Author: Consultant

Statistics Canada says manufacturing sales fell 2.8 per cent to $71.0-billion, led by a drop in petroleum and coal product sales as well as lower sales in the machinery and computer and electronic product subsectors.

The agency says sales fell in 12 of 21 subsectors it tracks.

The petroleum and coal products subsector fell 10.3 per cent to $8.4-billion in October as it saw lower prices as well as a decline in volumes.

The machinery subsector dropped 6.6 per cent to $4.4-billion, while computer and electronic products fell 15 per cent to $1.4-billion.

Sales of aerospace products and parts rose 6.9 per cent to $2.2-billion.

Statistics Canada says total sales in constant dollars fell 2.2 per cent in October, indicating a lower volume of goods sold.

World oil demand will rise faster than expected next year, the International Energy Agency (IEA) said on Thursday, a sign that the outlook for near-term oil use remains robust despite this week’s COP28 agreement to transition away from fossil fuels.

Despite the upgrade, there is still a sizable gap between the IEA, which represents industrialized countries, and producer group OPEC over 2024 demand prospects. The two have clashed in recent years over issues such as long-term demand and the need for investment in new supplies.

World consumption will rise by 1.1 million barrels per day(bpd) in 2024, the Paris-based IEA said in a monthly report, up 130,000 bpd from its previous forecast, citing an improvement in the outlook for the United States and lower oil prices.

The IEA, which advocates a speedy transition away from fossil fuels, detailed the increase to its 2024 forecast only at the bottom of Page 4 of its report, after discussing other findings including a demand slowdown in the last three months of 2023 and rising supply.

The 2024 revision reflects “a somewhat improved GDP outlook compared with last month’s report,” the IEA said. “This applies especially to the U.S. where a soft landing is coming into view.”

“Falling oil prices act as an additional boost to oil consumption,” it said.

Oil has weakened to a six-month low near $72 a barrel this week, even after OPEC+, which includes OPEC oil-exporting nations and allies such as Russia, on Nov. 30 announced a new round of production cuts for the first quarter of 2024.

Crude was up almost 2 per cent on Thursday after the IEA report was released to trade near $76.

In the report, the IEA also trimmed its forecast for oil demand growth in 2023 by 90,000 bpd to 2.3 million bpd and lowered its fourth-quarter estimate by almost 400,000 bpd.

A halving in the rate of demand expansion next year is due to below-trend economic growth in major economies, efficiency improvements and a booming electric vehicle fleet, the IEA said.

The extension of OPEC+ supply cuts into the first quarter of next year had done little to boost prices and higher output in other nations would act as a headwind, it added.

“The continued rise in output and slowing demand growth will complicate efforts by key producers to defend their market share and maintain elevated oil prices,” it said.

OPEC in a monthly report on Wednesday kept its forecast for world oil demand growth in 2023 at 2.46 million bpd. In 2024, OPEC sees demand growth of 2.25 million bpd, also unchanged from last month.

The difference between the IEA and OPEC 2024 forecasts has narrowed slightly but stands at 1.15 million bpd – equivalent to roughly 1 per cent of daily world oil use and the daily production of an OPEC member such as Libya.

Oil demand forecasters often have to make sizable revisions given changes in the economic outlook and geopolitical uncertainties, which this year included China’s lifting of coronavirus lockdowns and rising interest rates.

Sobeys parent company Empire Co. Ltd.EMP-A-T -7.45%decrease reported sales and earnings growth in its grocery business in the second quarter, while income from investments and other operations led to an overall decline in profits.

The Stellarton, N.S.-based retailer reported on Thursday that net earnings fell to $181.1-million or 72 cents per share in the quarter ended Nov. 4, compared to $189.9-million or 73 cents per share in the same period last year.

Empire recorded a $20.6-million insurance recovery related to a cybersecurity breach that hit the company last November. It also recorded $16.8-million in restructuring costs related to a plan to improve efficiencies in the company. Not including those items, adjusted net earnings were lower, at $178.3-million or 71 cents per share. Both sales and adjusted earnings per share came in below analysts’ estimates for the quarter.

The company, which owns chains including Sobeys, Safeway, IGA and FreshCo, reported that both sales and profits were up in its grocery operations, with adjusted net earnings in the food retailing segment rising 8.5 per cent to $171.5-million. Income from its investments and other operations declined, mostly because fewer property sales led to lower equity earnings from Empire’s interest in Crombie Real Estate Investment Trust.

