Balance Sheet

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Canadian retailers falling behind U.S. in ecommerce: BMO

Canadian retailers have a lot of catching up to do if they want to better compete with their American counterparts in the increasingly important ecommerce sales category, suggests a new report from BMO Nesbitt Burns.

It shows the overwhelming majority of the estimated $16 billion in total ecommerce sales generated in Canada last year was by American companies.

The top three ecommerce retailers – Amazon, eBay and Apple – accounted for nearly a third of online shopping sales in 2014. The top 10, which again are all American companies, accounted for just above 50 per cent of ecommerce sales.

Of the top 20 ecommerce sites ringing up sales in Canada last year, only one is based in Canada – an electronics site called Canada Computers – which is in 19th spot, according to the report.

The report says ecommerce accounted for just 3 per cent of retail sales in Canada in 2014, or $16 billion out of $500 billion. In the U.S., ecommerce transactions account for about 7 per cent retail sales and about 15 per cent of total retail sales in the United Kingdom, according to estimates.

Canada is lagging despite a number of studies showing Canadians are among the world’s most digitally-savvy consumers.

“Ecommerce is more in its infancy in Canada,” says BMO retail analyst Peter Sklar

Geography and population may be partially to blame. Retailers have to deliver their goods to fewer people across greater distances in Canada compared to markets such as the U.S. or in Europe.

The onslaught of ecommerce offering from Amazon and eBay in recent years has forced more Canadian retailers, and others selling online in Canada, to improve their game.

The BMO report also found that ecommerce sales in Canada are more narrowly focussed on electronics and apparel. It shows retailers offering consumer electronics, which includes personal computers, accounted for $8.7 billion of the $12.5 billion in sales represented by the 100 top retailers in 2014.

“While a large number of retailers among the top 100 offer apparel, the total sales of the retailers offering apparel represents a lesser $5.7 billion in sales,” the report states. When Amazon.ca is excluded, because it doesn’t have a huge selection of apparel, that number drops to $3.8 billion.

The report also takes a closer look at eBay, with the second-largest market share in Canada, at about 9 per cent, in line with Apple. (That compares to a 12 –per-share of ecommerce sales for first-place Amazon).

Citing comScore data, the report notes that eBay shoppers in Canada are slightly older than the median for Canadian Internet users, (41.7 years versus 37.2 years), and have a slightly lower income ($73,424 versus $79,388)

The report follows on Sklar released last fall highlighting Amazon’s dominance in the online retail space.

In the latest report, Sklar found Amazon’s was losing a bit of ground in Canada. It shows Amazon’s share of total website visits declined in February 2015 to 1.54 per cent, compared with 1.63 per cent in February 2014. There was also a drop in January compared to the same month last year.

That’s despite the company’s unveiling in November of same-day delivery in Toronto and Vancouver, which “has not had a noticeable impact on its overall share of Canadian visits in the first few months with the service,” the report notes.

Meantime, Walmart.ca’s share of visits increased slightly, by six basis points to 0.33 per cent of total website visits. Free shipping is likely helping Walmart gain some traction, the report notes.

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Canada’s ‘rocks and trees’ economy faces high northern price tag: study

Canadians have long prospered on the backs of those who dug for buried treasure in this country. But with southern metal deposits increasingly hard to find, the treasure is up north these days, and increasingly difficult and pricey to get to.

According to a new industry study, the cost to explore and build new mines is as much as 2.5 times higher in Canada’s far North than in the south, due to a lack of access, power lines, and just about everything you need to extract and ship tonnes of ore.

“There are no roads, so you have to build roads,” says Pierre Gratton, CEO of the Mining Association of Canada, which produced the study along with the Prospectors & Developers Association of Canada, the Association of Consulting Engineering Companies, the NWT & Nunavut Chamber of Mines, and the Yukon Chamber of Mines.

