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  • Power Tool Industry
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  • Canada
  • Market Trends
  • PDF

 

Canada

Canada December 2022

12/12/2022

 
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  • The unemployment rate fell to 5.1% in November after holding steady at 5.2% in October. In January 2021 unemployment peaked at 9.4%.
  • Employment rose by 10,000 jobs in November after rising by 108,000 jobs in October.
  • Employment rose in several industries, but fell in construction and retail.
  • Employment increased in Quebec but declined in five provinces, including Alberta and British Columbia.
  • Year-over-year wage growth remained above 5% for the sixth consecutive month.
  • There were few signs that tight labour market conditions in recent months have led to an increase in workers voluntarily leaving a job or switching jobs.
 
Consumer Prices Steady
Canada’s inflation rate held steady at 6.9% in October, matching the increase in September. Faster price increases for gas and mortgage interest rates were offset by slowing price growth for food. On a monthly basis, the CPI rose 0.7% in October following a 0.1% gain in September, largely driven by increased prices for gasoline. On a seasonally adjusted monthly basis, the CPI was up 0.6%. The homeowners' replacement cost index, which is related to the price of new homes, slowed in October (+6.9%) after increasing 7.7% in September. This index has decelerated, on a year-over-year basis, every month since May 2022 when it rose +11.1%.
 
Q3 GDP Grows 2.9%
GDP grew 2.9% in the third quarter, well ahead of expectations of 1.5% growth, according to Statistics Canada. Much of the growth came from higher exports in energy and agriculture.
 
Household spending dropped 0.3% in the quarter, the first drop since the second quarter of 2021. Much of the decrease came from lower spending on goods. Spending on services continued to grow, although at a much slower pace than in the previous quarter.
 
Investment in housing also fell sharply, with the annualized decline in residential investment dropping 15.4%. Renovation and housing resale activity both fell, as rising interest rates continue to push up mortgage costs.
 
The unexpected increase in GDP means that the BoC will most likely raise interest rates again in early December. Most analysts expect another half-point increase.
 
Housing and Construction News
Canadian housing starts fell 11% in October, pulling back after reaching the highest level in 2022 in September, according to Canadian Mortgage and Housing Corp. (CMHC). The seasonally adjusted annualized rate of housing starts fell to 267,055 units from a revised 298,811 units in September. Starts fell on both multiple unit and single-family detached homes.
 
Canadian home sales inched up 1.3% in October, the first increase in seven months. The number of newly listed properties rose 2.2% month over month, according to the Canadian Real Estate Association (CREA). However, the number of transactions decreased by more than 36% in October 2022 compared to October 2021. The decrease was most likely due to  rapidly rising interest rates.
 
Canadian economists believe the housing market still has much further to fall in terms of prices and sales. From the February 2022 market peak to spring 2023, home prices are predicted to fall as much as 30%. Currently, national home prices have fallen by 10% since the peak and 15% in the pricey Greater Toronto area. The sales-to-new listings ratio eased back to 51.6% in October compared to 52% in September, meaning there were more sellers than buyers in the market, according to CREA. To have a stabilized market, the ratio needs to reach 60%. A big uptick in sales would be needed In order for that to happen. Economists don’t think sales will increase significantly anytime soon as rates are expected to continue to increase and buyers and sellers alike are sitting on the sidelines.
 
Retail Sales Drop 0.5%
Retail sales decreased 0.5% to $61.1 billion in September after increasing to $61.8 billion in September. Sales declined in 7 of the 11 subsectors, representing 74.9% of retail trade. Core retail sales, which exclude sales at gasoline stations and motor vehicle and parts dealers, decreased 0.4%. Sales at building materials and garden supply retailers fell 2.0% and were also down for the third quarter. It was the first quarterly decline since sales fell by 11.9% in the second quarter of 2020. In volume terms, third quarter retail sales were down 1.4%.  Retail sales decreased in seven provinces, with British Columbia seeing the steepest decline.
 
Retail Ecommerce Sales Fall 5.4%
On a seasonally adjusted basis, retail ecommerce sales were down 5.4% in September. On an unadjusted basis, retail ecommerce sales were down 0.1% year over year to $3.4 billion in September, accounting for 5.3% of total retail trade. The share of ecommerce sales out of total retail sales fell 0.4% from September 2021.
 
Retail Notes
Canadian Tire reported Q3 retail sales grew by 2.8% but excluding sales of petroleum at Canadian Tire’s gas stations, sales grew just 0.6%. Canadian Tire reported total revenue rose 8.1% to $4.2 billion in Q3. At flagship Canadian Tire stores, comparable sales rose 0.7%.
 
Lowe’s struck a deal to sell its Canadian operations, including Rona and Reno-Depot chains, to New York private-equity firm Sycamore Partners for US$400 million in cash plus unspecified performance-based benefits. The agreement will mark the end of a frustrating multiyear run in Canada for Lowe's, during which it struggled to make Rona sufficiently profitable.
 
Sycamore will take over about 450 stores, including 70 Lowe's big-box stores and some 150 corporate-owned Rona stores as well as the wholesale business supplying 210 independent Rona dealers. Many of those independent dealers are expected to end their contracts with Lowe's Canada and look for new hardware and building-materials buying groups to ally themselves with, such as Castle Building Centres Group Ltd., Groupe BMR Inc., or Home Hardware Stores Ltd.
 
Lowe's entered the Canadian market in 2007 and made a hostile attempt to buy Rona in 2012 that was rejected by the company as well as the Quebec government. The U.S. giant initially failed to understand the political and public sensitivity in the province to a foreign takeover.
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