Need To Know News

Composite Leading Indicator: Unchanged (0%)
Manufacturing-New Orders: 1.3%
Manufacturing-Shipments ratio: Unchanged (0%)

The Composite Leading Index was unchanged in July, below the consensus estimate of a 0.1% increase and the second consecutive flat reading.
Only 2 of the 10 components of the index fell, however the decline in the Housing Index - down 2.9%, the largest drop since 2002 led by slumping Housing Starts, and the decline in Average Workweek in Manufacturing (down 0.5%) were large enough to offset the small increases in the 7 components that posted increases.
Consumer spending on durable goods continued to expand edging up 0.2%, Furniture and Appliance Sales were also up 0.6%. The stock index remained flat (0%) while Business and Personal Services Employment edged up 0.2%.
July New Manufacturing Orders were up 1.3% largely on aerospace, which although volatile has been trending upwards over the longterm.
The ratio of Shipments to Inventories leveled off in July following two consecutive declines, with shipments increasing for the first time this year.
The US leading indicator increased 0.1% for the first increase in 11 months.

Ex-Autos m-o-m: up 1.4%
Total Retail Sales m-o-m: up 0.5%

June Canadian Retail Sales Ex-Autos were up 1.4% beating the consensus estimate of a 0.6% increase and up from the disappointing revised 0.6% increase last month (previously reported 0.4% increase). The jump is the third 1% or more increase since the beginning of the year.
The rise was largely led by a 4.2% increase in sales at Gasoline stations mostly reflective of price although Clothing and Accessories were also up 2.5%, Sporting, Hobby, Music and Book Sales up 1.2%, Food and Beverage up 1.3%.

Total Retail Sales were up 0.5% in June, following a revised 0.3% increase prior (previously reported 0.4%) and slightly more than the consensus estimate of a 0.4% increase. The widespread increases (up in 6 of 8 sectors) were dragged down by a 3.1% drop in Sales by New Car Dealers, the fifth consecutive decline, largely on slumping truck sales, although recreational vehicles and parts dealers also posted a 0.8% decline.

Y-o-Y Total Retail Sales were up 4%.

In constant dollars Retail Sales fell 0.4% m-o-m.

Inventories m-o-m: 1.2%
Sales m-o-m: 2%
Sales ex-Autos m-om: 0.4%

June Canadian Wholesale Inventories increased for the fourth consecutive month by 1.2% in all trade groups except building supplies. The increase is the largest since January 2007, however with the faster increase in Sales, the Inventory to Sales Ratio declined from 1.24 in May to 1.23 in June.

June Wholesale Sales increase 2% from a revised 1.5% prior (previouslty reported 1.6%) 4 times the consensus estimate of a 0.5% increase. June’s increase was led by demand for automotive products up 10.6% the largest monthly increase since August 2005, following declines in 5 of the previous 6 months. Sales of motor vehicles led the surge up11.9% while sales of motor vehicle parts and accessories increased 6%.
Ontario which accounts for 75% of the Canadian Automotive sector saw a 4.2% increase in Wholesale Sales. While Saskatchewan which accounted for the bulk of May’s overall Wholesale Sales increase also posted a substantial rise (up 3.8%) though on strong demand for farm machinery and equipment in June instead of Fertilizers as was the case in May.
In sub-sectors, declines were posted in Computer and Electronic Equipment down 0.8%, Office and Professional equipment down 0.7%, while in Household and Personal Products, Apparel was down 0.2% while Household Products were up 1.7%.

Excluding Automotive products June Canadian Wholesale Sales edged up 0.4% as 6 of the 7 Wholesale sectors posted overall increases with the only decline seen in Other Products which had posted a substantial increase for May largely on fertilizers. .

Employees at a Wal-Mart outlet in Quebec, Canada have won an arbitrator-imposed contract today, becoming the only store in North America with a collective agreement. The contract was imposed after binding arbitration ended in June and only affects eight employees at Wal-Mart’s tire and lube garage across the river from Ottawa. It’s still unclear whether Wal-Mart will shut-down the Canadian unit as has been its response to previous union attempts.

Inflows m-o-m: C$ 7.2bln
Outflows m-o-m: C$ - 9.5bln (divestment)

Non-resident demand for Canadian Securities moderated to C$ 7.2bln from a revised C$ 10.6bln (previously reported 10.7bln) still well above the consensus estimate of C$ 5.5bln. The continuing increase was led by acquisitions of Canadian bonds at C$6.2bln, bringing quarterly investment by non-residents to C$27.6bln, the highest level since Q4 2001. Federal enterprise sector bonds led the charge, up C$3.8bln, on attractive yields, while investment in outstanding federal government bonds also increased to C$2.7bln in June from C$257mln prior. Investment in Canadian stocks however dropped to C$362mln from C$2.5bln in May.

On the other hand Canadians reduced their investments in foreign securities by C$9.5bln from a revised increase of C$ 6.3bln in May (previously reported C$ 6bln). Almost 60% of the divestment was in foreign shares as equity markets turned bearish. Canadians sold C$2.9bln in foreign bonds mostly 2 and 5-year US government bonds as prices hit their lowest levels in 6 months. Canadians also disposed of C$ 475mln in foreign short-term paper continuing a trend that began in August 2007. The C$ 6.2bln divestiment of foreign stocks followed 4 consecutive months of acquisitions averaging C$ 4bln/month, reflected weakened stock prices in major markets. Almost 90% of June’s divestment was in non-US foreign stocks.