“Depending on the nature of your commodity, you may need shipping. So base metals and precious metals, you often need some kind of port infrastructure. So you have to put that in. There’s air strips. You just keep adding it.”

And it does add up. The cost of permitting and building a large-scale mine (to say nothing of the challenge of finding the deposit) can run into the billions of dollars before a single nugget or ingot ever comes out of the ground.

But it can pay off as well. Canada’s mining industry contributed some $54 billion to the country’s GDP in 2013, and is the cornerstone industry of communities across the country. After all, Canada’s often called a ‘rocks and trees’ economy (though these days it’s often used as a criticism of Canada’s inability to evolve).

The problem is that the rocks in the southern part of the country are increasingly hard to find, and this is an issue for an industry where they judge you not by what you are producing, but what you have in the ground for future production.

Meanwhile, massive deposits such as the chromite and copper in the “Ring of Fire” region near James Bay remain isolated and unmined.

“That’s not to say there aren’t opportunities in the south, but it’s far more known, far more discovered, and the giants are up north,” says Gratton.

Ideally for the industry, federal and provincial governments would be building the infrastructure. But doing so is a pricey gamble for cash-strapped governments, particularly when the ebb and flow of commodity prices can spell the end of a project and leave you with a road to nowhere.

So the Mining Association and its partners are calling for some financial help from federal, provincial and territorial governments, including higher tax credits on exploration, capital pending, and certain infrastructure investments in remote areas, and incentives for drilling early-stage projects.

They’d also like to see the creation of a northern infrastructure investment bank to provide long-term financing for resource-related infrastructure projects in the territories.

“What we hear of course is that governments do want to take advantage of that northern wealth. They have to put their money where their mouth is, or industry will invest elsewhere,” says Gratton.

It’s no secret that Stephen Harper likes the north, or at least travelling there. And in an election year, the miners hope someone is paying attention.

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Winnipeg, Regina housing markets most at risk for correction: CMHC

Two Canadian cities are at “high risk” of a housing correction, but it’s not the ones you might think.

Canada Mortgage and Housing Corporation (CMHC) says Regina and Winnipeg face “problematic market conditions,” due to quickly rising prices, overvaluation and overbuilding, especially in the condo markets.

“In Winnipeg, risk of overvaluation and overbuilding are detected,” said the CMHC in its latest House Price Analysis and Assessment (HPAA), which takes the temperature of Canada’s housing market. The HPAA looks at economic, financial and demographic drivers of housing markets across the country.

As for Regina, “the inventory of completed and unsold units is at a record high,” CMHC says, despite fewer starts in 2014. It notes builders have been scaling back production this year. 

Toronto and Vancouver – two cities often cites as being the most overheated due to rising prices and seemingly unstoppable building trends – don’t appear to be raising alarm bells at the CMHC.

“Low overall housing market risk is observed for Vancouver, as none of the individual risk factors are currently detected,” the report states.

There was some “caution” that Toronto and Montreal may be overbuilding, but the CMHC called the risk of corrections in those markets “moderate.”

“Condominium units under construction are near historical peaks,” in Toronto, Montreal and Quebec, the report states.

“Inventory management is necessary to make sure that these condominium units under construction do not remain unsold upon completion.”

Overall, CMHC say risks of overbuilding and overheated markets vary across the country.

“At the national level, modest overvaluation is observed, meaning house prices are slightly higher than levels consistent with personal disposable income, population growth and other factors,” the report states. “Overheating,  acceleration in house prices and overbuilding are not a concern at this time.”

Calgary and Edmonton, cities where the housing market has been hit by the impact of plummeting oil prices, are seen as having “low overall risk.”

CMHC notes that sales have dropped in Alberta in recent months, amid cutbacks across the energy sector, “pushing the sales-to-new listings ratio to buyers’ market levels.”

That will reduce any lingering risk of housing market overvaluation in Calgary, the report states.

