CHHMA - EYE ON OUR INDUSTRY
Volume 15, Issue 34, September 16, 2015

Inside This Issue:

• Still Time to Register for the Industry Memorial Golf Classic on September 30th
• Industry Cocktail to Take Place on December 3rd at the Casino de Montreal
• Astro Marketing – Special Fall Jacket Promotion
• CSSA Annual Steward Meeting Set for October 29th
• Sears Canada Announces Updates to Loyalty Program/Credit Card Transition Process
• Wal-Mart Sparks Battle with Suppliers over Margin-Squeezing Fees
• Dollarama May Have to Raise Prices up to $4 to Deal with Lower Loonie
• HBC Results Bouyed by Faltering Competitors
• OECD Trims Canada’s Growth Outlook for this Year and Next
• Canadian Home Resales Little Changed in August; CREA Increases Annual Forecast
• Toronto, Vancouver HomePrices Poised to Surge ever Higher
• Latest U.S. Economic News

Association News

Still Time to Register for the 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. 


Industry Cocktail to Take Place on December 3rd at the Casino de Montreal

Mark your calendar and plan to join industry colleagues and retail customers for the annual industry year-end celebration on Thursday, December 3, 2015, 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.

So look for further details and registration info over the coming weeks and we hope to see you there!


Astro Marketing – Special Fall Jacket Promotion

The CHHMA has worked with Astro Marketing for many years, building a relationship and purchasing our incentive gifts for golf tournaments and speaker events. Our members have benefited by our volume and relationship when ordering items for their corporations.

Astro Marketing currently is running a special promotion on a Canada Sportswear jacket perfect for the fall season – see details below:

 
For further information and/or to place an order, please contact Brian Gravenor, Account Manager, at 416-665-7580 ext. 215 or bgravenor@astromarketing.ca.
 


Stewardship News

CSSA Annual Steward Meeting Set for October 29th

The Canadian Stewardship Services Alliance (CSSA) has announced that their third Annual Steward Meeting will be held on Thursday, October 29th.

The meeting details are as follows:

Time:10:00 am - 1:00 pm PDT; 11:00 - 2:00 pm CST; 12:00 - 3:00 pm CDT; or 1:00 - 4:00 pm EDT

Location:Webcast or In Person:

For those joining in person:Hilton Toronto Airport Hotel and Suites.5875 Airport Road, Mississauga, Ontario, L4V 1N1

CSSA looks forward to sharing information on the Multi-Material BC, Multi-Material Stewardship Western, Multi-Material Stewardship Manitoba and Stewardship Ontario programs including year-over-year program, financial performance, and 2016 material fee schedules.They also look forward to hearing from guest speakers who will provide insights on how packaging and printed paper recycling systems are evolving and what this means for stewards.

Further details including an agenda to follow.

Click here to register. 
 

Industry News

Sears Canada Announces Updates to Loyalty Program/Credit Card Transition Process

On Monday, Sears Canada announced an update and modernization to its customer loyalty program, Sears Club, which will bring it more firmly into the digital age. The enhanced Sears Club loyalty program, set to launch before the Holiday shopping season, will offer improvements to the customer experience.  Members will now earn valuable Sears Club points on purchases made in cash as well as with any debit or credit card accepted by Sears Canada. Customers can earn points on purchases made in store, through the Catalogue, online at www.sears.ca, or on mobile devices.

Under the new loyalty program, Sears Canada will:

- Provide existing Sears Club customers with a new Sears Club membership card, independent of any credit card
- Deliver to customers the new Sears Club membership card and program kit in time for the Holiday shopping season
- Transfer all existing Sears Club points to a new Sears Club membership card in the customer's name
- Maintain the value of all existing points
- Feature enhanced bonus points programs, and even more brands for which to redeem points
- Offer customers the option of redeeming any Sears Club points earned, including those transferred from the previous Sears Club loyalty program card, towards any purchases made at Sears Canada, whether in cash, or with any debit or credit card accepted by Sears Canada.

All of this will happen without the Sears Canada customer having to do anything at all other than continuing to shop at Sears Canada using their new Sears Club membership card.

As part of the modernization and ongoing improvement to Sears Canada products and services, the company is also in the process of updating the look and feel of its Sears Club brand identity elements.