In a report released today the Canada Mortgage and Housing Corp., a national housing agency, said Canadian home construction will moderate less this year than had been previously forecast but will continue to decline into 2009.
The agency is now forecasting a decline in new construction to approximately 215.5K units up from 214.6 units forecast in May but down from last year’s 228.3K units. The decline according to the report is still due to higher mortgage carrying costs. However the overall picture is still healthy.

“Strong economic fundamentals such as continuing high employment levels, rising incomes and low mortgage rates will provide a solid foundation for healthy housing markets this year,” wrote Bob Dugan, Chief Economist for CMHC in the report. “Increased competition from the existing home market, coupled with the elimination of the pent-up demand that built up during the 1990s, will exert downward pressure on housing starts, which will decline to 194,000 units in 2009 from 215,000 in 2008.”

New motor vehicle sales (unadjusted): 163.06K

Sales m-o-m (seasonally adjusted): 143.27K

Canadian New Motor Vehicle Sales in June fell 1% to 143.27K units fom the surprise 1.1% increase prior and below the consenus estimate of 0% (unchanged).  The decline was led by the continuing decreases in truck and passenger car sales. New Truck Sales fell 2.4% to 63.75K units in June as surging gasoline price dampened interest in those vehicles since the beginning of this year.

Passenger car sales edged up  0.1% to 79.52K units, led by increased sales in North American-built passenger car up 0.7%, offset by a 0.9% drop in overseas-built passenger cars. Quebec had one of the largest declines in motor vehicle sales down 3.7%, but sales continue to be strong despite this drop.

Change in Inventories: 0.6%

Change in Inventories ex-petroleum: 0.3%

Change in Inventories ex-auto: 0.9%

Change in Sales: 2.1%

Inventories to Sales Ratio: 1.27

Canadian Manufacturing Inventories in June rose 0.6% increasing at half the previous months pace, with petroleum and coal products accounting for half the increase on price. In constant dollars, Manufacturing inventories dropped 0.1%.  Meanwhile in spite of declining prices for primary metal, manufacturers reported an increase of 2.6% to C$7.3 bln in inventory levels for the 4th consecutive increase, still below the 2006 record of C$8bln.

Excluding Petroleum Canadian June inventories rose 0.3%.

June Manufacturing Sales were up 2.1% to 52.5bln, mostly on price, vs. the revised 2.2% increase prior (previously reported 2.7%) beating the consenus estimate of a 1% gain. Increases were broadbased with 14 of 21 industries representing 81% of sales reporting gains. The largest gain came from Petroleum and Coal manufacturers who reported a 6.4% increase in tandem with the 6.2% jump in prices for the month of June.    Primary Metals also contributed to the increase with a 6.1% gain in June a significant volume increase on strong international demand. Meanwhile, Auto-manfacturers posted a 4.2% gain reaching C$4.2bln in sales, the fourth increase in 6 months but below the 2007 monthly average of C$5bln.  All provinces but one reported increases with B.C. reporting a 2.1% drop from the previous month. In constant dollars the increase in Sales was only 0.6%.

The Inventories to Sales Ratio was 1.27 down from 1.29 previous and the 3rd consecutive decline bringing the ratio to its lowest level since April 2007.

July Canadian Housing starts in July dropped to 186.5K from a revised 215.9K in June (previously reported 217.8K) missing the consensus estimate of a drop to 210K. According to the Canada Morgage and Housing Corporation the decline which represents a 14.8% plunge in the annual rate of urban starts compared to June,was led by a 20.2% dive in urban multiples and a 6.6% drop in urban single starts. However according to CMHC the decline brings the annual rate of increase closer in line with the organization’s 2008 forecast of more than 200K housing starts for the 7th consecutive year.
The annual rate of decline in urban starts was led by Ontario down 38.8% the only province to register a decline in both single and multiple-unit urban starts. The Priaries were also down 1.6% overall. In Quebec urban starts were up 2.2%, up 2.4% in Atlantic Canada, and up 5.1% in BC. Single starts were down in all regions except the Atlantic region where they remained unchanged.
Y-o-y Canadian combined urban and rural starts have increased by an estimated 2.3% in the first seven months of 2008.

Canada Total Change y-o-y: 3.5%

Canada Total Change m-o-m: 0.1%

House Only Change m-o-m: 0.1%

Land Only Change m-o-m: 0.2%

Y-o-y contactors selling prices slowed to a 3.5% increase in June vs the 4.1% y-o-y increase recorded in May, for the slowest growth rate since March 2002 stalled by soft housing markets in Western Canada. The largest y-o-y increase was in Regina up 28.5% led by labour shortages and material costs. While St. John posted a 22.2% increase y-o-y for a faster rate of growth than Saskatoon (up 16.3%) for the first time since Dec 2005 on labour and land costs.

M-o-m Canadian New House Pice Index edged up 0.1% compared with 0% (unchanged) last month and in line with consensus estimates. The slowdown was led by Saskatoon down 2.8% compared to a 0.5% increase in May and continuing declines in home prices in Victoria, BC down 0.1% m-o-m, followed by Vancouver, BC which has slowed since last month, up 1.8% m-o-m in June compared to the 2.7% increase in May.
Contractor selling prices recorded strong increases in St. John up 2.8% m-o-m, Winnipeg up 1.1% m-o-m.

Land Only in June was up 0.2% m-o-m, a slight increase from the 0.1% gain recorded in May but continueing a slower growth trend observed over the past 2 years according to a Statistics Canada analyst.