Grocery retailers have faced scrutiny over whether they are doing enough to fight food inflation. Growth in grocery prices slowed in October, when prices were up by 5.4 per cent on an annual basis. That was a significant improvement compared to peak levels of more than 11 per cent in late 2021 and early 2022. But even food inflation slows down, shoppers are still faced with significantly higher grocery bills than compared to a couple of years ago.

In an appearance before the House of Commons agriculture committee last week, Empire chief executive officer Michael Medline expressed frustration at being compared to other grocers who have higher profit margins. He also noted that Canada has done better than other countries when it comes to food price growth.

“Although our country’s food inflation has been among the lowest in the world, and Canada is among the most competitive nations on earth when it comes to grocery retail, this provides little comfort to Canadians who are struggling,” he told the committee.

In October, Empire was among the grocery chains who complied with a request from the federal government to submit plans to stabilize prices, though some critics pointed out the plans mostly included strategies the sector already employs, such as discounts and price matching. Like other food retailers, Empire reported that its internal measures of food inflation have continually fallen slightly below the the food price growth tracked by Statistics Canada’s Consumer Price Index.

“Although it is difficult to estimate how long these inflationary pressures will last, the company continues to focus on supplier relationships and negotiations to ensure competitive pricing for customers whose shopping behaviours become more price sensitive in a heightened inflationary environment,” the company stated in a press release on Thursday.

Empire’s sales grew by 1.4 per cent in the second quarter compared to the prior year, to nearly $7.8-billion. Grocery sales were up, especially in the company’s FreshCo discount stores. But some growth was offset by the effects of Empire’s sale of its 56 gas stations in Western Canada in the first quarter, leading to lower fuel sales in the second quarter compared to the prior year. Sales from Empire’s e-commerce service, Voilà, increased by 15.4 per cent in the quarter.

Same-store sales – an important industry metric that tracks sales growth not tied to new store openings – grew by 2.2 per cent in the quarter, or 2 per cent excluding fuel. That represents slower growth compared to a year ago, but in a press release on Thursday the company said that same-store sales growth has improved in the first five weeks of the current quarter.

Empire is continuing to make claims under its cyber insurance policies related to last year’s breach. The company’s management said they are anticipating further insurance recoveries throughout this fiscal year, according to a press release on Thursday. Empire has previously estimated the cost of the breach will represent approximately a $32-million impact after insurance recoveries, and that estimate remains unchanged.

Pembina Pipeline PPL-T -2.97%decreasesaid on Wednesday it would buy Enbridge’s ENB-T -0.10%decreaseinterests in the Alliance Pipeline, Aux Sable and NRGreen joint ventures for $3.1 billion.

Alliance delivers liquids rich natural gas sourced in Northeast B.C., Northwest Alberta and the Bakken region to Chicago.

Aux Sable operates natural gas liquids (NGL) extraction and fractionation facilities in both Canada and the U.S., with extraction rights on Alliance, offering connectivity to key U.S. NGL hubs.

Pembina would assume $327-million of debt as part of the deal, helping Enbridge offload some leverage.

Investors fretted over Enbridge’s debt load from the US$14 billion bid for three of Dominion Energy’s natural gas distribution companies in September.

“The sales proceeds will fund a portion of the strategic U.S. gas utilities acquisitions and be used for debt reduction,” Enbridge said in a separate statement.

Pembina added the deals are expected to be completed in the first half of 2024.

Pembina currently owns 50% of the equity interests in Alliance, Aux Sable’s Canadian operations and NRGreen.

It also owns about 42.7% of the equity interests in Aux Sable’s U.S. operations.

• Retail sales rose 0.3% in November, stronger than the 0.2% decline in October and better than the Dow Jones estimate for a decrease of 0.1%.
• Sales held up despite a 2.9% slide in receipts at gas stations, as energy prices broadly slumped during the month.
• Initial claims for unemployment insurance totaled a seasonally adjusted 202,000, lower than the 220,000 estimate.

https://www.cnbc.com/2023/12/14/retail-sales-rose-0point3percent-in-november-vs-expectations-for-a-decline.html

Dollarama Inc. DOL-T -1.68%decrease reported a 31.4-per-cent increase in profit in its third quarter, as Canadians continue to turn to discount stores looking for some relief from the pressures of inflation.

This has been an ongoing trend for Dollarama, which stocks products at prices up to $5 and has seen significant sales increases over the past two years. The Montreal-based discount retailer reported on Wednesday that comparable sales – an important industry metric that tracks sales growth not tied to new store openings – grew by 11.1 per cent in the quarter ended Oct. 29. That marked the sixth consecutive quarter in which comparable sales grew by a double-digit percentage.