Sears Canada is also continuing to work on the development of a Sears Canada credit card program.As originally announced on November 17, 2014, the agreement with JPMorgan Chase Bank N.A. to manage the Sears Card and Sears MasterCard will terminate on November 15, 2015.JPMorgan Chase will soon communicate with customers about how this will affect their existing Sears-branded credit cards.

For Sears Canada's retail business, the enhanced Sears Club loyalty program allows the company to better control its own promotional strategies, and provides more flexibility for future program innovations.The conclusion of the existing relationship between Sears Canada and JPMorgan Chase will also result in Sears Canada receiving up to CAD $174 million if a sale of the Sears Card and Sears MasterCard credit card portfolio occurs. There is no assurance that such a transaction will be achieved or that the necessary conditions for the payment will occur.

"We are excited to launch the enhanced Sears Club loyalty program which allows customers to earn and redeem points on purchases using their preferred method of payment," said Brandon G. Stranzl, Executive Chairman, Sears Canada Inc. in a statement. "Existing Sears Club members can be assured their points will be transferred to the enhanced program at the conclusion of the agreement between Sears Canada and JPMorgan Chase. Our customers already have a meaningful direct one-on-one relationship with us, and this relationship will be further enriched through the launch of the improved Sears Club loyalty program, in combination with future credit card or similar financial products. These program enhancements provide us an opportunity to reach out and speak directly with millions of our customers, and to increase the number of recurring touchpoints between us and our customers so we can provide them with an outstanding retail experience that helps them outfit their lives with brands they love."

Source: Sears Canada Inc.


Wal-Mart Sparks Battle with Suppliers over Margin-Squeezing Fees

After years of meeting demands for ever cheaper prices, many Wal-Mart Stores Inc. suppliers are saying no to new margin-squeezing storage fees and a payment schedule that could delay for months how quickly some are paid.

The world’s largest retailer says the changes, laid out for vendors starting in June, reflect a push to simplify its relationships with suppliers, put them all on the same footing and reduce costs so it can offer customers the lowest prices. But some vendors see the new policy as an attempt by Wal-Mart to fatten its margins and offset wage hikes for store workers earlier this year.

Saying the new fees will hurt their own bottom lines, several vendors are hiring lawyers, and a top executive from at least one supplier visited Wal-Mart’s headquarters in Bentonville, Arkansas, in hopes of reversing all or some of the new terms. Two large suppliers with well-known brands that asked not to be identified for fear of hurting their relationship with Wal-Mart have refused to accept the terms and plan to use their size as leverage to negotiate a better deal.

“Any established supplier doing business with Wal-Mart is already offering by all means the lowest price possible,” said Carol Spieckerman, a consultant who works with several Wal-Mart vendors. “So these fees certainly sting.”

Wal-Mart began sending letters to 10,000 U.S. suppliers in June asking them to pay to use its distribution centers, warehouses and for shelf space in new stores, according to letters obtained by Bloomberg News and interviews with eight suppliers and industry consultants. Under the new rules, the frequency of payments depends on how quickly a supplier’s inventory moves.

Not all 10,000 suppliers will face higher charges because some were already paying to use Wal-Mart warehouses. Others won’t see a change to when they are paid.

Traditionally Wal-Mart has largely avoided the extra fees some other retailers charge, so the policy change was a surprise, said Leon Nicholas, a senior vice president at Kantar Retail, which advises dozens of Wal-Mart suppliers.

“What is so shocking this round is that they are being aggressive not in asking suppliers to take costs out of the system so the supplier can lower prices, but instead adding cost into the system,” Nicholas said. “It looks as though they are trying to have it both ways and trying to pad their own margins where they are facing cost pressure.”

Vendors were already feeling added pressure from Wal-Mart to cut costs after the retailer told them earlier this year to dial back on marketing and promotions and use the savings to lower their prices, he said.

Wal-Mart says the new fees aren’t an effort to offset wage increases for store workers, but part of an overall strategy to revive the U.S. business, which includes everything from making stores warmer to how employees manage inventory and stock shelves, said Wal-Mart spokeswoman Deisha Barnett.

“It isn’t going to always be easy for our suppliers,” she said. “Change isn’t easy. But we firmly believe driving everyday low cost that gets to everyday low price has proven to wow our customers. It increases sales volume for us and our suppliers.”

Barnett said Wal-Mart is willing to negotiate with suppliers and takes into account many factors -- history with the vendor, quality of the products -- to decide if the relationship is worth continuing.  To help suppliers adjust to the less frequent payments, Wal-Mart is encouraging them to seek low-interest loans through an existing financing program. But those that don’t agree to the new terms may find their Wal-Mart business affected, she said.

