes such as Fairtrade to help audit smallholder farmers.

David Linich, supply chain expert at consultants Deloitte, advises retailers to find ways to work together to monitor the thousands of producers they buy from: “If you go it alone it can be really burdensome, really cost prohibitive.”

The Consumer Goods Forum (CGF), a global network of some 400 retailers and manufacturers from 70 countries, is co-ordinating efforts to harmonize product data and labeling.

Most firms accept that more transparency is needed after scares such as the 2013 scandal about horse meat being sold as beef in Europe, but it is still proving hard to persuade them to share data that many see as commercially sensitive.

Capgemini’s Jacobs, who is working on the CGF project, hopes pilot schemes to standardize digital information, like one between rival retailers in Belgium including Delhaize, Carrefour and Colruyt, could be the precursors to new global data standards.

GS1 already holds data from 30,000 companies on some 18 million products that its industry members share with each other behind the scenes to smooth logistics.

It is trying to persuade its members to let consumers access more of this information, while keeping some of it confidential, such as detailed pricing and stock levels.

Malcolm Bowden, president of global solutions at GS1, predicts agreement could come quickest - within a year - on sharing nutrition data as there are already broadly accepted standards, and calorie and allergen apps are proliferating.

“The will is there. It has to happen. Like any major change, big companies have to have time to think through the implications,” he said.

GS1 is also working to create identifier numbers for individual farms and is trying to harmonize standards on sustainability data, such as a measure of water efficiency for detergents and washing powders currently being piloted.

But making such a wealth of data available will sound the death knell for the bar code. Only a QR code can carry that much information without taking up too much space on packaging.

Longer term, more products could carry wireless tags such as the RFID labels that are being widely rolled out across the fashion industry. These tiny tags, which can be embedded in an object and, unlike a bar code or QR code, do not need to be within the line of the sight of a reader, were long too expensive for everyday goods but their price is falling fast.

Bowden predicts different systems will probably have to coexist for the next decade or so as retailers and logistics providers gradually upgrade their scanning systems.

“I am convinced we will have a day where pretty much all information about all products will be available to all consumers,” he said.

Source: Article by Emma Thomasson, Reuters   


Retailers Continue to Struggle to Get Consumers to Use their Apps: RetailMeNot Study

A few weeks ago, RetailMeNot, Inc., the operator of the world's largest marketplace for digital offers, released the findings of an August 2015 study it commissioned from Forrester Consulting that looked into how smartphones and apps are changing the retail landscape and how retailers should respond to engage shoppers.

The findings of the study were based on consumer surveys and retailer interviews. One major insight the study provided was that while today's consumers overwhelmingly prefer to access the Internet on their mobile devices, only 30% use retailer applications to purchase products.

This mobile revolution in retail is not lost on marketers. Retailers increasingly understand the importance of engaging with shoppers in these mobile moments. However, retailers struggle to get consumers to download and use their apps. In fact, 60% of consumers have two or fewer retailer apps on their phones, and 21% have none.

"Retailers' mobile strategies needs to encompass more than just their app and website—they must also reach extended mobile audiences engaged in the shopping or browsing process," said Michael Jones, senior vice president, retailer and brand solutions, RetailMeNot, Inc.

"This new Forrester study focuses on mobile as the most important touch point for retailers to win, serve and retain customers," added Jones. "Whether consumers are shopping in-store, online or while time shifting on their smart phone or tablet device, retailers' mobile experiences must meet consumer expectations."

Smartphones Are Quickly Becoming The First Screen For Consumers—Even In Retail
• 84% of consumers surveyed use their smartphones while shopping in-store.
• Internet usage at home in the living room and common areas is now predominately done utilizing a smartphone (83%), surpassing PC/laptop usage (53%) and tablet usage (54%).

Coupons Continue To Be Compelling Content And Have Gained More Traction As An In-store Influencer Year-over-year
• 65% of consumers use their smartphones to find coupons online.
• More than half (55%) of consumers surveyed say they use a smartphone to find a coupon while shopping in-store, and an equal number use their smartphone to redeem a coupon while in-store.
• The study found that in 2015, 49% of digital coupons discovered on smartphones are ultimately used in-store to make a purchase, a 22% increase from 2014.