While the CMHC has a more measured take on the state of Canada’s housing market, other predictions vary wildly. For instance, Deutsche Bank has said the market is overvalued by about 60 per cent, while other forecasts range from about 3 to about 25 per cent.

The Economist recently labelled Canada as the most overvalued housing market in the world, using measure of rental rates, and in the top three based on income.

Bank of Canada governor Stephen Poloz said this week that the degree of housing valuations across the country is to be expected. He also reiterated that the overall market isn’t in a bubble.

Senior Deputy Governor Carolyn Wilkins, who testified alongside Poloz at the House of Commons Standing Committee on Finance earlier this week, said there are signs of a soft landing in many areas of the country. Toronto and Vancouver were cited as exceptions.

"Those two markets are continuing to grow quite robustly," Wilkins said, according to a report from Reuters.

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Mixed bag for consumers in Ontario budget

Commuters are getting a long-term promise of better transit and roadways through increased infrastructure spending and some special interest groups will see their funding continue, but there were no major incentives in the Ontario budget for everyday citizens living in Canada’s largest province.

There is another way to look at it though: There were no personal tax increases (unless you count the new beer charge), which means the broader public was spared what could’ve been a more painful path to balance the books.

Economists say it wouldn’t have been prudent for the Ontario government to provide broader perks to people in the province, given its balancing act between reducing the deficit and trying to capitalize on economic growth.

“With a return to balance the priority, there was limited fiscal room for new initiatives in this budget,” said TD economists Leslie Preston and Jonathan Bendiner in a note after the budget was tabled on Thursday. TD described the budget as a “progress report” on the government’s ambitious plan to balance its books by 2017-18, without setting any new direction.

Major changes in the budget included setting aside $130 billion over 10 years for infrastructure spending, as well as confirmation of recently announced money-making moves such as allowing beer to be sold in grocery stores for the first time in history, and the sale of a majority stake in giant utility Hydro One.

There were cuts across some government sectors, minus a few such as health and education, but critics say those spending increases aren’t big enough to offset inflation and added pressure from population increases. 

Overall though, not much will change for people in the province, experts say. 

“There is no real splash here, but when you think of the long-term and what’s right for the bigger issues … I think it’s the right approach,” said Paul Woolford, tax partner in Toronto with KPMG Enterprise. 

Still, the seemingly uneventful budget drew much criticism. 

The Ontario Public Service Employees Union (OPSEU) said the budget was good for making money from public assets, but "an unmitigated disaster" for citizens as a result of planned cuts across the public sector.

The Ontario Medical Association (OMA) said the government “continues to drastically underfund health care,” and is putting the health care system “at risk.”

"There are 900,000 people in this province without a family doctor and the population continues to grow and age – this budget ignores both that growth and that unmet need and that's unacceptable,” stated OMA president Dr. Ved Tandan.

Business groups were also dissatisfied. The Ontario Chamber of Commerce called it a “mixed-bag budget,” that delivers much-need transportation infrastructure spending, “but little is being done to address the growing burden on businesses and get the province’s fiscal house back in order.”

Certain industries applauded the budget for some smaller measures though, such as the discount on insurance premiums drivers will get if they use snow tires.

"It's clear that the government recognized that the auto insurance product needed reforms to work better for consumers," Insurance Bureau of Canada vice present Ralph Palumbo stated after the budget.

Music Canada was happy to see another extension of the Ontario Music Fund, which the government said receives $15-million per year.

Unifor, Canada's largest union in the private sector, criticized the sale of Hydro One but was pleased the government is moving ahead with plans to introduce the Ontario Retirement Pension Plan (ORPP) by 2017. 

"More than 60 per cent of Ontario workers do not have a workplace pension plan,” stated Katha Fortier, Unifor Ontario Regional Director. "To be most effective, the ORPP must mirror the CPP (Canada Pension Plan) as a universal, defined benefit plan that is indexed to inflation. Clearly, the Wynne government understands how dire the situation is."

