A Tough Turnaround Ahead for Target in Canada 
 
Rarely has a retailer raised consumer expectations so high and dashed them so quickly.  Target Corp. arrived in Canada almost a year ago amid buzz and anticipation that the U.S. discount chain would wow shoppers with chic bargains.  Instead, Target stubbed its toe badly, unable to do the basics of replenishing its store shelves while taking criticism for charging noticeably higher prices than at its U.S. stores.

The extent of the damage became clear last week when Target unveiled its grim 2013 results, which included a $941-million (U.S.) operating loss in Canada. It had originally forecast a profit here as early as the fourth quarter of 2013.  Read More >>

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Economic News
 
Bank of Canada Keeps Neutral View on 1% Rate 

The Bank of Canada kept its main interest rate unchanged earlier today and reiterated the next move depends on the progress of economic data after early signs of faster growth and inflation.  Policy makers kept the benchmark rate on overnight loans between commercial banks at 1%, where it’s been since September 2010, as expected by all 20 economists in a Bloomberg News survey.

The central bank also dismissed recent warnings from about a possible crash of Canada’s housing market. “Recent data support the bank’s expectations of a soft landing in the housing market” and stabilizing household debt levels, the statement said.  The bank acknowledged that a number of key measures of the economy are starting to look better, including inflation, GDP growth and exports.  Read More >>
 

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Pimco Sees Canadian Housing Market Falling as Much as 30%             

The world’s biggest bond fund is taking a decidedly grim view of Canada’s housing market, projecting a marked decline over the next few years and slashing its holdings in the country.  Ed Devlin, who heads up Canadian investing for Pacific Investment Management Co. (Pimco), told the Financial Times he expects a drop in the residential real estate market of up to 30% over the next two to five years.  To be clear, Mr. Devlin is not forecasting a sudden crash, but he joins a chorus of voices, from Deutsche Bank to the Organization for Economic Co-operation and Development, in raising red flags.  Read More >>

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Canadian Economy Grows 2.9% in Last Three Months of 2013
 
Canada’s economy expanded more than expected in the final three months of last year — despite a weather-related setback in December — to post the best year of growth since 2011. For all of 2013, GDP grew 2%, three-tenths of a point higher than what the Bank of Canada or Finance Minister Jim Flaherty’s budget introduced earlier this month had predicted.  The fourth quarter had an annualized growth rate of 2.9% — four-tenths of a point better than the general estimate of 2.5% — but Statistics Canada also upgraded growth numbers in both the first and second quarters of 2013.

The only fly in the ointment detracting from a strong GDP report was that December was even poorer than expected, as output fell 0.5% from November, the biggest monthly setback since March 2009 when the economy contracted by 0.7%. Economists had projected GDP would fall 0.3% in December.  Read More >>

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Retail Sales in Canada Start 2014 On an Uptrend

Last week, Statistics Canada reported that retail sales in Canada declined 1.8% in December 2013 from the previous month. This is on a seasonally adjusted basis however, accompanied by a note that seasonal estimates were under review. As retailers are now pushing holiday sales ever earlier, it could be that historical seasonal patterns have shifted. On a not seasonally adjusted basis, December 2013 Canadian retail sales were in fact up 2.1% from a year ago, which paints a different picture.  Read More >>

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Latest U.S. Economic News
 
The U.S. government lowered its estimate for fourth-quarter economic growth last Friday in the latest sign of a loss of momentum, but some tentative signs emerged that suggested the worst of the slowdown may be over.  GPD expanded at a 2.4% annual rate in the fourth quarter, the Commerce Department said, down sharply from the 3.2% pace it reported last month and the 4.1% logged in the third quarter; U.S. consumer sentiment rose marginally in February even as concerns about the extreme weather persisted, a survey released last Friday showed.  The Thomson Reuters/University of Michigan’s final reading on the overall index on consumer sentiment for February came in at 81.6, slightly above the 81.2 in both the preliminary February number and the final January reading ....  Read More >>
  

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