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Industry Cocktail Set for December 13th in Montreal  
 
This year’s Industry Cocktail will be taking place on Thursday, December 13, 2012 at the W MONTRÉAL HOTEL, 901 Square Victoria, close to picturesque Old Montreal, the Montreal Museum of Fine Arts and the city's world-class downtown.

W Montréal is a stylish luxury hotel located in the city's historic Bank of Canada building. It was winner of the Condé Nast Traveller UK's coveted Best New Hotel award and a 2010 Fodor's Choice distinction selection.

Registration information will be sent out in the next few days but in the meantime, please mark your calendar and we hope to see you there at the annual industry year end celebration.

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CHHMA Introduces New Commercial Insurance Program for Member Companies
 
The CHHMA is pleased to announce that our member companies can now take advantage of a new CHHMA Commercial Insurance Program brought to you by Aaxel Insurance Brokers Ltd.  

Aaxel Insurance Brokers Ltd. has developed the new and unique commercial insurance program specifically for the Canadian Hardware & Housewares Sector. The program is underwritten by Canada’s largest and progressive insurance companies such as: Chartis Insurance, Intact Insurance, Chubb Insurance, Aviva Insurance, Economical Insurance, Unica Insurance, Lloyds of London and more………

Some of the benefits of the customized CHHMA Commercial Insurance Program are:

• Broad Insurance Coverages, High Limits, Various Endorsements plus Broad Policy Wordings
• Profit Sharing endorsement is available
• Aggressive Pricing due to Group Premium Volume
• Various Premium Payment Options available with no Finance charge
• Special Endorsements and Coverages tailor made to meet insured’s needs/requirements
• Special Claims Handling Process by Dedicated Staff
• Exceptional Service for Policy Issuance, Claims Handling, and Loss Control Services
• And more…

Aaxel Insurance Brokers Ltd. is available to meet with any CHHMA member to answer any questions you may have about the CHHMA Commercial Insurance Program or to provide a confidential quote on your upcoming renewal. Please contact:

Paul Mann, CAIB 
President
paul.mann@aaxelinsurance.com 
Cell # 905-829-7470 

Raj Suri, M.S., M.B.A.
Chief Executive Officer
raj.suri@aaxelinsurance.com
905-796-7600 x 41

Aaxel Insurance Brokers Ltd.
Aaxel Financial Services Ltd.
202 Main Street North, Brampton, ON L6V1P1
Phone-(905) 796-7600; Fax-(905)796-9700; EFax-(888)-511-3535; Toll Free-1-866-358-2860
www.aaxelinsurance.com    info@aaxelinsurance.com

The CHHMA offers a number of money saving programs for our members, and we hope your company can benefit from this latest commercial insurance program.

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Industry News
 
Wal-Mart To Open Stores in India    
 
Wal-Mart Stores Inc. plans to open retail outlets in India in the next 12 to 18 months, the company said last Friday, making it the first multinational to jump on the government's decision to open the country's huge retail market to foreign players.

Raj Jain, the managing director of Bharti Wal-Mart, a joint venture that operates 17 outlets that cater to small businesses in India, confirmed by email that Wal-Mart plans to open stores that serve consumers over the next 18 months, but declined to say how many.

India announced last week that it would allow foreign firms to take a majority stake in multi-brand stores for the first time. The surprise decision cheered investors but cost the ruling Congress Party an important coalition ally.

New Delhi first tried to enact the measure last year, but backed down in the face of resistance from coalition partners, badly damaging its credibility with global investors. Prior to the reversal, foreign retailers like Wal-Mart could only operate wholesale outlets.

Opponents say the move will cost Indians jobs and decimate millions of mom-and-pop shops. Advocates say welcoming players like Wal-Mart is necessary to attract the investment needed for India to modernize its food supply chains, reduce waste and bring down spiraling food prices.

Under the new rules, individual states will have the right to decide whether to let the retailers operate from their territory. Only 10 of India's 35 states and territories which are controlled by the ruling Congress Party are likely to welcome foreign retailers initially, according to Eurasia Group analyst David Sloan.

The rules also mandate that foreign retailers spend half their investment on building supply chain infrastructure and source 30 per cent of manufactured goods from local small- and medium-sized companies. Foreign retailers are also restricted to India's 53 cities with populations exceeding 1 million.