Paul Forestell, national retirement leader at consulting firm Mercer, is in favour of the “pay now and get paid back later approach” with the ORPP.  However, he said it will be complicated for national employers to implement.  

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Jobs cut as tough times loom for Canada’s billionaire banks

Canada’s banks have been ranked the strongest in the world for seven straight years and recently reported first quarter profits that topped $8 billion for the group. And to be clear, that’s $8 billion for five banks over three months.

So, time for a hiring spree, right? Not quite. To look at the recent headlines, you’d think it’s tough times for the big lenders.

According to reports this week, Bank of Montreal has cut some 50 jobs on its capital markets side, and Toronto-Dominion is paring jobs from several departments. This follows Scotiabank’s announcement in the fall that it will cut 1,500 jobs, most of them in Canada.

Of course, the big banks each employ tens of thousands, so these aren’t exactly mass layoffs. But the banks are clearly in a cost-cutting mindset, and their quarterly reports show headcounts lower this year than last.

“2015 is going to be a bad year for Canadian banks,” says Ian Lee, a former banker and current business professor at Carleton University.

Now, it should be noted that ‘bad year’ is a relative term. A bad year for the Canadian banks is not like a bad year for General Motors. It usually takes one of those once-a-decade financial crises to put the banks into the red, and the last time that happened in 2008-09, they emerged stronger than ever. And we mentioned they’ve already booked a few billion in this fiscal year.

But Lee says the banks, which are in a way victims of their own success as they have to show not only profitability but also growth to satisfy shareholders, have good reason to worry.

“Profit levels are going to decline significantly and they’re going to decline for two reasons: their revenues are going to be coming down and expenses are going to be going up,” he says.

For much of this, we can blame oil (which is an easy thing to do this year). Generally, the banks make money by lending money, and successful oil companies borrow money to expand. So, weak oil equals less oil growth equals less business borrowing. And beyond that, energy workers who have been laid off may default on loans, and smaller companies themselves could go belly up, all of which forces the banks to take big writeoffs.

But the other big contributor is interest rates, which are a double-edged sword for the banks. Low rates makes loans cheaper, which has prompted Canadians to borrow like drunken gamblers over the past five years, pumping up the housing market and driving personal debt to record levels.

But the low rates also mean the banks earn less per dollar lent. And with rates still on the decline, and consumers expected to start clamping down on their high-rolling ways, the banks are looking at a pullback in the biggest contributor to their bottom line.

“Consumers who are tapped out are going to be pulling back,” says Lee, who expects the coming slump to least at least into next year or perhaps into 2017.

What this means for the folks sitting at home hating bank executives and their seven-figure salaries, however, is that bank stocks could soon be hitting a rough spot, and that can be a big deal. Anyone with retirement savings in this country probably owns quite a lot of bank, so when they take a hit, we all take a hit.

But worried investors can take comfort in one truth: the Big Five have proven time and again they know how to make money in a blah economy.

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Budget can ease retirement savings, help small businesses, but not all Canadians will benefit

Small businesses, seniors and Canadians with extra money to sock away will benefit most from the federal government’s pre-election budget.

There were few surprises in the document released on Tuesday, given much of the contents were already reported leading up to budget day, helping the government gain momentum for its policies as it readies to meet voters this fall.

“It’s obviously an election-year budget,” said Deb MacPherson, national leader of KPMG’s Enterprise Tax practice, and a partner in the company’s Calgary office.

Measures such as increasing the contribution level Canadians can make to their Tax-Free Savings Account (TFSA) — to $10,000 from $5,500 starting this year — and reducing the small business tax rate to 9 per cent from 11 per cent by 2019, are some of the goodies.

MacPherson said both are beneficial, but taxpayers should consider them in the context of their own personal or business situations.

She said a higher TFSA limit is only good news if you have another $4,500 to spare. She recommends people with limited budgets contribute to their Registered Retirement Savings Plans (RRSPs) first, especially during years when they’re in a higher tax bracket, because it offers a tax deduction.