While on average, the size of shoppers’ baskets on each trip are only slightly higher than they were a year ago, people are visiting discount stores more often. Dollarama reported that it saw a 10.4-per-cent increase in the number of transactions at its stores in the quarter.

The company’s net earnings grew to $261.1-million or 92 cents per share in the 13 weeks ended Oct. 29, compared to $201.6-million or 70 cents per share in the third quarter the prior year.

Sales are up across product categories, and people continue to buy more “consumables” than usual at Dollarama, such as food and household products.

But competition for those shoppers is ramping up as other retailers push back with their own discounted prices on those consumable products, chief executive officer Neil Rossy said on a conference call Wednesday to discuss the financial results.

“On core consumables, we are seeing that the market is becoming more competitive,” Mr. Rossy said. “Extremely competitive, in fact.”

Dollarama has seen some costs rise: its general, administrative and store expenses grew by 17.6 per cent in the third quarter compared to the same period the prior year, as store labour costs were up and the timing of some other operating costs fell within the quarter. But the company also saw its grow profit margin expand, as costs to ship products into the country decreased, as did logisticsexpenses.

Sales grew by 14.6 per cent to nearly $1.5-billion. The increase was due to both new store openings – Dollarama had 1,541 as of the end of October, compared to 1,462 a year earlier – and sales growth at existing stores.

Dollarama has opened 55 net new stores so far this fiscal year, and is on track to meet its goal of opening 60 to 70 new locations by the end of the year, Mr. Rossy said.

On Wednesday, Dollarama boosted its sales outlook for the year, predicting that comparable store sales will increase by 11 to 12 per cent for the fiscal year ending Jan. 28, 2024. Its previous outlook, provided in mid-September, predicted comparable sales would grow by 10 to 11 per cent for the year.

While Dollarama benefits from a tight economic environment, where consumers are looking for discounted products – a habit known in the industry as “trading down,” – Mr. Rossy noted that the retailer is not overly reliant on inflationary pressures to drive its business.

“Consumers tend to look at Dollarama as a solution to having to trade down, and when the market and the economy are strong, there are just more dollars to spend. So Dollarama gets its share of those dollars, even if the percentage is smaller than it would be when there’s a trade down,” Mr. Rossy said. “I think that’s part of the strength of our business model, is that it’s resilient on both sides.”

The Federal Reserve on Wednesday held its key interest rate steady for the third straight time and set the table for multiple cuts to come in 2024 and beyond.

With the inflation rate easing and the economy holding in, policymakers on the Federal Open Market Committee voted unanimously to keep the benchmark overnight borrowing rate in a targeted range between 5.25%-5.5%. 

Along with the decision to stay on hold, committee members penciled in at least three rate cuts in 2024, assuming quarter percentage point increments. That’s less than market pricing of four, but more aggressive than what officials had previously indicated. 

Markets had widely anticipated the decision to stay put, which could end a cycle that has seen 11 hikes, pushing the fed funds rate to its highest level in more than 22 years. There was uncertainty, though, about how ambitious the FOMC might be regarding policy easing. Following the release of the decision, the Dow Jones Industrial Average jumped more than 400 points, surpassing 37,000 for the first time.

The committee’s “dot plot” of individual members’ expectations indicates another four cuts in 2025, or a full percentage point. Three more reductions in 2026 would take the fed funds rate down to between 2%-2.25%, close to the long-run outlook, though there was considerable dispersion in the estimates for the final two years. 

In a possible nod that hikes are over, the statement said that the committee would take multiple factors into account for “any” more policy tightening, a word that had not appeared previously. 

Along with the interest rate hikes, the Fed has been allowing up to $95 billion a month in proceeds from maturing bonds to roll off its balance sheet. That process has continued, and there has been no indication the Fed is willing to curtail that portion of policy tightening. 

Inflation ‘eased over the past year’

The developments come amid a brightening picture for inflation that had spiked to a 40-year high in mid-2022. 

“Inflation has eased from its highs, and this has come without a significant increase in unemployment. That’s very good news,” Chair Jerome Powell said during a news conference.

That echoed new language in the post-meeting statement. The committee added the qualifier that inflation has “eased over the past year” while maintaining its description of prices as “elevated.” Fed officials see core inflation falling to 3.2% in 2023 and 2.4% in 2024, then to 2.2% in 2025. Finally, it gets back to the 2% target in 2026.

