Monthly Economic Summary – July 2016 Contents Global Overview......................................................................................................................... 2 Smartphones overtake computers as top e-commerce traffic source...................................... 2 Corporate raiders seek Brexit bargains in Britain .................................................................... 2 National Overview ...................................................................................................................... 4 Canada’s International Trade: the great provincial obstacle course ........................................ 4 Local Overview .......................................................................................................................... 6 B.C.'s liquor laws put craft cider at a distinct disadvantage ..................................................... 6 Quarterly Hiring Demand Update............................................................................................ 7 Labour Force Survey Report ...................................................................................................... 8 Canada................................................................................................................................... 8 British Columbia ..................................................................................................................... 8 Abbotsford-Mission ................................................................................................................. 8 Monthly Housing Statistics ......................................................................................................... 9 Articles Referenced ...................................................................................................................10 Global ....................................................................................................................................10 National .................................................................................................................................10 Local .....................................................................................................................................10 Labour Force Survey .............................................................................................................10 Housing Statistics ..................................................................................................................10
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Monthly Economic Summary – July 2016 The summary that is shared below is intended to capture, consolidate and highlight some of the relevant key economic articles that have been recently released from credible sources, globally, nationally and locally. Links for articles referenced are captured on the final page.
Global Overview Smartphones overtake computers as top e-commerce traffic source For retailers at least, the most important screens are now the small ones, according to an article from Declan Harty for Bloomberg News. Smartphones accounted for 45.1 per cent of web-shopping traffic in the first quarter of this year, edging out computers at 45 per cent, according to a study from Demandware, an e-commerce software provider. The firm projects that number will continue to increase, with phones accounting for 60 per cent of e-commerce visits by the end of next year. While the rise of smartphone shopping provides retailers with an opportunity to reach customers any time and any place, merchants face obstacles in getting the most out of their mobile platforms. Those hurdles include lengthy checkout times and payment procedures that deter consumers from completing their orders. Demandware found that mobile-checkout completion is 11 per cent lower than the combined rate from all other devices. “If they can get it right on mobile today and tomorrow, that’s where they’re going to see a lot of value going forward,” said Rick Kenney, author of the study and head of consumer insights for Demandware. Retailers can expect to see online shopping evolve into a “mobile only” space, Kenney said. By 2019, EMarketer expects 71 per cent of U.S. consumers will have a smartphone, compared with today’s 59 per cent, and Demandware predicts that by the fourth quarter of 2018, phones will outstrip computers for online order placements by about 13 per cent. Some retailers already are rapidly approaching a mobile-only world. Rainbow, which sells women’s and children clothing at about 1,100 stores, says mobile accounts for 70 per cent of its e-commerce traffic, up from 50 per cent two years ago.
Corporate raiders seek Brexit bargains in Britain Overseas buyers lured by a plunge in the pound are looking to snare British companies on the cheap, ensuring a steady flow of deals since Britain voted to leave the European Union and defying expectations of an M&A drought, a recent Globe and Mail article explains. Almost 60 transactions totalling $34.5 billion have been struck by foreign companies for British firms since June 23, according to Thomson Reuters data, compared with 79 deals amounting to $4.3 billion in the month leading up to the vote. 2
This activity - dominated by Japanese group SoftBank’s $32 billion swoop for chip designer ARM Holdings - has defied warnings that dealmaking could dry up for a period if Britain backed Brexit, given uncertainty surrounding risks to the economy and access to the EU single market. The list of British takeovers could grow after the summer, according to bankers who say they are working on possible bids on behalf of foreign companies interested in UK targets. The SoftBank deal was hailed by the government as a sign of UK economic resilience, prompting new Prime Minister Theresa May to declare the country “open for business”. But M&A bankers said some of the post-vote takeovers had more to do with the relatively low valuations of British companies given current exchange rates, rather than being driven by confidence in the British economy. Sterling has taken the brunt of market concern since the Brexit vote on June 23, falling to a 31year low in the aftermath of the vote. “Clearly this is a buying opportunity,” said Ben Ward, head of UK corporate at law firm Herbert Smith Freehills. “People with strong currencies – dollar, renminbi, yen – will no doubt be interested in acquiring sound sterling-denominated assets.” After the vote British companies have become 10-15 percent cheaper for overseas buyers due to the devaluation of the pound which was trading at $1.31 on July 22 against $1.50 the day before the referendum.