India's rules are more restrictive than those of China, Thailand, Russia, Brazil and Indonesia, all of which allow foreign investors 100 per cent ownership in retail, according to Goldman Sachs.

Wal-Mart opened its first wholesale outlet in its partnership with Bharti in May 2009 in Amritsar in Punjab state. British-based Tesco PLC and French retailer Carrefour have also expressed interest in expanding in India.

"There is enormous opportunity in India," Moriarty said, adding that the country is "underserved" by retailers and that consumers there increasingly have more spending money.

Source: The Associated Press

    

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In Memoriam – Chris Hrushowy     
 
The CHHMA was saddened to learn of the passing of Chris Hrushowy on September 18, 2012. Husband of Suzie Gibbs, father of Jeanne Rodeck, Laurie Bickle, and Neil Hrushowy, and grandfather of Kelly, Gregory, Tracey, Ian, Aidan and Anders, Chris died peacefully after a long struggle with ALS. Born in Brandon, MB, Chris traveled the world with family and on business, and savoured the opportunity to learn from wherever he went. A renowned storyteller, Chris lived life most fully through the spoken word, and he always appreciated the value of a tall tale. But no story was complete until he brought it back to the importance of family, the theme around which he built his life. He will be missed by his many friends in the industry for his warmth, humour and steady resolve.

There will be a private memorial for family and close friends, according to Chris's wishes. No flowers, please. Donations may be made to No Strings Theatre for Youth.        
 

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Economic News
 
Retail Sales Jump in July Led by Autos  

Statistics Canada reported on Tuesday that retail sales in July unexpectedly jumped 0.7% from June, to a near record $38.99 billion, led by the sales of new cars and general merchandise.

The July figure was the second highest on record after the $39.0 billion posted in March. Statscan revised June’s decline to 0.3% from an initially reported 0.4% drop.

Economists were expecting a 0.1% – 0.2% increase only for the month.

Eight of the 11 subsectors accounting for 72% of retail trade reported increases.

In volume terms, retail sales rose by 0.6% in July.

Retail sales increased in all provinces in July.

Sales at motor vehicle and parts dealers were up 1.7% in July, mainly because of strong sales of new cars (+1.7%) and high sales of RVs, motorcycles and boats (+2.8%), after three consecutive monthly declines.

General merchandise stores registered a 1.5% increase with department store sales up 2.9%.

Gasoline stations reported a 0.7% sales gain after two consecutive monthly declines.

Sales at building material and garden equipment and supplies dealers were up by 1.9% after dropping in April, May and June.

Furniture and home furnishings store sales rose 2.1%. Sales in this subsector have remained relatively unchanged since the end of 2011.
Sales at clothing and clothing accessories stores edged up 0.2%.

Receipts at food and beverage stores declined 0.9% in July after rising in May and June. Lower sales at supermarkets and other grocery stores (-1.3%) accounted for most of the decline.

Sales at electronics and appliance stores (-1.7%) declined for the third time in four months. Sales in this subsector have been on a downward trend since the end of 2011. 

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Canada’s Inflation Rate Dips Slightly, No Pressure to Raise Interest Rates  
 
Canada’s annual inflation rate in August slipped, as consumer prices rose 1.2% in the 12 months to August, down from a 1.3% gain in July. According to Statistics Canada data from last Friday, prices of most goods and services rose moderately or fell year-over-year, leaving little pressure on the Bank of Canada to start raising interest rates due to inflation concerns.

The agency said the result returned the inflation rate to where it stood in May and equalled the lowest level in the consumer price index in more than two years.

Market analysts were expecting a 1.3% increase for the year-over-year CPI.

Consumer prices rose for every major component of the index compared to last year with the exception of clothing and footwear which was 1.2% lower.

The Bank of Canada’s closely watched core inflation rate, which strips out the prices of volatile items such as gasoline, tobacco and some foodstuffs, dropped to 1.6% from 1.7% in July. Market analysts had expected the rate to fall to 1.5%.

“It just reinforces the message that inflation is just not a concern of the Bank of Canada at the moment, and likely will not be for some time, so the Bank of Canada can continue to hold interest rates,” said Sal Guatieri, senior economists at BMO Capital Markets.