Wal-Mart could punish suppliers that don’t agree to all or some of the new terms by cutting back shelf space for a product, giving it less favourable placement in the store or dropping a supplier all together, Nicholas said. While it’s unlikely a major brand like Tide detergent or Huggies diapers would disappear from Wal-Mart shelves, that could be the case for smaller vendors selling less well-known brands, he said.

With nearly $500 billion in sales last year, Wal-Mart is the largest customer for many packaged-goods companies, such as General Mills Inc., Kellogg Co. and Hanesbrands Inc., which get more than 20% of their revenue from Wal-Mart, according to data compiled by Bloomberg.

“You can push and push, but at the end of the day you know where the power lies,” Nicholas said. Wal-Mart “has substantial negotiating leverage.”

A senior executive for a major supplier said if it doesn’t successfully roll back the new fees, the company will pass the increases on to its own suppliers. That’s a luxury unavailable to smaller vendors, so the new policy will likely hurt them more, the executive said.

A smaller supplier, notified of the fees late last month and given two weeks to accept, said it won’t be able to make a profit on its Wal-Mart business under those terms unless it fires workers or cuts wages and benefits.

The company will also have to borrow money to cover the change in payment terms, which will means it will now be getting paid every 90 days rather than every 30 days, an executive said. Officials there are still trying to determine if they should accept the costs or risk losing business from Wal-Mart, their largest client.

While the charges could be painful, the investments Wal- Mart is making in its stores, website and supply chain will benefit suppliers in the long run, said Spieckerman, the retail consultant.

“These fees are a result of a new retail reality,” Spieckerman said. “This is the price of not just selling things to Wal-Mart, but leveraging Wal-Mart’s massive platform.”

Source: Article from Bloomberg News 


Dollarama May Have to Raise Prices up to $4 to Deal with Lower Loonie

Dollarama says the weaker Canadian dollar is forcing it to raise prices and could lead the discount retailer to increase its current price threshold from $3 to as much as $4 by late next year.

“The probability is in the third and fourth quarter of next year, we’ll have to move our price points up,” CEO Larry Rossy said last Thursday during a conference call about its latest results, which beat analyst expectations.

Rossy told analysts the company hopes to get more “clarity” about the need for higher prices during a trip to China in October.

“In general, we like to maintain our prices as long as we can, but this is really an exceptional time where the Canadian dollar has gone so poorly against the U.S. dollar and everything is bought in U.S. dollars. So to absorb 25 to 35% (in currency swing) is almost impossible.”

Compounding Dollarama’s efforts to offer consumers value is the dwindling availability of goods it can purchase for 25 to 35 cents and sell for $1 or $1.25. Rossy said China is no longer focusing on those price levels anymore.

Meanwhile, the Montreal-based discount retailer says new, higher-cost items could also weigh on its decision to raise the chain’s current price threshold to $3.50 or $4 by late 2016.

However, Rossy said the new, higher-priced items would not lead to the introduction of new product categories. Food, for example, would remain priced at a maximum of $2.

And the company could mitigate pricing pressures by reducing product sizes.

“So as a consumer, I guess next year will not be a pleasant year from a purchasing point of view because you’ll probably be seeing some inflation in all likelihood.”

Dollarama said its earnings surged 39% to $95.5 million in the three months ended Aug. 2 on a 14% increase in sales.

During the second quarter, 76.5% of Dollarama sales were for products priced higher than $1, up from 67% a year ago.

Same-store sales rose 7.9%. It included a 6.2% increase in the size of average purchases and 1.5% more transactions.

Overall sales grew to $653.3 million from $572.6 million.

Net income amounted to 74 cents per common share, up from 51 cents per share or $68.9 million in the prior-year quarter.

Dollarama was expected to earn 61 cents per share on $642.7 million of revenues according to analysts polled by Thomson Reuters.

It has benefited from the addition of 72 net new stores over the past year, including 17 during the quarter. Dollarama operates 989 stores across Canada.

Sales growth is consistent across the country with no real negative impact being seen in oil-producing regions like Alberta.

Source: The Canadian Press


HBC Results Bouyed by Faltering Competitors

Hudson’s Bay Co. is enjoying a stronger performance in its traditional Canadian department store business than in its U.S. operations even though the economy south of the border is more robust than that in this country.