Retailers Struggle To Get Consumers To Use Their Apps
• Of the U.S. consumers surveyed who have used a mobile phone in the last 3 months to perform a retail-related activity, 60% have two or fewer retailer apps on their phones, and 21% do not have any.
• Over half of respondents (56%) use retailer apps once a month or less.
• In fact, the study revealed that consumers more frequently choose to use a mobile website to perform the majority of their shopping-related activities, such as purchasing a product, finding a coupon or coupon code or comparing prices with other websites or stores.

Retailers Must Do More To Reach Customers Beyond Having A Great App
Retailers can extend their mobile reach through partnerships with the applications customers use most often, helping the retailer to "borrow" mobile moments. Partners like RetailMeNot can act as additional channels for retailers to market to customers, and for new customers to discover retailers. Furthermore, promotional partners with large mobile audiences and active users can provide retailers with an invaluable source of data, context and insights that retailers need to provide customers with personalized, superior shopping experience.

Click here to access the full study.  

Source: RetailMeNot, Inc.          


Economic News

Canada’s Economy in a Technical Recession as Q2 GDP Declines but Worst Appears to be Over

Canada's economy declined for the second-straight quarter of 2015 — knocking the country backwards into a technical definition of recession, Statistics Canada data revealed on Tuesday.

The federal agency said real GDP contracted at an annual pace of 0.5% in the second quarter of the year, which followed a revised decline of 0.8% during the first three months of 2015.  Economists polled by Reuters had forecast a 1.0% contraction in the second quarter.

Statistics Canada says the first-quarter performance was weaker than originally estimated, forcing the agency to lower its GDP reading for the first three months of the year from an original estimate of 0.6%.

On the positive side, there was evidence to suggest Canada's economy began to bounce back in June as GDP grew by 0.5% for the month after shrinking over five straight months.Economists had expected growth of 0.2%.

That June increase was led by a 3.1% boost in natural resources extraction — the category's first increase following seven consecutive months of decline.

The new batch of data is likely to add fuel to the heated, ongoing political debate over how best to respond to the weakened economy as parties battle for support ahead of the Oct. 19 federal election.

It is also expected to intensify the economic argument over the severity of the technical recession — recently defined by the federal government as two consecutive quarters of negative GDP.

Drilling deeper into the second-quarter data, natural resources extraction contracted by 4.5%.

A considerable amount of growth in the quarter was found in household consumption at a time when interest rates remained low.

Statistics Canada found that household consumption rose by 0.6% in the second quarter, which followed a 0.1% gain in the first three months of the year. The second-quarter increase was led by 1.5% growth in transport prices.

“For consumption spending to maintain the pace of growth in the second half, the labour market will have to remain resilient,” said Krishen Rangasamy, senior economist at National Bank Financial.

Exports also crept up in the second quarter by 0.1% after contracting for two consecutive quarters.Imports fell by 1.5%.

Business investment fell by 7.9% in the second quarter after a 10.9% decline in the prior three months, partly because of a drop in mineral exploration. GDP was also curbed as companies slowed their investment in inventories to $7.1-billion (Canadian) from $12-billion, Statistics Canada said.

Positive numbers in the June data suggest the expected turnaround could be underway.

On a monthly basis, Statistics Canada said wholesale trade rose by 1% in June after a 1.1% decrease in May and a 1.6% in April.

It found that manufacturing output rose by 0.4% after contracting by 1.6% in May.

The finance and insurance sector grew by 0.7% in June and the arts and entertainment industry rose by 6.4%, thanks in large part to Canada's role as host of the FIFA Women's World Cup.

The last time the economy contracted over two consecutive quarters was in 2009 during the Great Recession, when GDP pulled back by 8.7% in the first quarter and 3.6% in the second.

Source: Statistics Canada, The Canadian Press, The Financial Post  


Economists Cut Canada’s Growth Projection, Casting Cloud on Election Pledges

Economists were shaving their growth forecasts for 2015 ahead of Statistics Canada’s report this week that confirmed that Canada slipped into a technical recession earlier this year.