The more significant movers pushing the annual inflation rate higher were gasoline, passenger vehicles, which on average cost 2% more than a year ago, meat (+5.7%), and homeowner replacement costs, which increased by 2.2%.

Energy prices rose 0.8% following three straight months of year-over-year falls.

Prices for transportation rose 1.8% in the 12 months to August, after rising 1.1% in July. The cost for the purchase of passenger vehicles rose 2.0% and gasoline prices increased 2.2%.

Shelter costs rose 1.0%, matching the increase in July. Increases for homeowner’s replacement costs(+2.2%), electricity prices (+3.4%), and rent (+1.4%) were major factors leading to the rise. Natural gas prices continued to fall on a year-over-year basis
(-13.9%).

Food overall was 2.2% higher, a slight increase from July, but showing no signs as yet of the major bounce expected later this year in response to the drought in the southern U.S. states.

Video equipment (-15.6%), women’s clothing (-3.4%), furniture (-3.0%), and mortgage interest costs (-1.8%) all saw lower prices from a year ago.

With a jump of 4.6% in August, gasoline prices in Quebec were strong enough to push up the annual inflation rate in Quebec by one-tenth to 2.0%, the highest in Canada. The gasoline price jump in Quebec was more than twice the national average.

Inflation was lowest in New Brunswick, Ontario, Alberta and B.C., which all recorded an annual rate of 1%.

On a seasonally adjusted monthly basis, the CPI increased 0.4% in August, after decreasing for three consecutive months. Prices rose in August for every major component except for clothing and footwear, and household operations, furnishings and equipment.

The major take-away from the report is that inflation remains well under control in Canada.

Most economists are not expecting any rate hikes from the Bank of Canada for at least a year as Canada’s economy sputters along.

Canada’s housing bubble is deflating, weak global demand is hurting exports and commodity prices, and the Federal Reserve’s recent decision to deploy a third asset-purchase program is putting pressure on the Canadian dollar as international investors seek better returns than can be had in the U.S. All these factors argue against higher interest rates in Canada. 

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Impulse Buying Costs Canadians $3,720 a Year     
 
A majority of Canadians surveyed by the Bank of Montreal say they shop to cheer themselves up and mood-lifting impulse purchases cost Canadians $3,720 annually.

The Bank of Montreal poll results released on Tuesday, found that 59% of those surveyed did impulse shopping and bought items like clothes and shoes and also treated themselves to eating out.

“We’re really struggling to save money on a monthly basis,” said Janet Peddigrew, district vice-president of midwestern Ontario at BMO.

Consumers have been spending more than they’ve been saving over the last 10 years, which is cause for concern, Peddigrew said.

“Those who answered the survey, the majority, said they would do it to cheer themselves up,” she said.

The survey found that 60% of Canadians did this kind of emotional shopping and 55% bought something they might not need because it was on sale.

On average, that amounts to $310 a month being spent on items that are wanted but not needed.

Those surveyed believed they could save two-thirds of that amount if they made an effort to limit impulse spending, the bank said.

The poll results come as Canadian debt-to-income ratios sit at a record 152% and top officials issue warnings to start paying down debt before interest rates rise.

There’s also an element of regret that comes with impulse shopping and in some cases, financial difficulties.

The survey found that more than half of respondents regretted their purchases and 43% sometimes spent more than they earned in a month. Another third of those surveyed had to borrow money or take out a loan to cover their impulse spending.

The consequences of impulse spending were more common among Canadians under 30 with one in three unable to afford something they needed because of spending on “wants,” the survey said.

Men said they spent more than women on average, $414 versus $207 dollars but men tended to spend more on technology items, Peddigrew said.

BMO said its psychology of spending report is the first in a series that will examine personal finance and investing behaviours among Canadians.

Source: Canadian Press   

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Housing Market Cooling Down Across Canada    
 
The Conference Board of Canada says new mortgage rules are putting the brakes on home sales and listings across Canada.

Research released on Monday from the organization shows sales of existing homes fell in August from the month earlier in 21 of the 28 metropolitan markets it tracks, with new listings easing in 17 centres. 

Canada’s housing market appears to be cooling across the board in the face of tighter mortgage rules that affect many first-time buyers of modest means, a new analysis from the Conference Board shows.