Economic data released this week showed both consumer and wholesale prices were little changed in November. By some measures, though, the Fed is nearing its 2% inflation target. Bank of America’s calculations indicate that the Fed’s preferred inflation gauge will be around 3.1% year over year in November, and actually could hit a 2% six-month annualized rate, meeting the central bank’s goal. 

https://www.cnbc.com/2023/12/13/fed-interest-rate-decision-december-2023.html

Prices across a broad range of goods and services edged higher in November as energy prices declined, providing hope that inflation could be on a lower trajectory.

The consumer price index, a closely watched inflation gauge, increased 0.1% in November, and was up 3.1% from a year ago, the Labor Department reported Tuesday. Economists surveyed by Dow Jones had been looking for no gain and a yearly rate of 3.1%.

While the monthly rate indicated a pickup from the flat CPI reading in October, the annual rate showed another decline after hitting 3.2% a month ago.

Excluding volatile and energy prices, core CPI increased 0.3% on the month and 4% from a year ago. Both numbers were in line with estimates and little changed from October.

This is breaking news. Please check back here for updates.

Monday December 11

China CPI, PPI, aggregate yuan financing, new yuan loans and money supply

Japan machine tool orders

Earnings include: Caseys General Stores Inc.; Mainstreet Equity Corp.

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Tuesday December 12

(6 a.m. ET) U.S. NFIB Small Business Economic Trends Survey for November.

(8:30 a.m. ET) U.S. consumer price index for November. The Street is expecting a flat reading from October and up 3.0 per cent year-over-year.

(10 a.m. ET) U.S. quarterly services survey for Q3.

(2 p.m. ET) U.S. treasury budget for November.

Also: U.S. Fed meeting begins

Earnings include: Transcontinental Inc.

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Wednesday December 13

Japan large manufacturing index

Euro zone industrial production

(8:30 a.m. ET) Canadian national balance sheet accounts for Q3.

(8:30 a.m. ET) U.S. producer price index for November. Consensus is an increase of 0.1 per cent from October and up 1.0 per cent year-over-year.

(2 p.m. ET) U.S. Fed announcement and summary of economic projections with chair Jerome Powell’s press briefing to follow.

Earnings include: Adobe Systems Inc.; Dollarama Inc.; Lennar Corp.

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Thursday December 14

Bank of England policy announcement (7 a.m. ET)

ECB policy announcement (8:15 a.m. ET)

EU Summit in Brussels (through Friday)

(8:30 a.m. ET) Canadian manufacturing sales and orders for October. Estimates are month-over-month declines of 2.7 per cent and 3.0 per cent, respectively.

(8:30 a.m. ET) Canadian new motor vehicle sales for October. The expectation is a year-over-year increase of 18.0 per cent.

(8:30 a.m. ET) U.S. initial jobless claims for week of Dec. 9. Estimate is 225,000, up 5,000 from the previous week.

(8:30 a.m. ET) U.S. retail sales for November. The Street is expecting a decline of 0.1 per cent from October and 0.1 per cent year-over-year.

(8:30 a.m. ET) U.S. import prices for November. Consensus is a decline of 0.8 per cent from October and down 2.0 per cent from the same period a year ago.

(9 a.m. ET) Canadian existing home sales for November. Estimate is a year-over-year decline of 1.0 per cent with average prices rising 1.5 per cent.

(9 a.m. ET) Canada’s MLS Home Price Index for November. Estimate is a rise of 0.8 per cent year-over-year.

(9:45 a.m. ET) U.S. S&P Global PMIs for December.

(10 a.m. ET) U.S. business inventories for October. Consensus is a flat reading month-over-month.

Earnings include: Costco Wholesale Corp.; Empire Co. Ltd.; Enghouse Systems Ltd.; Oracle Corp.; Sprott Physical Gold and Silver Trust; Transat AT Inc.

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Friday December 15

China retail sales, industrial production and fixed asset investment

Japan and Euro zone manufacturing and services PMI

(8:15 a.m. ET) Canadian housing starts for November. Estimate is an annualized rate rise of 0.1 per cent.

(8:30 a.m. ET) Canadian wholesale trade for October. Estimate is a 1.1-per-cent decline month-over-month.

(8:30 a.m. ET) Canada’s international securities transactions for October.

(8:30 a.m. ET) U.S. Empire State Manufacturing Survey for December.

(9:15 a.m. ET) U.S. industrial production for November. Consensus is a decline of 0.2 per cent from October with capacity utilization increasing 0.2 per cent to 79.1 per cent.

(12:25 ET) Bank of Canada Governor Tiff Macklem speaks at the Canadian Club in Toronto.

Earnings include: Darden Restaurants Inc.; Wall Financial Corp.