Hudson’s Bay is being buoyed here by picking up sales from a string of retailers that have faltered, particularly Target Corp.

As well, HBC has been helped by progressive improvements in its Canadian operations since the company was bought in 2008 by U.S. real estate mogul Richard Baker, the current executive chairman. He was also was instrumental in Target’s launch in Canada by spearheading HBC’s sale of its Zellers store leases to the U.S. chain.

“This is really like a little snowball that’s just rolling down a hill and getting better and better and bigger and bigger,” Mr. Baker said in an interview last Thursday with the Globe and Mail after HBC reported improved second-quarter results. “We’ve made a tremendous amount of improvements and the Canadian customer has rewarded us … But we have a long way to go.”

Hudson’s Bay’s next step in Canada will be launching its luxury Saks Fifth Avenue stores here along with its sister, discount OFF 5th, starting in early 2016. The company, which already has rolled out advertising posters in Toronto for the chain, is betting that shoppers have an appetite for pricey fashions in an increasingly crowded upscale clothing segment.

Next week, U.S. high-end department-store retailer Nordstrom Inc. will open a flagship store in Vancouver – its third store in Canada -- adding to the competition.

Overall, HBC fared well in its second-quarter with a profit of $67-million, which compared with a loss of $36-million a year earlier. The latest quarter included a $107-million gain from HBC’s contributions of properties to real estate joint ventures. On a normalized basis, HBC had a $53-million loss in the quarter – up from a $28-million loss a year earlier.

HBC’s retail sales under all banners, which include the U.S. Lord & Taylor and Saks Fifth Avenue chains in the United States as well as Hudson’s Bay and Home Outfitters in Canada, totalled $2.04-billion – up 15.2% from a year earlier. Part of the increase in retail sales was due to the higher value of the U.S. dollar and increased digital sales.

Even so, the impending entry of Saks in this country comes as that chain grapples with weak sales in the United States, hit by the strong U.S. dollar that is keeping international tourists – and traditionally big Saks spenders – away from Saks and other U.S. retailers. The downturn in overseas tourists is particularly noticeable in New York City, where Saks’ large flagship store is located.

“Here in this city [New York] I don’t think there’s anyone who isn’t seeing an issue related to international tourism and the impact on the business,” said Gerald (Jerry) Storch, chief executive officer of HBC. “We’re very focused on the domestic customer as a consequence of that.”

In its second quarter, Saks’ same-store sales were essentially flat (on a constant currency basis they rose 0.1%) while, over all at HBC, those sales rose 4.2% (and 14.3 %, when excluding currency differences.)

In an exception to the softer U.S. performance, same-store sales at OFF 5th jumped 12.7%, underlining the strength of the so-called off-price discount sector, which offers markdowns on high-profile branded goods, often leftovers from past seasons.

Oliver Chen, retail analyst at Cowen & Co. in New York, said despite HBC’s lower-than-expected profit margins as a result of heavy spending on digital and store launches, the retailer posted overall “solid” same-store sales growth.

He said he is encouraged that HBC reaffirmed its sales guidance of between $9-billion and $9.3-billion for fiscal 2015.

Mr. Storch said HBC would lower expenses by introducing more automation and operating more functions in common among its various chains.

In Canada, the company is focused on launching Saks in February, starting by stocking high-end lines in its Toronto Queen Street store, where Saks will be located in the same building at Hudson’s Bay.

“The Queen Street Saks Fifth Avenue will be the single most luxurious department store in Canada, we promise,” Mr. Baker said.

He said Saks in Canada could benefit from foreign tourists who like to take advantage of the weaker domestic currency when shopping during their vacations.

Mr. Storch added: “The biggest international spenders at Saks in the U.S. are Canadians. They won’t have currency questions when it’s in Canadian dollars when Saks opens in our home country.”

He said HBC understands the Canadian consumer and will be able to make subtle tweaks to best cater to local customers. He suggested other foreign rivals, such as Target, have failed to adapt to local tastes.

“We’ve seen what happens when American companies try to import the U.S. in to Canada,” Mr. Storch said. “We’re a Canadian company that loves Canada … We understand the people.”

In its second quarter, HBC was helped by its real estate component as the company returned to profitability, which Mr. Baker said marked a “transformative” period for the iconic Canadian retailer.