A new survey of 16 economists conducted this month by the London-based research firm Consensus Economics shows the economy is only expected to grow by 1.1% this year, which is down from the 2% growth the federal government expected when it released its April budget.

The GDP numbers are having an immediate impact on the federal election campaign, where economic management is shaping up as a key point of debate between party leaders. It is also likely to impact the discussion over Ottawa’s bottom line as both the Conservatives and NDP are promising surpluses while the Liberals say they would fund major infrastructure spending through short-term deficits.

Economic growth has a direct impact on expectations for federal revenue and a slowing economy could place the Conservative government’s projected surplus of $1.4-billion at risk.

“I think everyone must realize that things were quite different in terms of expectations in April than they are today,” said Philip Hubbard, director of Consensus Economics. “We see expectations for GDP growth in Canada as having declined quite a bit over the last six or eight months.”

Mr. Hubbard said this drop in growth should force political parties to explain what that means for their forecasts as they make political promises during the campaign.

While there has been a considerable drop in the forecast for 2015, the consensus projection for economic growth in 2016 is still roughly in line with the assumptions in the budget.

The issue of whether Ottawa’s finances should be in deficit or surplus is now a major dividing line in the federal election campaign even though there is no agreement on the current state of the government’s bottom line.

The government ignored opposition requests to move up the fall fiscal update so that more current figures could be released before the campaign. As a result, it is not clear what parties will use as their baseline assumptions in their campaign platforms.

Conservative Leader Stephen Harper seized on a Finance Canada report from last Friday that showed Ottawa posted a $5-billion surplus over the first three months of the 2015-16 fiscal year, but even the department itself cautioned that such early figures should be treated with caution. About $2.1-billion of that early surplus was thanks to the government’s April 6 sale of its remaining shares in General Motors.

Party leaders have staked out clear positions in recent days when it comes to fiscal issues. Mr. Harper is standing by his budget plans and insists they will lead to a string of budget surpluses. NDP Leader Thomas Mulcair is promising an NDP government would balance the books starting in 2016-17.

Liberal Leader Justin Trudeau is taking a dramatically different approach, promising $60-billion in new infrastructure spending over 10 years. The Liberals said their plan involves running deficits of up to $10-billion for two years before balancing the books by 2019.

The Consensus Economics report provides a hint of what a fiscal update would show. While 16 economics firms contributed their growth projections and other data to the Aug. 10 survey, only six of the 16 provided fiscal projections.

That limited survey forecasts a deficit on average of $300-million for 2015-16. The survey forecasts a $400-million surplus for 2016-17, in contrast to the budget’s forecast of a $1.7-billion surplus.

Parliamentary Budget Officer Jean-Denis Fréchette issued a report in July that forecasted a $1-billion deficit in 2015-16, due to the fact that the economy is not performing as expected in the budget.

For a government that brings in more than $270-billion a year in revenue, even the latest forecasts show a federal budget that is very close to balance at the moment.

“Ottawa will probably find a way to balance the budget if they really want to,” said BMO economist Robert Kavcic, who believes the PBO’s July forecast of a $1-billion deficit for this year is a reasonable starting point for political parties to use.

TD Bank economist Randall Bartlett agrees that the latest growth figures would translate into either a very small surplus or very small deficit, which he describes as economically “meaningless.” He cautions that it is too early in the fiscal year to rely on the Finance Canada report, which is the document the Conservatives are highlighting.

“Things are changing,” he said, noting the government’s fiscal year only started April 1. “We don’t even have GDP [data] for the first quarter of this fiscal year and we still have three quarters left and oil prices have dropped quite significantly. … I really think it’s going to be too close to call at this point whether or not it’s going to be a deficit or a surplus.”

Economy by the numbers
Economic forecasts are regularly updated as new information comes in. The figures below show how expectations for growth and size of future surpluses and deficits have evolved in recent months.

