Canada September 2019

BoC Changes Rates Posting
The overnight lending rate finished the month of August at 1.75%, after having briefly ticked up to 1.8% earlier in the month. Effective October 1, 2019, the Bank of Canada will no longer publish the monthly Chartered Bank Interest Rates but will instead post weekly rates. These interest rates represent the typical posted rates offered by the six major chartered banks in Canada for the prime rate, conventional mortgages, guaranteed investment certificates and daily interest savings, among other things.
 
Unemployment Remains at 5.7% 
Following three consecutive months of little change, employment increased by 81,000 in August, largely in part-time work. The unemployment rate remained at 5.7% as more people participated in the labor market. Compared with August 2018, employment rose by 2.5%, or 471,000 new jobs, as the number of full-time jobs increased 2%, or 306,000 jobs and the number of part-time jobs grew 4.8%, or 165,000. The bulk of the employment increase in August was in Ontario and Quebec. There were also smaller gains in Manitoba, Saskatchewan and New Brunswick. Employment held steady in the other provinces. Employment declined in business, building and other support services.
 
Consumer Confidence Rises to 55.60
Consumer Confidence in Canada increased to 55.60 Index Points in August from 54.51 Index Points in July of 2019. Consumer Confidence in Canada averaged 53.49 Index Points from 2010 until 2019, reaching an all time high of 57.05 Index Points in November 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 Steady
The Consumer Price Index (CPI) remained at 2.0% year over year in July after rising 2.0%, according to Statistics Canada. On a seasonally adjusted monthly basis, the CPI was up 0.5% in July after falling 0.1% in June. Core inflation rose slightly to 2.03% in July from 2% in June. The BoC targets an inflation rate of 2%. All eight components of the CPI rose in July.
 
Q2 GDP Grows 3.7%
The Canadian economy grew 3.7% in the second quarter to $2.085 trillion CAD, rebounding with its best performance in two years. Strong export sales helped to offset a decline in business investment and softness in household spending, which slowed to just 0.1% growth after advancing 0.7% in the first quarter. Results were well ahead of both expectations and the Bank of Canada’s forecast. The economy grew just 0.5% in the first quarter. Monthly GDP rose 0.2% in June, with growth recorded in 17 of 20 sectors tracked.
 
Housing and Construction News
Housing starts fell 9.6% in July to an adjusted annual rate of 22,013 units, according to Canada Mortgage and Housing Corp. Multiple unit starts fell 1%; the construction of single-detached houses was down 1.6%. CMHC said that residential construction is still strong and the real estate market is stabilizing after steep declines in 2018.
 
Home sales rose 3.5% compared with June and were up 12.6% year over year, according to the Canadian Real Estate Association (CREA). The increase in sales came as the number of newly listed homes rose 0.4% in July. The national average price of a home sold in July was just under $499,000, up 3.9% from July 2018.
 
Retail Sales Steady
Retail sales were essentially steady in June after dropping 0.1% to $51.5 billion in May. Sales were down in 4 out of 11 subsectors, representing 48% of retail trade. Excluding sales at motor vehicle dealers and gas stations sales were up 1.7%. Sales decreased in four provinces but were higher in Quebec and Ontario. Sales at building material and garden equipment and supplies dealers rose 6.0% as they recovered from the effects of inclement weather in parts of the country in May. Compared with June 2018, retail ecommerce accounted for 3.4% of total retail trade. On a year-over-year basis, retail ecommerce increased 30.7%, while total unadjusted retail sales were down 0.3%.
 
Retail Notes
Canadian company Shopify wants to challenge Amazon’s dominance in the storing and shipping business, and has created technology that routes packages and orders based on what a customer orders and what inventory is available at each site. Shopify was founded in 2006 with a simple promise: for $29 a month they will deliver all the tools a retailer needs to start an online business. Shopify has grown exponentially and become one of Canada’s most successful startups. Revenue is growing as much as 74% annually, but they are struggling to turn a profit. Shopify says that this latest adventure will help them better serve their 820,000 customers and also be more profitable.
 
Canadian Tire’s Q2 revenues of C$3.69 billion missed analysts’ estimates of C$3.71 billion. Canadian Tire has been spending to broaden their retail offerings by including private labels and rolling out options like home delivery
 
Canadian Tire is acquiring Party City Holdings brand, store network, employee base, leaseholds and fixed assets in Canada for C$174.4 million, which included C$40 million in inventory.
 
Amazon will buy a stake in Canadian cargo carrier Cargojet. Cargojet is a key air cargo carrier for Amazon's “middle mile” transportation in Canada. Amazon already has a commercial partnership with them for overnight air cargo services and charters. The first agreement allows Amazon to acquire up to 9.9% of the company; they can acquire an additional 5% if they deliver an addition C$200 million in business volume.

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