HBC completed joint ventures with two major real estate companies during the quarter and reached an agreement to acquire German department store chain Galeria Kaufhof – the company’s first move outside North America.

“This was a transformative quarter for us, with multiple major initiatives that will shape HBC for years to come,” Mr. Baker said in a statement.

“During the quarter we closed our joint venture with Simon Property Group as well as the first tranche of our joint venture with RioCan REIT, as we continue to execute on our strategies to highlight the value of our real estate assets …

“We also entered into a definitive agreement to acquire Galeria Kaufhof, Germany’s leading department store chain, which we expect to be significantly accretive to our shareholders.”

Mr. Baker said all of HBC’s businesses are “in excellent shape” for the fall and holiday quarters, which typically are the busiest for retailers.

Source: Article by Marina Strauss, The Globe and Mail 


Economic News

 OECD Trims Canada’s Growth Outlook for this Year and Next

The Organization for Economic Co-operation and Development (OECD) is taking a dimmer view of Canada’s economy, cutting its growth forecasts for this year and next.

In a fresh outlook Wednesday, the OECD trimmed its forecasts for Canadian economic growth to just 1.1% this year, and 2.1% for next year, down 0.4 of a percentage point for 2015 and 0.2 of a point for 2016.

The organization says the global economic outlook has grown darker than it was only a few months ago, but the United States is doing well enough that its central bank should go ahead with its first rate increase since the financial crisis.

The world economy is set to grow 3.0% this year and 3.6% next year, the Paris-based Organization for Economic Co-operation and Development said in an update of its forecasts for major economies.

It trimmed its estimates from 3.1% and 3.8% in June, citing primarily a slowdown in emerging market economies like China and Brazil.

“Global growth prospects have weakened slightly and become less clear in recent months,” OECD chief economist Catherine Mann told Reuters in an interview.

The United States stood out as a bright spot. The OECD raised its growth outlook for this year to 2.4% from 2.0% in June. It lowered its 2016 forecast to 2.6% from 2.8% previously, though.

The OECD saw more arguments in favour of the Federal Reserve raising interest rates than standing pat when its policy makers meet this week rather than at their next meeting at the end of the year.

“Raising interest rates now would remove uncertainty in the markets,” Mann said. The pace of future increases was more important than whether the Fed acted now or in December, according to the OECD’s simulations, she said: “The path matters four times as much as the timing.”

Looking at the euro zone, its outlook was the brightest in four years. Its growth was projected at 1.6% this year and 1.9% next year.

However, the bloc should be growing as much as a full percentage point faster, Mann said, with a weak euro and low interest rates and oil prices in its favour. It was not because it remained too burdened by its debts, she said.

The euro zone’s priority should be repairing the banking system and tackling bad loans, she said, rather than extending or expanding the European Central Bank’s bond-buying program as some economists have suggested following recently weak inflation data.

The OECD slightly lowered its growth estimate for China to 6.7% for this year and 6.5% next year after a string of disappointing data and plunges on its stock market.

Brazil was a particularly weak spot in the global economic outlook. The OECD forecast its economy would contract 2.8% this year and 0.7% next year as it struggles with a collapse in the price of commodities it exports.

Source: Reuters 


Canadian Home Resales Little Changed in August; CREA Increases Annual Forecast

The boom in Canada’s housing market continued in August with sales of existing homes edging up 0.3% month over month and holding at levels not far off the five-year high reached in May, according to the Canadian Real Estate Association (CREA).

In its latest survey released Tuesday, CREA says sales of existing homes were little changed from July in all local markets, with an even split between those posting increases and those showing declines.

On a full-year basis, actual sales were up 4% compared with August 2014 and were 6.6% above the 10-year average for the month of the month.

“August marked the fourth month in a row for strong and stable national sales activity,” CREA president Pauline Aunger said in the report.

Prices continued to rise in Ontario and B.C. “where listings are either in short supply or heading in that direction,” said CREA chief economist Gregory Klump, who noted that the month also provided “early evidence that modest price growth is re-emerging in some markets in Quebec and New Brunswick.”

Klump added that enduring low interest rates continued to boost home sales and were “likely to keep doing so for some time.”

CREA said actual sales were up from levels in the same period last year in more than 60% of all local markets, led by B.C.’s Lower Mainland region and the Greater Toronto Area, while those in Calgary continued to post the largest year-over-year declines.