Budget numbers (April 21)
Real GDP
2015 – 2%
2016 – 2.2%

Unemployment rate
2015 – 6.7%
2016 – 6.6%

Bottom line
2015-16 – $1.4-billion surplus
2016-17 – $1.7-billion surplus

Bank of Canada Monetary Policy Report (July 15)
Real GDP
2015 – 1.1%
2016 – 2.3%

Parliamentary Budget Officer (July 22)
Revised forecast based on Bank of Canada’s July numbers
2015-16 - $1-billion deficit
2016-17 - $600-million surplus

Consensus Economics survey of private sector forecasts (Aug. 10)
Real GDP
2015 – 1.1%
2016 – 2.1%

Unemployment rate
2015 – 6.8%
2016 – 6.7%

Bottom line
2015-16 – $300-million deficit
2016-17 – $400-million surplus

Source: Article by Bill Curry, The Globe and Mail     


Canadian Home Prices Predicted to Rise Despite Economic Uncertainty

Canadian home prices are expected to rise a more than 5% this year and 2% in 2016 even as the economy weakens, a Reuters poll has found.

Canada’s economy shrank in the first three months of the year and it may have in the second quarter as well, owing in part to slumping oil prices. But house prices have defied this weakness so far and have kept climbing.

The Reuters survey of more than 20 analysts predicted home prices would rise 5.2% this year, up sharply from a forecast of 3.4% in June’s survey.

The latest expectations for 2016 and 2017 have also been revised upward, to 2.0% and 2.3% from 1.3% and 1.7% respectively. Canada’s Teranet-National Bank House Price Index was up 1.2% in July.

Calling the Canadian housing market “bulletproof,” Mark Hopkins, senior economist at Moody’s Analytics said: “It seems to not only be defying the odds in terms of surviving the large downturn in the global economy, but even now with gross domestic product contracting, it seems as though existing home prices have accelerated, which is a bit strange and counterintuitive.”

A majority of analysts predict a slowdown in home buying despite two rate reductions by the Bank of Canada this year.

“Even though the Bank of Canada is lowering rates, we are going to see a slowdown starting as people find that it is more expensive to buy stuff, and the home renovation activity will begin to slow down,” said David Watt, chief economist at HSBC.

In recent years, the housing market has been an important driver of the Canadian economy. It largely remained strong throughout the U.S. housing market crash and helped Canada brave the worst of the global financial crisis.

While home prices in the United States have begun to recover, in Canada they have been rising unabated ever since and several economists – although not a majority – have long warned of potential correction.

Average home prices have doubled over the past decade fuelled by cheap debt, but 13 of 19 respondents said the housing market remains affordable – at least on a national basis, because low interest rates have kept debt-servicing costs under control.

The Bank of Canada estimates the housing market is about 30% overvalued and has said it poses a significant risk to consumers overexposed to mortgage debt, especially in regions of the country where last year’s oil-price shock and persistent weakness has hit the job market hard.

In July, the Bank of Canada brought its benchmark interest rates down to 0.50% to dull the sting of plummeting oil prices and reduce the chances of a housing market crash.

But that rate cut likely has fuelled further house price rises in Toronto and Vancouver. Poll respondents said both these urban markets have surpassed affordability limits of the average Canadian homebuyer, outside of the condominium sector, where vast amounts of new supply are being built.

Some analysts fear a risk of correction – particularly in Toronto and Vancouver – once the U.S. Federal Reserve begins to tighten policy this year, which may take Canadian mortgage rates higher.

“The [Fed] rate hike is clearly going to have an impact on the [Canadian] housing market. That’s guaranteed,” Mr. Hopkins of Moody’s said. “But as long as the Fed continues to be the cautious agent that it is now in moving very slowly, I don’t think there will be any surprises.”

The Reuters poll also showed home building in Canada is expected to remain robust over the next year, averaging around 180,000 units.

Source: Reuters   


Most Canadian Store Types Hit Sales Peaks In H1 2015, But H2 May Not Be As Good

Total Canadian retail sales have been on a slide for the last 9 months and June 2015 continued this trend, according to the latest data from Statistics Canada. For Q2 2015, total retail was up just 2.2% on a not seasonally adjusted basis. This was the lowest year-over-year calendar quarter gain since Q1 2013.

However, it's almost all due to the collapse in gas prices. Excluding gas station retail sales from the numbers shows that the rest of retail is in healthy shape.

