Unemployment Rises to 5.6%
Consumer Confidence Rises to 120.6 The Index of Consumer Confidence rose 6.5 points to 120.6 in February, the highest level since 12 points in January to 114.0, the highest level since July 2019, according to the Conference Board of Canada. The monthly Index of Consumer Confidence is constructed from responses to four attitudinal questions posed to a random sample of Canadian households. Consumer Prices Rise 2.4% The Consumer Price Index (CPI) rose 2.4% in January after rising 2.2% year over year in December, according to Statistics Canada. Excluding gasoline, the index was up 2.0% year over year, down slightly from December’s core index. On a seasonally adjusted annual basis the index rose 0.3% in January after rising 0.4% in December. Q4 GDP Rises 0.3% GDP rose at a tepid 0.3% during the fourth quarter, according to Statistics Canada. For the full year, GDP rose 1.6%, a slowdown from 2% growth in 2018. The weak quarter was expected, as there were a number of temporary disruptions, including the Canadian National Railway strike, poor weather in parts of the country and pipeline shutdowns. GDP began to recover in December, with the economy growing 0.3% for the month. Analysts are uncertain what impact the growing threat from coronavirus will have on the Canadian economy. For the quarter, consumer spending grew at an annualized 2%. Construction edged up 0.2% with increases in a majority of subsectors. Residential construction expanded 0.9% as increases in multi-unit dwellings and home alternations and improvements fully offset lower single-family home construction. Nonresidential construction increased 0.6%, up for a fourth consecutive month, as all types of nonresidential construction rose. Repair construction was up 0.6%, while engineering and other construction contracted 0.9%. Retail sales edged up 0.2% in December as activity in 9 of 12 subsectors increased. Leading the growth were building material and garden equipment and supplies (+2.5%) with a second consecutive monthly increase. Sales were up 0.4% year over year. Bank of America Trims Canada Outlook Bank of America is cutting its forecast for economic growth in Canada this year, and now expects GDP growth between 1% and 1.5% for the year. They kept 2021 growth unchanged at 1.8%. Most of the downward revision is due to lower oil prices and lower demand from China due to coronavirus, but some is also due to rail disruptions in the first quarter. Bank of Canada Cuts Interest Rates The Bank of Canada (BoC) followed the Fed’s lead and slashed its benchmark interest rate to 1.25% from 1.75% in early March in the face of the rapidly spreading coronavirus outbreak. The BoC said it was prepared to cut rates again if needed to support economic growth. Housing and Construction News Housing starts rose 8.8% in January to a seasonally adjusted annual rate of 213,224 units. Gains were concentrated in multifamily buildings such as apartment and condos, which saw a 13.2% increase in starts. Single-family detached home starts fell 2.1% to 55,100 units. Overall starts were above expectations. Both regional economic strength and milder than normal winter weather in Central Canada likely boosted construction in Ontario and Quebec, while inclement weather dragged down activity in British Columbia, according to Canada Mortgage and Housing Corp (CMHC). Canada’s home sales rose 11.5% in January to the highest level in 12 years, according to the Canadian Real Estate Association (CREA). Seasonally adjusted sales fell to 2.9% from December 2019, due primarily to an 18% drop in sales in the Lower Mainland of British Columbia. The actual average price for homes sold in January was up 11.2% from January 2019 to $504,350. Removing the pricey areas of Greater Vancouver and Greater Toronto, the national average price was around $395,000. Mortgage rates fell amid a sharp drop in bond yields, with 5-year rates dropping to 4.99% from 5.34% and special rates, which are actually closer to what most buyers pay, fell to 3.09% from 3.2%. There is a lot of pressure on banks to cut rates based on current market conditions and sluggish growth prospects. Retail Sales Steady Retail sales were virtually unchanged at $51.6 billion in December, after growing 1.1% in November. A 3.8% increase in sales at building material and garden equipment and supplies dealers and food and beverage stores were more than offset by lower sales at motor vehicle and parts dealers and gasoline stations. Sales were up in 7 of 11 subsectors, representing 49% of retail trade. Retail sales in volume terms were unchanged. Retail sales decreased 0.2% in the fourth quarter and 0.3% in the third quarter. Sales totaled $615 billion in 2019, up 1.6% from 2018. On an unadjusted basis, retail ecommerce sales were $2.6 billion in December, accounting for 4.7% of total retail trade, the largest share on record. On a year-over-year basis, retail ecommerce increased 31.5%, while total unadjusted retail sales rose 2.7%. Retail Notes Canadian Tire’s fiscal 2019 sales rose 3.4% to $14.5 billion and comp sales rose 3.8% at Canadian Tire, 3.3% at Sport Chek and 2.5% at Mark’s. Q4 revenue rose 4.5% and comp sales grew 4.8% at Canadian Tire stores. Traffic was up substantially as were high ticket sales. Canadian Tire will roll out lockers in hundreds of stores so customers can pick up online orders. They tested the program in 2019. Canadian Tire had more than $500 million in ecommerce revenue for 2019, with ship to home orders doubling in the last three months of the year compared to 2018. In-store pick up is the fastest option for the customer and the cheapest option for the store. Canadian Tire’s CEO says the company has not yet experienced any supply side issues due to the coronavirus outbreak, but the long-term impact remains unclear. Canadian Tire does not have any active vendors in the quarantined area. The CEO also noted that Canadian Tire is well-stocked for a number of months, has done business in China for decades and has strong relationships. Lowe’s comp sales in Canada were slightly negative in local currency. They are making fundamental changes to improve execution and delivery long term improved profitability in Canada. They remain confident in the long term potential for their Canadian business. They’ve implemented key leadership changes in Canada, and during the fourth quarter appointed Chris West as SVP Merchandising. West is a native of Montreal. He’ll report to new president Anthony Hurs. During the fourth quarter they completed 28 store closures, with the remaining six completed in early February. THD Canada plans to hire more than 5,500 new associates across Canada to support the busy spring home improvement season. © Robert Bosch Tool Corporation. All rights reserved, no copying or reproducing is permitted without prior written approval.
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