Nationally, the number of newly listed homes edged up by 0.5% in August from July, led by gains in Edmonton and the GTA, while the national sales-to-new listings ratio was 56.7% in August, down from 56.9 per cent in July.

CREA says a sales-to-new listings ratio between 40 and 60% is generally consistent with a balanced housing market.

Meanwhile, the association said two-storey single family homes continued to post the biggest year-over-year price gains, up 8.85%; followed by one-storey single family homes, up 6.09%; townhouse/row units, up 4.29%, and apartment units, up 3.08%.

Greater Vancouver continues to show the highest year-over-year price growth, up 11.96%; followed by Greater Toronto, up 9.99%.

Prices in Calgary were flat on a year-over-year basis in August, marking the first month since September 2011 of no year-over-year price growth. Those in Saskatoon also ran roughly even with last August’s levels.

Elsewhere, home prices were up about 1.5% in Greater Montreal, about 1% in Greater Moncton and by about 0.5% in Ottawa. Prices fell by about 3.5% in Regina, extending year-over-year price declines that began in 2013.

The national average price for homes sold in August was $433,367, up 8.7% on a year-over-year basis.

CREA Updates Resale Housing Forecast

Meanwhile, CREA is revising upward its national housing forecast for the year despite the dampening effect in some provinces of low prices for oil and other commodities.

CREA says that is because low interest rates and supportive demographics have resulted in stronger than expected home sales activity in British Columbia and Ontario, which account for about 60% of Canadian housing activity.

The national average price has run higher than expected since CREA’s last forecast, in part reflecting a jump in the proportion of higher priced home sales this spring and early summer in B.C.’s Lower Mainland, in and around the Greater Toronto Area (GTA) and Calgary. This trend now appears to be receding, causing the national average price to follow suit.

However, recent trends in the MLS® Home Price Index (MLS® HPI) – which is not affected by changes in the mix of sales activity the way that average price is –suggest that prices are still accelerating across much of B.C., in and around the GTA and Montreal.

B.C. continues to see some of the strongest economic growth in the country, coupled with strong demographics. Home sales there have been drawing down inventories and boosting prices across the province.

In Alberta, home sales have gone from setting records in 2014 to running at or below their 10-year average, as uncertainty surrounding the outlook for oil prices and employment continues to sideline potential homebuyers.

In Ontario, the ongoing shortage of single family homes for sale in and around the GTA continues to drive very strong price gains. Record levels of activity in the province would likely be higher were it not for a shortage of low-rise homes coming onto the market.

In Saskatchewan, Manitoba, Quebec, and most of Eastern Canada, supply remains elevated. Home prices outside of B.C. and Ontario are forecast to keep pace with or lag inflation, as elevated supplies are drawn down by sales and return to better balance.

The forecast for national sales in 2015 has been revised slightly higher, reflecting stronger than anticipated activity in B.C. and Ontario.  National sales are now projected to rise by 3.3% to 495,800 units in 2015, marking the second strongest year on record for home sales in Canada.

Across the country, British Columbia is projected to post the largest annual increase in activity in 2015 (+18.1%). Alberta, Saskatchewan, and Nova Scotia are expected to post the largest annual sales declines (-21.6%, -12.0%, and -12.1% respectively). Activity in Manitoba is forecast to rise by 2.2% this year.

Home sales in Ontario are projectedto rise by 7.3% in 2015, while sales in Quebec are forecast to rise 4.6% compared to a sluggish 2014.

In Eastern Canada, where activity tends to be more volatile, sales in New Brunswick and Prince Edward Island have surprised on the high side in recent months, while sales in Nova Scotia have remained weaker than previously forecast.

Home sales in New Brunswick are now expected to post an annual increase of 5.1% in 2015. Activity in Prince Edward Island is set to rebound by 14.9% over 2014, when sales slowed to their lowest level in over a decade. Sales activity in Newfoundland and Labrador is projected to remain little changed (+0.5%).

The forecast for national average home price growth has been revised up slightly to $433,600 in 2015, representing an annual increase of 6.2%. The upward revision reflects average price gains in British Columbia and Ontario together with a projected increase in their proportion of national sales. British Columbia is expected to be the only province where the average home price rises faster (8.5%) than the national average, while the rise in Ontario’s average price (6.0%) is forecast to be roughly in line with the national increase.