The underlying 12 month trend has been climbing more or less steadily for the last 2 years when gas stations are left out. The 3 month trend has softened slightly, but is still running well above average for recent years. On a year-to-date basis for the first half of 2015, Canadian retail sales ex-gas-stations were up 5.0%, the best H1 result since 2010.

On the other hand, the Q2 2015 year-over-year gain excluding gas stations was 4.7%, which is less than the previous 3 quarters. So while things are still good, the pace of retail sales gains could now be cooling off. Up-cycles don't last forever.

Food & Drug Stores
Retail sales growth in the Food & Drug sector is more or less following the general pattern. H1 2015 sales were up 3.9%, the best first half since 2009. But the Q2 2015 year-over-year gain was 3.2% and markedly down from the 4.6% increase recorded for Q1 of the year. In short, performance may have already peaked and is now set to adjust to a more modest level.

Supermarkets & other grocery stores had only a 1.1% year-over-year retail sales gain in June 2015, but the occasional slow month is not unusual in the business. Year-to-date sales for the first half of the year are still up 3.1%.

Health & personal care stores on the other hand were up a strong 7.2% year-over-year in June, and year-to-date sales are running 5.2% higher.

Convenience stores however are having the strongest year so far in this sector, with year-to-date retail sales up 7.4% for H1 2015. This was their best first half in over 10 years.

Store Merchandise
The general pattern in the Store Merchandise sector is even more pronounced. The underlying 12 month trend has been rising more or less steadily for the last 2 years, indicating accelerating retail sales growth. But in Q2, the 3 month trend has dipped below it, so that the up-cycle may now have peaked. Nevertheless, 2015 year-to-date sales are up 5.0%, the best H1 since 2007. On the other hand, it's unlikely that this pace can be maintained going forward due to the slow Canadian economy

All store types in this sector had positive retail sales growth in the first half of 2015. The biggest winners were building material & garden equipment/supplies dealers (+9.1%), clothing stores (+6.8%), shoe stores (+6.8%), and home furnishings retailers (+6.0%).

Note that Statistics Canada is now suppressing the breakdown of general merchandise stores for confidentiality reasons.

Automotive & Related
The Automotive & Related sector's downfall is due to significant declines in gasoline station retail sales. Pump prices started coming down drastically last November, but have been generally moving back up in recent months. The low point for gas stations was in January when their retail sales were down 21.5% year-over-year. By June 2015, this improved with sales down "only" 11.7% from the previous year. The trend lines should stabilize and start coming back up again by the end of the year.

The other part of this sector is motor vehicle & parts retailers, and about 94% of these sales come from new car dealers. The picture here is very different.

Thanks to low interest rates, Canadians continue to buy new vehicles at a high pace. Although the 3 month trend has cooled since last year, the underlying 12 month trend in June was at 7.8% annual increase, significantly higher than in either the Food & Drug or Store Merchandise sectors.

For further information and to see the full article, click here.  

Source: From Article by Ed Strapagiel, Consultant  


Latest U.S. Economic News  

U.S. Factory Activity Slows; Construction Spending Up Solidly
U.S. factory activity hit a more than two-year low in August as manufacturers struggled with a strong dollar, weak global demand and the lingering effects of deep spending cuts in the energy sector.

Other data on Tuesday, however, suggested the U.S. economy appeared to be on solid footing, with construction spending rising in July to its highest level since 2008.

The Institute for Supply Management (ISM) said its national factory activity index fell to 51.1 last month, the lowest reading since May 2013, from 52.7 in July. A reading above 50 indicates expansion in the manufacturing sector.

The decline in the index also likely reflected the recent global equities sell-off, which was triggered by concerns over China’s slowing economy. The ISM’s new orders subindex fell to 51.7, also the lowest level since May 2013, from 56.5 in July.

The employment index slipped to 51.2 last month from a reading of 52.7 in July.

Manufacturing, which accounts for 12% of the U.S. economy, has been under pressure from the strength of the dollar, which has gained 16.8% against the currencies of the United States’ main trading partners since June 2014.

A more than 60% plunge in crude oil prices since June last year has led to deep spending cuts in the energy sector.

The U.S. dollar fell against a basket of currencies after the data, while U.S. stocks were trading sharply lower. Prices for shorter-maturity U.S. government debt rose.

