Canada August 2018

Interest Rates Rise to 1.5%
The Bank of Canada (BoC) raised benchmark rates a quarter point to 1.5% in July, and reiterated more rate hikes would be needed to keep inflation in check. Despite concerns about the impact of new tariffs, many Canadian companies are dealing with a surge in orders and growing exports. Rates are seen rising to 1.8% this year and 1.9% next year.
 
Unemployment Falls to 5.8%
Canada’s unemployment rate fell 0.2% in July to 5.8% and the economy added 54,000 jobs, driven by gains in part-time work. The economy has added 246,000 new jobs since July 2017, with most of the gains due to a growth in full-time jobs. Ontario, British Columbia and Newfoundland and Labrador added jobs in July. The number of workers declined in Saskatchewan and Manitoba and was little changed in the other provinces. Employment rose in many services-producing industries, but fell in most goods-producing industries, including manufacturing, construction and natural resources. The employment increase was driven by public sector employees, while there was little change in the number of private sector employees and the self-employed.
 
Consumer Confidence Drops to 54.21
Consumer Confidence in Canada decreased to 54.21 Index Points in July after rising to 55.83 in June. Consumer Confidence in Canada averaged 53.34 Index Points from 2010 until 2018, reaching an all-time high of 56.43 Index Points in April of 2018 and a record low of 46.80 Index Points in February of 2016. The monthly Index of Consumer Confidence is constructed from responses to four attitudinal questions posed to a random sample of Canadian households.
 
Consumer Prices
The consumer price index (CPI) rose at an annual pace of 2.5% in June, according to Statistics Canada. It was the fastest pace of acceleration since 2012, and about twice the median forecast from economists. The CPI rose 0.1% in May.
 
GDP
Canada’s GDP rose 0.5% in May after rising 0.1% in April, marking the fourth consecutive month that Canada’s economy has expanded. Economic growth was up 2.6% from May 2017, ahead of expectations of 2.3% annual growth. Statistics Canada said the mining, quarrying and oil and gas extraction sector was the biggest driver of the gain in output. Retail and construction also got a boost from the return to more normal weather.
 
Business Confidence
Business confidence hit the second-highest level on record in the first quarter, with more companies expecting to hire, invest and sell more this year, although the survey was administered before the US imposed tariffs on steel and aluminum in early June. The percentage of companies reporting labour shortages reached the highest level in a decade at 57% and the percentage of companies expecting to face higher input costs rose sharply.
 
Canada/ US Trade Updates
Mexican and Canadian officials said that talks on the North American Free Trade Agreement (NAFTA) will remain a three-way negotiation, despite suggestions by the US that it might pursue separate trade deals with both countries. The US administration has indicated that NAFTA will have to wait until after the November elections.
 
Housing and Construction News
Canada’s housing starts totaled 248,138 units in June, up 4.1% from a downwardly revised 193,902 units in May. The six-month moving average of the monthly seasonally adjusted annual rate rose to 222,041 in June from 216,701 in May. Sales were down 10.7% from June 2017. The increase reflected a jump in multi-unit dwellings in urban centers, as demand for this type of housing has consistently exceeded supply. Solid gains were posted in most provinces, with Ontario leading with 104,371 starts. Homebuilding in Western Canada faltered, with starts dropping substantially. Housing inventories are below their long-term average as demand absorbs supply. Building permits for residential properties have been trending higher, and analysts say the forecast for 208,000 units for the year will likely be revised up in August.
 
Retail Sales Increase 2.0%
Retail sales increased 2.0% in May to $50.8 billion after dropping 0.9% in April. Sales rose in 8 of 11 subsectors, representing 70% of retail trade. Higher sales at motor vehicle and parts dealers and at gasoline stations were the main contributors to the gain in May. Excluding these two subsectors, retail sales were up 0.9%. After removing the effects of price changes, retail sales in volume terms increased 2.0%. General merchandise stores were up 3.2% and sales at building material and garden equipment and supplies dealers were up 5.4%. Retail sales rose in seven provinces, led by Ontario and Quebec, where results more than offset declines in April. On an unadjusted basis, retail ecommerce sales totaled $1.4 billion, accounting for 2.5% of total retail trade. On a year-over-year basis, retail ecommerce sales were up 16.9%, while total unadjusted sales rose 5.5%. In Canada, retail sales account for about half of all consumer spending, and are considered a proxy for overall consumer spending.
 
Retail Notes
Amazon is expanding their footprint in Canada with a fulfilment centre in Ottawa that will create 600 full-time jobs. The new warehouse in the capital city's eastern suburb of Orleans will pick, pack and ship large items such as household decor, sporting equipment and gardening tools. The warehouse will be Amazon’s eighth in Canada, joining others in Ontario, British Columbia and Alberta. Amazon also has a technology hub in Vancouver that is undergoing an expansion.
 
Canada contributed exceptional organic growth of 13% to Stanley Black & Decker’s second quarter results.
 
Sylvain Prud’homme will remain CEO of Lowe’s Canada. Lowe’s new US CEO Marvin Ellison recently made several changes in Lowe’s C-suite.
 
W.W. Grainger reports that they are on schedule with their business turnaround in Canada.
 
Canadian Tire’s Duncan store surprised kids and parents in the Chemainus neighbourhood in British Columbia  when they rolled up with a truck full of toys, games and inflatable pools for neighbourhood kids. The board of the subdivision they live in had voted to ban kids from playing in the street, including biking, chalk art and other activities, for safety reasons.

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