The housing market was slowing in some cities before the July 9 start date of the tighter mortgage rules, which had the effect of raising monthly payments on mortgages. But since July, the cooling appears to have become widespread.

“When you see sales down in three-quarters of the market, that means it’s pretty widespread,” said Conference Board senior economist Robin Wiebe. “It’s knocked previously high-flying markets like Regina and Saskatoon down a peg. Vancouver had been showing signs of cooling, now it’s spread out into the Fraser Valley.”

At the time Finance Minister Jim Flaherty announced maximum amortization period for mortgage would be reduced to 25 years from 30 years, the government estimated it would increase monthly payments by $184 on a $350,000 mortgage.

It had been the fourth time Flaherty tightened mortgage requirements in four years, but the July measure was regarded as the one likely to be the most effective.

While sales and prices were only temporarily sidetracked by the previous announcements, only to recover a few months later, this might “be the one that broke the camel’s back,” said Wiebe.

Last week, the Canadian Real Estate Association reported that sales of existing homes fell 5.8% in August from July, and were down 8.9% from August 2011.

Still, the latest data shows that while sales and listings are down, prices appear to be holding steady.

The report found prices fell in only nine of the 28 markets in August from the previous month. Compared to last August, prices were up in 25 markets.

Economists have generally been forecasting a correction of between 10 and 25% in prices over the next two or three years. Vancouver, which had for years been Canada’s hottest market, has seen a tumble of about 30% in resale homes.

But Wiebe is not so sure the correction will be as severe as many predict, or that Vancouver’s market is as cold as the numbers suggest.

He notes that Vancouver’s average home prices are skewed by the number of high-end property sold — many to investors from China. Both the meteoric rise and current decline are “overstated,” he said.

Homes in the Toronto area, Canada’s largest market, are also likely to retain their value, he said, because the economy in the city remains healthy and the greater metropolitan area continues to experience strong population growth.    
 

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Shrinking Family Size/Retiring Baby Boomers Helping Canada’s Condo Market   
 
Statistics Canada’s census data from last Wednesday showed a dramatic increase in one-person households, up 10.4% from 2006 to 2011. For the first-time, more households were comprised of couples without children than with children. Family size also shrunk, with the average number of children dropping from 2.7 in 1961 to 1.9 in 2011.

All of this seems to bode well for the condo market which sees occupants typically living in smaller quarters than they are historically used to.

The census data shows that families are becoming smaller, partially explaining the trend to smaller living spaces. Affordability is also a factor. But real estate experts say that the ways in which condo buildings are financed and sold are causing developers to favour smaller units, creating concern that the housing stock is changing faster than lifestyles.

From 2006 to 2011, the proportion of Vancouver’s households living in high rises grew to 14.5% from 12.8%, and in Toronto it rose to 27.4% from 26.6%, according to the new census data.

Meanwhile, the average number of members in a family is falling. More couples are not having children, divorces are up, and 13.5% of people aged 15 and up are living alone.

“The trend towards one and two-person households helps explain why new houses and condos are being built smaller than they once where,” TD Bank economist Sonya Gulati wrote in a research note. “High home and land prices and reduced home affordability also help explain why living spaces are getting smaller.”

In Toronto, developers are increasingly building smaller condo units because they are more affordable and more appealing to investors who want to rent them out. The rise in small units makes them easier to sell and therefore, obtain financing for the project.

While real estate players in Toronto say that the city’s condo market is being driven by young first-time buyers, aging baby boomers across the country are also looking to downsize with less maintenance worries and are therefore also adding to the trend.

Detached houses continue to be the most common type of home in Canada, accounting for about 55% of households in 2011, down slightly from 55.3% five years earlier. But data from Natural Resources Canada suggest the average size of homes being built (including detached homes and apartments) began falling after 2006 for the first time since the Second World War. While the latest data is from 2009, the decrease could mark the start of a trend.

“As the average size of apartments is usually smaller than single-family homes, the average size of the whole Canadian housing stock might be decreasing as the share of apartments is increasing, said Michelle Viau, a spokesperson for Natural Resources Canada.

“I think the housing stock has already responded,” said Don Lawby, chief executive of Century 21 Canada. “I think the major cities are the ones that reacted the fastest. There is a movement that has been forced by economics to smaller accommodation.”