But apart from manufacturing, the economy is thriving. In a separate report, the Commerce Department said construction spending increased 0.7% to $1.08-trillion, the highest level since May 2008, after a similar gain in June.

Construction spending has increased for eight straight months and was as up 13.7% compared to July of last year.

The construction spending report rounded off a month of solid data that suggested the U.S. economy had retained much of its strength from the second quarter, when it expanded at a 3.7% annual pace.  July data for consumer spending, industrial production, business spending, housing and employment painted a fairly upbeat picture of the economy.

Construction spending in July was buoyed by a 1.3% jump in private construction spending to the highest level since April 2008. Spending on private non-residential construction projects surged 1.5% to the highest level since October 2008.

Spending on private residential construction increased 1.1% in July to a near 7-1/2-year high, reflecting gains in home building.

Public construction outlays, however, fell 1.0%. Spending on state and local government projects, which is the largest portion of the public sector segment, dropped 1.1%. Federal government outlays rose 0.9%.

Source: Reuters

U.S. Consumer Spending Rises in July; Inflation Muted
U.S. consumer spending picked up a bit in July as households bought more automobiles, offering further evidence of strength in the economy that could keep the door open to a Federal Reserve interest rate hike this year.

The Commerce Department said last Friday that consumer spending increased 0.3% after an upwardly revised 0.3% rise in June. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, was previously reported to have gained 0.2% in June.

Economists polled by Reuters had forecast consumer spending rising 0.4% last month.

It was the latest report indicating momentum in the U.S. economy as it confronted recent global financial markets turbulence, sparked by concerns over a slowing Chinese economy, which has diminished the chances of an interest rate increase next month.

New York Fed President William Dudley said this week that prospects of a September lift-off in the central bank’s short-term interest rate “seems less compelling to me than it was a few weeks ago.”

Some economists, however, believe the U.S. central bank could still raise interest rates in September if financial markets settle down and the streak of fairly strong data continues.

Economists say that underlying strength, also highlighted by a rebound in business spending, buoyant housing and labour markets, as well as bullish consumer confidence, gives
the U.S. economy muscle to weather the fallout from the markets rout.

The fairly upbeat consumer spending report also suggested the economy maintained some of its vigour from the second quarter, when it expanded at a 3.7% annual rate.

Last month, spending on long-lasting goods such as automobiles increased 1.1%, reversing June’s 1.1% drop. Auto purchases accounted for about half of the increase. Outlays on services like utilities rose 0.2%.

When adjusted for inflation, consumer spending rose 0.2% after being flat in June.

Personal income increased 0.4% in July, rising by the same margin for a fourth straight month. Wages and salaries shot up 0.5%, the largest rise since November 2014, after advancing 0.2% in June.

With income gains outpacing spending, the saving rate increased to 4.9% from 4.7% in June.

Despite the steady increase in consumption, inflation remained muted. Inflation, which has persistently run below the Fed’s 2% target, dominated the discussions at the Fed’s July 28-29 policy meeting.

A price index for consumer spending rose 0.1%, slowing from a 0.2% increase the prior month. In the 12 months through July, the personal consumption expenditures (PCE) price index rose 0.3% for a second straight month.

Excluding food and energy, prices edged up 0.1% for the fourth straight month. The so-called core PCE price index rose 1.2% in the 12 months through July, the smallest rise since March 2011. It increased 1.3% in June.

Source: Reuters

U.S. Pending Home Sales Edge Higher
Slightly more Americans signed contracts to buy homes in July, as pending sales edged up after dipping in June.

The National Association of Realtors (NAR) said last Thursday that its seasonally adjusted pending home sales index rose 0.5% to 110.9 last month. This marks a slight recovery from June, when the index fell to 110.4 after reaching 112.3 in May, a level last seen in 2006.

Steady job growth coupled with low mortgage rates has improved home sales this year. As the recovery from the Great Recession enters its seventh year, more Americans have rebuilt their savings, increased their home equity and returned to the real estate market.

Pending sales are a barometer of future purchases. A lag of a month or two usually exists between a contract and a completed sale.