Average prices in 2015 among other provinces are projected to remain stable, with annual gains in Manitoba (+1.6%), Quebec (+1.4%), and Nova Scotia (+2.9%) and declines in New Brunswick (-2.7%), Prince Edward Island (-0.9%) and Newfoundland and Labrador (-0.4%).

In 2016, national sales are forecast to number 495,000, which is little changed compared to forecast sales for 2015.  Activity gains in Quebec and some improvement in Prairie provinces are expected to offset a slight cooling for activity in B.C. and Ontario, where affordability for single family home buyers is anticipated to become strained.

Elsewhere, strengthening economic prospects are expected to translate into slow and steady sales gains among provinces where home sales have struggled while prices remained more affordable due to an elevated supply of listings. The exception is in Newfoundland and Labrador, where economic and demographic challenges are expected to persist in 2016.

The national average price is forecast to edge higher by two per cent to $442,400 in 2016. Increases are forecast to be slightly larger but less than 3% in British Columbia, Saskatchewan, Manitoba, Ontario, New Brunswick, and Prince Edward Island, with gains in some provinces reflecting an expected rebound from levels in 2015.

Price growth in 2016 is forecast to be strongest in Ontario (+2.8%) due to an ongoing supply shortage of listings for low rise homes in and around the Greater Toronto Area. Alberta and Quebec are forecast to see average home price growth of about 1.7 and 0.8% respectively in 2016, while Nova Scotia and Newfoundland and Labrador are forecast to edge slightly lower.

Source: CREA, The Canadian Press      


Toronto, Vancouver Home Prices Poised to Surge ever Higher

Home prices in some Canadian cities are on a tear, driving the national average up to a pace that eclipses the 11-year average for August.

Prices rose 1% last month from July and 5.4% from a year earlier, according to the Teranet-National Bank Home Price Index released on Monday.

Yet again, prices in Vancouver, Toronto and Hamilton scaled new heights.

Even prices in Calgary chalked up a strong monthly gain of 3.9%, though prices in Edmonton dipped 0.5%.

Toronto prices climbed 1.6% on the month, and 8.7% for the year.

Vancouver’s annual showing was also strong, at 9.7%, with a month-over-month rise of 0.6%.

“The dichotomy on the Canadian residential market is more obvious than ever,” said National Bank’s Marc Pinsonneault.

“On one side, 12-month price increases over 8% in Vancouver, Toronto and Hamilton have pushed the Teranet-National Bank national composite index to a near record in August for a sixth consecutive month,” he added.

“On the other side, prices in the eight remaining regions have grown over all a mere 0.2%.”

It’s worth noting, too, that the national 1% gain tops the 11-year August average of 0.9%.

There’s not only a regional mix in Canada, but also a mix of housing types.

Condo prices in Toronto and Vancouver, Mr. Pinsonneault said, rose “moderately” by about 5.5%, while other homes surged more than 10%.

“Were it not for non-condo dwellings in these two regions, house prices at the national level would have risen much less than the 12-month rate of 5.4% reached in August,” he added.

The ratio of sales to new listing suggests annual price gains, driven by Vancouver and Toronto, will climb ever higher to 6% before the end of the year, said David Madani, the Canada economist at Capital Economics.

“With mortgage rates likely to stay low for some time, housing could maintain its momentum,” said BMO senior economist Benjamin Reitzes.

Source: The Globe and Mail  


Latest U.S. Economic News   

U.S. Consumer Prices Post First Decline in Seven Months
U.S. consumer prices unexpectedly fell in August as gasoline prices resumed their decline and a strong U.S. dollar curbed the cost of other goods, pointing to tame inflation that complicates the Federal Reserve’s decision whether to hike interest rates.

The Labor Department said on Wednesday its Consumer Price Index slipped 0.1% last month, the first decline since January, after edging up 0.1% in July.

In the 12 months through August, the CPI rose 0.2% after a similar gain in July.

Signs of a disinflationary trend reasserting itself are in stark contrast with a rapidly tightening labour market and highlight the dilemma Fed officials face as they contemplate raising interest rates for the first time in nearly a decade.

The U.S. central bank’s policy-setting committee was due to start a two-day meeting later on Wednesday. While solid data on consumer spending, housing and employment have been supportive of a rate hike, the case for higher borrowing costs has been undermined by recent global financial markets turmoil.

“You can make a strong case either way for the Fed to begin raising interest rates or waiting,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania.