“Of course, this all plays into the condo’s hand,” he says. “But there still will be people who desire to have a single family detached home where they are the king of the castle.”

The evidence already points to huge demand for high-rise units, both from buyers who want to live in the units and investors who rent them out. Canada Mortgage and Housing Corporation (CMHC) said it expects 207,200 new housing starts with 123,700 in the multiple-unit category, predominantly made up of condominiums.

And while there are forecasts that the housing market is slowing, the CMHC is still predicting 193,100 starts next year with 109,000 coming from the multiple category. Condominium projects in Vancouver, Montreal and Toronto have driven the demand they say.

Brian Johnston, chief operating officer of Mattamy Corp., said the industry has been responding rather than leading. “I think there has been demand for smaller housing,” he said.

All of this might just confirm what the real estate industry has been saying all along — they were just giving the people what they want. “I see these comments that builders are building too many houses — builders don’t create new houses because it’s a good idea, they do it because there is demand,” says Mr. Johnston, noting bank financing requires high pre-sale levels.

Doug Norris, chief demographer at Environics Analytics, predicts the impact on real estate of the country’s changing demographics is just starting. “Part of the condo boom is driven by Boomers starting to downsize and move into new types of housing,” he said. “[Living in] the single family [home] starts to dwindle after 50.”

Though the impact of the Baby Boomers has yet to be seen, Mr. Norris said they will probably downsize more than their predecessors.

Yet, Craig Alexander, chief economist with TD Bank, says while there definitely is more demand for condo-style living, the overall amount of housing stock being built is still above household formation.

“We can tell from the census numbers that we are building too many houses,” says Mr. Alexander, noting there were 189,000 net new households per year from 2006 to 2011. “Yet when we look at the pace of home construction it has been well over 200,000 and in fact it was 218,000 annualized starts so far in 2012.”

He says you can build past demographic requirements for a short period, perhaps catching up with a previous lag, but it has to stop at some point.

“On the one hand I am concerned about the condo market because when we look at the current pace of construction and compare it to a generally sustainable rate, it’s way too fast but over the long haul there is long-term strong demand for condos,” says Mr. Alexander.  
 

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Latest U.S. Economic News            

U.S. Consumer Confidence Jumps to 7-Month High
U.S. consumer confidence jumped in September to the highest level in seven months, as Americans became more optimistic about the prospects for employment, business conditions and incomes.

Rising home values and higher stock prices are helping bolster sentiment, which may encourage households to boost the spending that accounts for about 70% of the U.S. economy. At the same time, a jobless rate in excess of 8% and limited wage gains are acting as restraints.

The Conference Board said on Tuesday that its consumer confidence index rose to 70.3. That’s up from 61.3 in August, which was revised higher. And it’s the highest reading since February, when the U.S. economy added 259,000 jobs.

Since the beginning of the year, the index has fluctuated sharply and still sits below 90, a level that indicates a healthy economy.

The latest reading showed Americans were more optimistic about the current availability of jobs and their outlook over the next six months. That’s despite the fact that employers added only 96,000 jobs in August, down from 141,000 in July and too few to keep up with population growth.

The measure of present conditions increased to a five-month high of 50.2, up from 46.5 last month. The measure of expectations for the next six months advanced to 83.7 from 71.1, the highest since February.

Those stating jobs are “plentiful” rose to 8.3% from 7.2%, while those claiming jobs are “hard to get” edged down to 39.9% from 40.6%.

Those expecting more jobs in the months ahead increased to 18.5% from 15.8%, the highest since February, while those anticipating fewer jobs declined to 18.5% from 23.7%.

The proportion of consumers expecting an increase in their incomes edged up to 16.3% from 16.0%, the highest this year.

U.S. New Home Sales Edge Down in August
New U.S. single-family home sales eased in August but held near two-year highs and prices vaulted to their highest level in more than five years, adding to signs of a broadening housing market recovery.

The Commerce Department said on Wednesday sales slipped 0.3% to a seasonally adjusted 373,000-unit annual rate. July’s sales pace was revised up to a 374,000-unit pace, the highest level since April 2010, from the previously reported 372,000 units.

Economists polled by Reuters had forecast sales at a 380,000-unit rate last month. Compared to August last year, new home sales were up 27.7%.