The modest increase in the index last month indicates that sales may soon be peaking after surging this year.

Completed sales of existing homes increased 2% in July to a seasonally adjusted annual rate of 5.59 million, the fastest pace in eight-and-a-half years, the Realtors said last week. But the market has also revealed a mismatch between rising demand and limited supplies of homes on the market. Sales have increased 9.6% over the past 12 months, while the number of listings has declined 4.7%.

The higher demand has largely emerged out of solid hiring since early 2014 and relatively low mortgage rates.

Over the past 12 months, employers have added 2.9 million jobs as the unemployment rate has fallen to 5.3% from 6.2%. The hiring has generated a greater sense of financial security that has boosted housing.

Mortgage rates have also remained roughly two percentage points below their historic levels.

The average 30-year fixed mortgage rate was 3.84% this week, according to mortgage firm Freddie Mac.

Source: The Associated Press

U.S. Second-Quarter Economic Growth Revised Sharply Higher
The U.S. economy grew faster than initially thought in the second quarter on solid domestic demand, showing fairly strong momentum that could still allow the Federal Reserve to hike interest rates this year.

GDP expanded at a 3.7% annual pace instead of the 2.3% rate reported last month, the Commerce Department reported last Thursday in its second GDP estimate.

The GDP report, which was released in the wake of a global stock market sell-off, should assure investors and cautious Fed officials that the United States was in good shape to weather the growing strains in the world economy.

Concerns over slowing economic growth in China sent global equity markets into a tailspin last week, raising doubts that the U.S. central bank would raise its short-term interest rate next month.

Last Wednesday, New York Fed President William Dudley said that prospects of a September lift-off in the central bank’s key lending rate “seems less compelling to me than it was a few weeks ago.”

Prices for U.S. government debt fell after the GDP data, while U.S. stock index futures held on to gains. The dollar was stronger against a basket of currencies.

The upward revisions to second-quarter growth also reflected the accumulation of $121.1-billion (U.S.) worth of inventories, $11.1-billion more than previously estimated. That meant inventories contributed 0.22 percentage point to GDP instead of subtracting 0.08 percentage point as reported last month.

While the huge inventory build will likely weigh on growth in the third quarter, the blow could be softened by rebounding business investment in capital goods.

Economists polled by Reuters had expected that second-quarter GDP growth would be revised to a 3.2% rate.

The economy grew at a 0.6% rate in the first quarter. Output expanded 2.2% in the first half of the year compared to growth of 1.9% during the same period in 2014.

Underscoring the solid economic fundamentals, a measure of private domestic demand that excludes trade, inventories and government expenditures increased at a 3.3% rate in the second quarter, instead of the previously reported 2.5% pace.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, grew at a 3.1% rate, rather than the 2.9% pace reported last month. Consumer spending got off to a brisk start in the third quarter, with retail sales rising solidly in July.

A strong labour market, cheaper gasoline and relatively higher house prices are boosting household wealth, helping to support consumer spending.

The employment picture was further brightened last week by a separate report from the Labor Department showing initial claims for state unemployment benefits slipped 6,000 to a seasonally adjusted 271,000 for the week ended Aug. 22.

It was the 25th straight week that claims remained below the 300,000 threshold, which is usually associated with a strengthening labour market.

The Commerce Department said investment in non-residential structures was revised to show an increase of 3.1%, reflecting stronger spending on commercial and health care construction. It was previously reported to have contracted at a 1.6% pace.

Spending on residential construction was raised to a 7.8% pace from a 6.6% rate. Business spending on equipment was not as weak as initially thought.

The energy sector continued to weigh on growth as it struggles with the lingering effects of deep spending cuts by oil-field companies like Schlumberger and Halliburton in the aftermath of a more than 60% plunge in crude oil prices since last year.

Spending on mining exploration, wells and shafts plunged at a 68.3% rate in the second quarter, the largest decline since the second quarter of 1986.

The trade deficit was smaller than previously reported, adding 0.23 percentage point to GDP growth.

The GDP report also showed after-tax corporate profits rebounded 1.3% in the second quarter after declining 7.9% in the first quarter. A strong dollar has constrained the profits of multinational corporations.   

Source: Reuters

  

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