“The good news is that the TFSA contribution room carries forward, so you’ve not lost anything if you can’t contribute right now,” MacPherson said.

The lower tax for small businesses will also be more beneficial to those companies able to defer taking money out of the corporation over a longer period of time, she said.

“It’s great for deferring longer term,” MacPherson said. “But if you’re a small business owner who needs every penny that you earn in your company, then this is nothing to get excited about because you are going to turn around and pay it out as either as a salary or a dividend.”

Seniors are getting some relief in the budget on an issue many have been griping about for years, which is the minimum amount of money they must withdraw from their Registered Retirement Income Funds (RRIFs). That amount is being reduced to a minimum of 5.28 per cent at age 71, when the mandatory withdraws begin, down from 7.38 per cent.

“Those that draw more than the new minimum are allowed to re-contribute the excess,” noted Adrian Mastracci, portfolio manager at Vancouver-based KCM Wealth Management Inc.

He said both the TFSA and RRIF measures “are very positive moves that enhance retirement” for many Canadians.

The tax-rate cut for small businesses will save companies between $1,500 and $25,000 over the next four years, according to the Canadian Federation of Business (CFIB).

“It’s a good budget for small business,” CFIB chief economist Ted Mallett told BNN on Tuesday, citing reductions in red tape in some areas, that will save companies time and money.

“Our members are looking for ways to expand their business without too much regulatory rigamarole,” he said. “We need to reward entrepreneurship and risk taking.”

While there were benefits for small business, more could’ve been done to support small business, according to Keith MacIntyre, national tax leader at Grant Thornton LLP.

His firm would like to have seen the government increase the small business limit from $500,000, as well as a lower tax rate for businesses, from software firms to manufacturers, who are commercializing products.  

He said it’s an incentive that is used in place such as the UK and France to drive the economy and create higher-end employment within those countries.

Overall, experts say there was nothing new in the budget that would get families excited.

The government’s key message was its balanced budget, with a narrow surplus, which is expected to be a key campaign theme as is heads towards an election this fall.

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With budget looming, non-oil provinces not seeing benefit of cheap energy: report

It’s no secret that the plunge in oil prices is wreaking havoc in Canada’s oil-producing provinces, but economists had expected that to be partially offset by an improvement in other parts of the economy that benefit from cheaper energy.

According to a report by the Conference Board of Canada, it isn’t playing out that way.

In a “primer” ahead of the release of the federal budget next week, the Conference Board says, in so many words, that Canada is getting the sour, but missing out on the sweet.

“You’d think (weak oil) would have a positive effect, that low gasoline prices would boost the consumer and that would have a positive effect on retail and then hopefully business investment,” says Matthew Stewart, associate director of the Conference Board’s National Forecast. “That hasn’t really happened.”

To be sure, consensus is that the overall impact of falling oil is bad for the economy, and Stewart estimates oil producing firms will cut their budgets by about one-third, which is major when you consider they make up about one-third of total business investment.

But outside of the main oil producing provinces (Alberta, Saskatchewan, and Newfoundland), the impact of cheaper energy should be economically positive.

But businesses don’t seem to be taking the hint.

“They’re unsure how the oil shock’s going to spread through the economy,” and also trying to wait out the weakness in the Canadian dollar before investing,” Stewart says.

Of course, the weak currency is also a two-edged sword, as it gives us less spending power, but also makes our products cheaper to foreign buyers. And predictably, the international trade sector has been one of the few bright spots, helped also by the strong U.S. economy.

However, Stewart says the lack of business investment outside of the energy sector means capacity is not increasing, which puts that bright spot in peril.

“There’s some risk that that is not going to be sustainable,” he says.

So how does this all factor into next week’s budget?