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National Overview Canadian Economic and Financial Indicators The following data has been extracted from the Economist’s Economic and Financial Indicators tool as at July 26, 2016 Output and Prices Gross domestic product, % change on a Industrial Consumer prices % change on a year ago production, year ago % change on a year ago Latest
Quarter
2016
2017
Latest
Latest
+1.1 Q1
+2.4
+1.4
+1.9
+0.9 Apr
+1.5 June
Year ago +1.0
2016 +1.6
Trade, Exchange Rates, Budget Balances and Interest Rates Trade balance Latest 12 months, $bn -17.9 May
Current-account Currency units Budget Interest rates balance balance Latest 12 % of July Year % of 3-month 10-year months, GDP, 25th, ago, per GDP latest government $bn 2016 per $ $ 2016 bonds, latest -47.6 Q1 -3.1 1.32 1.30 -2.5 +0.82 1.11
Canada’s International Trade: the great provincial obstacle course Last year Don Dean, a logistics expert, set out to solve a mystery: why were oil and mining firms in Alberta buying heavy equipment from Asia, landing it in United States ports and bringing it in by motorway rather than using suppliers in Ontario? The answer, he discovered, is bureaucracy. Lorries carrying heavy loads in Canada need permits from each provincial government, municipality and utility company along the route. Ontario can take 27 weeks to issue one, says Mr Dean, who works for Prolog Canada, a consultancy. The journey on American roads requires just one licence, an article in The Economist explains. Canada lacks a single securities regulator; production of milk must be matched to local consumption; the sale of alcohol is reserved for provincial monopolies. Twelve regional regulators license engineers. Canada’s internal market for goods and services is less integrated than that of the EU, concluded Alicia Hinarejos, of the University of Cambridge, in a study in 2012. No one knows how much this costs in lower productivity from lost economies of scale. In a recent report, “Tear Down These Walls”, the Senate’s banking committee guessed that the economy loses C$130 billion ($99 billion) a year from internal barriers, which is among the 4
higher estimates. A more reliable answer will come later this year when EY, an accounting and consulting firm, completes work on an index of barriers and their costs that was commissioned by the federal government in 2014. Internal obstacles are one reason that provinces trade more with foreign countries than with each other; another is the American market next door. Earlier attempts to dismantle barriers have been half-hearted. An Agreement on Internal Trade reached in 1994 eliminated specific obstacles but did not sweep most away. Provinces often ignored it. Quebec protected its dairy farmers by insisting that margarine could not be the same colour as butter; Alberta which makes butter-coloured spread from canola, protested for years (before winning its case). Fines of up to C$5m, introduced in 2009, improved compliance. The agreement has been extended to cover some aspects of labour mobility, but large gaps remain. Unlike the EU, Canada has left the demolition of internal trade barriers to politicians rather than the courts. Canada’s Supreme Court, reluctant to interfere in provincial affairs, has ruled narrowly in trade cases on whether a province was acting within its constitutional powers rather than on broader issues of internal free trade. That has spared Canada EU-style complaints about rules on banana curvature imposed from afar by bureaucrats. But it has also allowed the national market to remain a patchwork. The federal government, which has jurisdiction over inter-provincial commerce, has sermonised on freer trade but not enforced it. Resistance to the Canadian single market remains strong. Alberta lobbied to reserve for local firms a big share of contracts to rebuild Fort McMurray, the centre of its oil industry, which was burnt down by wildfires this year. Deregulation of trade in liquor, dairy products, poultry and eggs has been left until later. Provincial protectionism is not dead yet.
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Local Overview B.C.'s liquor laws put craft cider at a distinct disadvantage Brewers in B.C. need only look over yonder at Washington State and Oregon to spot the next big thing in brewing—and it has nothing to do with beer. A recent article in BC Business Magazine explains that while still in the shadow of B.C.’s $73-million craft beer industry, B.C.’s nascent cider sector—an estimated $2-million industry—is on a streak. In 2012, Sea Cider was the only cidery to use B.C. apples that was up and running in the province, but by 2016 there were seven operating and another dozen in the process of starting up, according to the Northwest Cider Association. But local cidermakers are hampered by a regulatory scheme that treats craft cider like wine (with much higher markups per bottle than beer) and a consumer that has trouble differentiating craft cider from the mass-market coolers, like Okanagan Cider and Grower’s, which mix in sugar, water, apple concentrate and grain spirits.