Despite the month-on-month dip in sales, the report was consistent with other data that have suggested a turn-around in the U.S. housing market after collapsing in 2006 and igniting the 2007-09 recession.

Home resales surged last month and homebuilder sentiment jumped to a six-year high in September. However, the housing market recovery lacks sufficient strength to take the baton from manufacturing as the main driver of the economic recovery.

The Federal Reserve moved this month to bolster the economy, announcing it would buy $40 billion in mortgage-backed securities per month until the outlook for employment improved significantly.

Last month, the median price of a new home increased a record 11.2% to $256,000 — the highest level since March 2007. Compared to August last year, the median sales price jumped 17%, the largest rise since December 2004.

The inventory of new homes on the market held near record lows last month. At August’s sales pace it would take 4.5 months to clear the houses on the market, unchanged from July.

Source: Reuters

U.S. Home Prices Rise in July
U.S. home prices increase 1.2% in July, compared to the same month last year, according to the Standard & Poor’s/Case Shiller index released on Tuesday. That’s the second straight year-over-year gain after two years without one.

The report also says prices rose in July from June in all 20 cities tracked by the index. That's the third straight month in which prices rose in every city.

Steady price increases and record-low mortgage rates are helping drive a housing recovery.

In the 12 months ending in July, prices have risen in 16 of 20 cities. In Phoenix, one of the cities hardest hit by the housing bust, prices are up 16.6 percent in that stretch. Prices in Minneapolis and Detroit have risen more than 6 percent.

"We are more optimistic about housing," David Blitzer, chairman of the S&P's index committee. "Stronger housing numbers are a positive factor for other measures, including consumer confidence."

Prices fell from a year earlier in Atlanta, Chicago, New York and Las Vegas.

U.S. home prices are still 30% below their peak in June 2006, according to Case-Shiller. That was the height of the housing boom.

The broader economy is likely to benefit from rising home prices. When home prices rise, people typically feel wealthier and spend more. And more Americans are likely to put their houses up for sale, which could further energize the market.

Home sales have been bolstered by the lowest mortgage rates on record. The average rate on the 30-year fixed mortgage touched a record low of 3.49% last week and has been below 4% all year. A limited supply of homes has also helped drive prices higher.

Prices are also rising because of a decline in foreclosures and sales of other deeply discounted homes. Many homes in the foreclosure process will likely come on the market in the coming months, which could drag on prices.

Still, many Americans, particularly first-time homebuyers, are unable to qualify for a mortgage or can't afford larger down payments required by banks. That's holding back sales.

Home sales could get a further boost from the Federal Reserve. The Fed said two weeks ago that it would purchase $40 billion of mortgage-backed securities each month until the economy and hiring improve substantially. That's likely to keep mortgage rates at record-low rates for some time.

Source: Associated Press

U.S. Housing Starts Weaker Than Expected in August
U.S. housing starts rose less than expected in August as groundbreaking on multifamily home projects fell, but the trend continued to point to a turnaround in the housing market.

The Commerce Department said last Wednesday that U.S.housing starts increased 2.3% to a seasonally adjusted annual rate of 750,000 units. July’s starts were revised to show a 733,000-unit pace instead of the previously reported 746,000.

Economists polled by Reuters had forecast residential construction rising to a 765,000-unit rate. Compared to August last year, residential construction was up 29.1%.

Housing starts are now a third of their 2.27 million-unit peak in January 2006. The housing market, the Achilles heel of the recovery from the 2007-09 recession, is slowly healing.

Sales have been creeping up and the house price decline has bottomed, with a tightening supply of properties on the market raising prices in some metropolitan areas. In addition, homebuilder sentiment touched a six-year high in September.

Home building is expected to add to GDP growth this year for the first time since 2005.

Last month, groundbreaking for single-family homes, the largest segment of the market, rose 5.5% to a 535,000-unit pace — the highest level since April 2010. Starts for multi-family homes fell 4.9%.

Building permits slipped 1.0% to a 803,000-unit pace in August after surging the prior month to the highest in four years. July’s permits were unrevised at 811,000 units.

Economists had expected permits to fall to a 796,000-unit pace. Permits to build single-family homes rose 0.2% last month to a 512,000-unit pace. Permits for multi-family homes fell 3.0% to a 291,000-unit rate. 

Source: Reuters   
  

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