Well, with less oil, the government gets less revenue (The Conference Board expects Canadian growth of 1.9 percent this year, down from 2.4 percent last year), which can be problematic for a government that has set up 2015 as the year of the balanced budget.

Finance Minister Joe Oliver has already said the government will be in the black this year, so you can bet they will be, although Stewart predicts there won’t be much breathing room.

“We expect they’re right on the line right now. So they’re not in deficit, but certainly they don’t have any money to spend,” he says.

However, it’s still no small feat to balance the books in the midst of a significant economic turmoil. Stewart says the Harper government laid the groundwork for this through cost cuts over the past few years, including thousands of public sector layoffs (and the recent sale of the government’s remaining GM shares for some $3 billion doesn’t hurt).

He, like many, also expects oil to steadily push higher from its current levels over the next two years. The government is certainly hoping it does, because there are only so many cost-cutting cards to play.

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Nanaimo, B.C., gets a boost from the next big thing: medical marijuana

Canadian cities looking for ways to jumpstart economic growth should maybe take a lesson from Nanaimo, B.C., which says it is reaping the benefits of a growing medical marijuana plant that opened last year. It’s nice to have options when the local Target or Future Shop closes it’s doors, and you’ve have to think the packing room at the Tilray plant in Nanaimo has a more convivial scent than traditional retail.  Okay, cheap pot joke there, but city officials say that Tilray, which started production last April, does a lot more than just serve as a punch line.

According to a report by the city’s economic development corporation, Tilray is already one of the top employers in town, with about 140 workers, and has supported a total of 395 direct and indirect jobs through its construction and operation so far.

“The employment positions created by Tilray include PhD research scientists, patients advocates, security personnel filled by former RCMP officers, professional managers, manufacturing executives, botanists and horticulturalists,” the report says.

The initial investment in the plant of $26.9 million, meanwhile, has generated $48.1 million in total economic output. Growth potential

So, it’s not quite like a new Toyota plant dropped in the middle of town, but this is a growing industry. Already Tilray has plans to ramp up the business to as much as five times the current size, which would make the company the largest private sector employer in the region.

Now sure, this does seem like a B.C. thing, and more than that a Vancouver Island thing, as from afar, the island seems like a western utopia where all things are possible.

But the medical marijuana production boom is a real thing following new Health Canada rules last year that open up the industry to private producers. Since then, hundreds of small companies have scrambled for licenses, several have announced stock listings, and greenhouses are spring up across the country.

Depending who you ask, its either the next big thing, or the next dot-com bust.

“We’re talking multibillions in revenues in the coming years,” says Jacob Securities analyst Khurram Malik.

The most recent numbers from Health Canada projects the number of medical users to grow about five-fold to 450,000 by 2024. Malik sees the 2014 numbers closer to 825,000 due to the increased ease of getting a prescription, and the expected migration of users who currently grow their own to using licensed distributors.

 “Buying it from a… facility is more often than not cheaper, more convenient and legal than buying on the proverbial street corner,” he says.

And of course, with a federal election this year, the possibility exists that a new government could move to legalize recreational marijuana (the Liberals are definitely on board). If that happens, Malik says it would still take years to pass the federal and provincial legislation needed to open up the market. In the U.S., Colorado and Washington State are already there, although things are muddied by federal prohibitions on the drug.

But it seems clear that Canada’s headed in that direction, and it stands to reason that when it happens, the licensed producers will see demand go up even more.

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Higher mortgage premiums, soaring prices to squeeze Canada’s first-time buyers

Higher mortgage insurance premiums are another setback for first-time homebuyers, alongside relentlessly rising real estate prices in some of Canada’s largest cities, experts say.

Despite historically low interest rates, it’s getting increasingly pricey for young Canadians to purchase their first pad.

Genworth Canada, the country’s largest private residential mortgage insurer, announced this week that its premium rates for homebuyers with less than 10-per-cent down will rise 15 per cent, starting June 1. The move follows a similar premium rate hike made last week by Canada Mortgage and Housing Corp.  