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Quarterly Hiring Demand Update
The City of Abbotsford Economic Development has a license with Vicinity Jobs network to access their Hiring Demand Analysis reports. With businesses in Abbotsford having challenges finding skilled labour, the statistical information that this software provides promises to be extremely helpful in informing workforce development needs, employers and educators. Analysis completed on these reports indicates a positive outlook for Abbotsford given these indicators of recent job postings. Some highlights of our findings have been bulleted below for your information. Highlights from Quarter 2:
The Fraser Valley as a whole had a 5.1% increase in number of job postings as compared to quarter 1 of 2016. The South Fraser Region and Abbotsford saw similar increases with 5.2% and 6.1% respectively. Abbotsford is second only to Langley in the South Fraser Region for number of fourth quarter postings at 1,659, with Chilliwack a distant third with 674 postings. Fraser Health is the top employer in the Fraser Valley, South Fraser and Abbotsford. While the retail trade was the top hiring industry the past 12 months in the Fraser Valley and Abbotsford, the share was lower in Abbotsford (28.5% vs. 24.4%). In the most recent quarter, the share of full-time postings was slightly higher in Abbotsford (47.8% of all postings) than in the South Fraser region (46.9%). For the Fraser Valley, all occupational categories saw hiring growth.
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Labour Force Survey Report The Labour Force Survey is a monthly survey which measures the current state of the Canadian labour market and is used, among other things, to calculate the national, provincial, territorial and regional employment and unemployment rates. The latest Labour Force Survey was released by Statistics Canada on Friday, July 8, 2016. Below is the relevant information that was released as part of this report.
Canada Employment was unchanged in June (18,055,000). The unemployment rate declined 0.1 percentage points to 6.8%, as the number of people searching for work edged down. In the second quarter of 2016, employment was little changed (+11,000 or +0.1%). This was the smallest quarterly change in employment in two years. In the 12 months to June, the number of people employed rose by 108,000 (+0.6%), with most of the gains in part time (+77,000 or +2.3%). Over the same period, the total number of hours worked fell slightly (-0.1%). Employment fell among men aged 55 and older, while it increased for youths aged 15 to 24 and changed little for the other demographic groups.
British Columbia British Columbia was the lone province with employment gains in June (+16,000 or +0.7%), continuing an upward trend going back to the spring of 2015. The unemployment rate in the province was 5.9%, the lowest rate in the country. On a year-over-year basis, employment in British Columbia was up 70,000 or 3.0%, the fastest rate of growth among the provinces.
Abbotsford-Mission The unemployment rate is 6.6%, down 0.2% as compared to the month previous. The employment rate remained at 60.1%. The participation rate fell 0.1% from May to 64.6%.
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Monthly Housing Statistics The Fraser Valley Real Estate Board’s Monthly Statistics Package for June 2016 indicates that June was another record-setting month, but continued to ease off since this year’s sales peak in March. The Fraser Valley Real Estate Board processed 2,864 sales of all types on its Multiple Listing Service® (MLS®) in June, an increase of 18.7 per cent compared to June 2015. The previous record for sales processed in a June was set in 2005 at 2,517. However, when compared to May 2016, sales dipped 1.5 per cent. With 1,281 sales of single family detached homes, demand for greater space and land remained consistent. However, nearly matching that was the combined total of June’s 656 townhome sales and 604 apartment sales, a rare feat for the Fraser Valley region. “Demand for Fraser Valley homes grips the market, tightly. Still, we are seeing a slight levelingoff that while not drastic, is giving both buyers and sellers a bit more room to maneuver,” said Charles Wiebe, President of the Board. Across Fraser Valley, the average number of days to sell a single family detached home in June 2016 was 17 days, compared to 35 days in June 2015. "Simply put, to meet demand, we need even more listings. More than half of our active inventory consists of new listings that came on to the MLS® in June; our market is truly in the hands of hopeful sellers,” added Wiebe. The MLS® HPI benchmark price of a Fraser Valley single family detached home in June was $861,600, an increase of 41.3 per cent compared to June 2015 when it was $609,900. In June, the benchmark price of townhouses was $387,100, an increase of 27.9 per cent compared to $302,600 in June 2015. The benchmark price of apartments also increased year-over-year by 20.8 per cent, going from $191,900 in June 2015 to $231,900 in June 2016.
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Articles Referenced Global
http://www.theglobeandmail.com/technology/smartphones-overtake-computers-as-top-ecommerce-traffic-source/article31094485/ http://www.theglobeandmail.com/report-on-business/international-business/europeanbusiness/corporate-raiders-seek-brexit-bargains-in-britain/article31092668/
National
http://www.economist.com/node/21604509 http://www.economist.com/news/americas/21702495-country-far-being-single-marketmay-be-about-change-great-provincial
Local
http://www.bcbusiness.ca/your-business/bcs-liquor-laws-put-craft-cider-at-a-distinctdisadvantage
Labour Force Survey
http://www.statcan.gc.ca/daily-quotidien/160708/dq160708a-eng.htm
Housing Statistics
http://www.fvreb.bc.ca/statistics/Package%20201606.pdf
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