“The prudent risk management approach would argue for them to hold off, but if the Fed was really data dependent there is a very a strong case to raise rates on Thursday,” he said.

Tightening labour market conditions, marked by record high job openings and a 5.1% unemployment rate, have so far not spurred faster wage growth. Sluggish wage gains and a strong dollar have contributed to keeping inflation below the Fed’s 2% target.

Economists polled by Reuters had forecast the CPI unchanged in August and rising 0.2% from a year ago.

The so-called core CPI, which strips out food and energy costs, ticked up 0.1% last month after a similar rise in July. The muted gains in the core CPI reflect the dollar’s impact on the cost of imported goods.

In the 12 months through August, the core CPI increased 1.8%. It was the fifth time in six months that the 12-month change was 1.8%. The Fed tracks the personal consumption expenditures price index, excluding food and energy, which is running well below the core CPI.

Last month, gasoline prices fell 4.1%, the biggest drop since January, after rising 0.9% in July. Food prices gained 0.2% as egg prices increased 7.7%.

Egg prices are now up 35.3% from a year ago, reflecting the impact of the avian flu that struck some parts of the country early in the year. The rental index increased 0.3% last month, matching a similar gain in July.

There were also increases in tobacco prices and apparel. However, airline fares fell 3.1% and used car prices declined for a fourth straight month. Household furnishings also fell as did the cost of recreation.

Source: Reuters

U.S. Consumer Spending Rising Solidly; Manufacturing Still Weak
U.S. consumer spending grew at a fairly healthy pace over the past two months, but factory production slipped in August, providing the Federal Reserve a mixed picture of the economy ahead of a rate-setting meeting later this week.

The Commerce Department said on Tuesday that U.S. retail sales excluding automobiles, gasoline, building materials and food services increased 0.4% in August after an upwardly revised 0.6% increase in July.

These so-called core retail sales, which correspond closely to the consumer spending component of GDP, provided the latest sign of sturdy economic momentum and suggested the recent stock market sell-off had little immediate impact on U.S. household spending.

A separate report from the Federal Reserve, however, showed manufacturing output fell a sharper-than-expected 0.5% as auto production slid, after a rise of 0.9% in July.

Excluding autos, factory output was unchanged.

“Today’s data are positive news for final demand in the third quarter and should give the Fed more confidence in the spending outlook,” said Laura Rosner, an economist at BNP Paribas in New York, referring to the retail sales data.

Data ranging from employment to housing have suggested the U.S. economy retained most of its momentum from the second quarter, when output expanded at a 3.7% annual pace.

The manufacturing sector, however, has been struggling, faced with the headwinds of a strong dollar, slack economies oversees and lower oil prices.

A third report on Tuesday showed factory activity in New York state contracted in September for a second straight month.

Overall retail sales rose 0.2% last month as strong gains in auto sales were offset by a 1.8% drop in the value of sales at service stations as gasoline prices declined.

Receipts at auto dealerships rose 0.7% last month after rising 1.3% in July. Sales at clothing stores were up 0.4%, while receipts at building materials and garden equipment stores were down 1.8%.  Sales at furniture stores fell 0.9%.

There were sales increases for online retailers, restaurants and bars, sporting goods and hobby stores, and electronics and appliance outlets.

The general bright news on spending was tempered by the soft factory data.

The Fed said auto and autopart production contracted 6.4% last month, reversing much of the strong gains registered in July.

A drop in mining production combined with the drop in factory output to leave overall industrial production down 0.4% during the month, despite higher output for utilities.

Source: Reuters

U.S. Consumer Sentiment Falls to One-Year Low
U.S. consumer sentiment dropped to its lowest level since September last year, a survey released last Friday showed.

The University of Michigan’s preliminary September reading on the overall consumer sentiment index slid to 85.7, compared with the final reading of 91.9 in August. It was also much lower than the median forecast of 91.2 among economists polled by Reuters.  September’s consumer sentiment index was the lowest since September 2014.

The survey’s barometer of current economic conditions fell to 100.3 from 105.1 in August. It was below a forecast of 103.6. The current conditions reading was the weakest since October 2014.

The survey’s gauge of consumer expectations fell to a one-year low of 76.4 from 83.4 in August and was way below an expected 82.8.

The survey’s one-year inflation expectation, meanwhile, was 2.9% in September, from 2.8% in August, while the survey’s five-year inflation outlook was 2.8% from 2.7% in August.   

Source: Reuters

  

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