Genworth says the increase amounts to $6-a-month hike for homebuyers with a 95 per cent loan-to-value mortgage of $300,000. While that doesn’t seem like much, mortgages can be more than double that in places like Toronto or Vancouver.

“All that move is doing is hurting first-time home buyers even more,” says TD Bank economist Diana Petramala,

She believes the policymakers should instead focus more on making it harder for speculators to enter the market, not first-time buyers looking to build home equity.

“While [it’s] a prudent move to manage taxpayer risk at CMHC, young Canadians are the ones who bear the burden,” Royal LePage CEO Phil Soper told the Financial Post.  “The insurers have no way to surgically apply it there [Vancouver and Toronto] alone. So the entire country will feel the impact of the increase.”

Still, Sopher and executives at both Genworth and CMHC say the move will have little impact on the overall housing market, and targets homebuyers at a higher risk of default.

"This new pricing is reflective of higher capital requirements and supports the long-term health of Canada's housing finance system," stated Genworth Canada CEO Stuart Levings.  "Genworth Canada remains committed to helping Canadians achieve homeownership responsibly and we believe these changes will not have a material impact on affordability."

The day after the insurance hike, Genworth released a survey characterizing many first-time homebuyers as both wealthy and wise.

It says 31 per cent of first-time buyers surveyed have household incomes of more than $100,000. About two-thirds (63 per cent) made a down payment of less than 20 per cent. (There was no mention of how many put down less than 10 per cent.)

The survey also paints the first-time buyer as cost conscious: 57 per cent have avoided extra debt since buying their home; 36 per cent have doubled-up or increased their bi-weekly mortgage payments, or made a larger, one-time lump sum payment.

It cites higher median down payments in cities such as Toronto (21 per cent) and Vancouver (20 per cent), “which appear to be driven by higher savings and larger gifts or loans from a family member in those markets.” The median down payment nationally was 12 per cent.

More than half (55 per cent) of first-time buyers purchased a fully detached home, while 17 per cent squeezed into a condo, 15 per cent bought a townhouse and 13 per cent a duplex.

Not surprisingly, because they’re more affordable, condominiums are the most popular option in large, costly cities such as Vancouver (47 per cent), Montreal (40 per cent) and Toronto (39 per cent).

Levings said first-time homebuyers “have their eyes wide open, their hands firmly on their pocketbook and are thinking hard before assuming the responsibility of homeownership.

“This prudence and careful planning should serve Canada’s housing market well as responsible first-time buyers grow into responsible long-term owners."

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Workers don’t like their jobs, and managers aren’t very good: Gallup poll

If you’re sitting in your cubicle right now shooting mind-arrows at your boss, you’re not alone, according to a new survey by Gallup.  Furthermore, you may even be justified in doing so.

The U.S. poll finds that about half of respondents have left a job at some point in order to get away from a manager. It also finds that only about one-third of managers are actively engaged in their job, and that most lack the skills needed to do it well.

In other words, unless you’re one of the lucky ones, you’re living in a Dilbert cartoon.

According to the poll, most managers are simply wrong for their role, and have been promoted based on factors other than their ability to do it well.

“That’s not to say these people don’t have talent,” says Gallup.

“But the talent that makes someone a great salesperson, accountant or engineer is not the same talent that makes him or her a great manager.“

We’ve all seen this happen: the person who is a successful worker bee is suddenly put in charge of the operation, largely as a reward for being so effective.

Bad move, says Gallup. Instead, managers should be chosen based on their talent, particularly five abilities: to motivate employees, to overcome obstacles, to create a culture of accountability, to build trusting relationships, and to make informed, unbiased decisions.

Communication is the key to it all. Face-to-face meetings, daily updates, and interest in an employee’s personal life are key to keeping employees dialed in to their jobs.

Interestingly, the survey also found that women in general are better managers than men.

According to Gallup, only 18 percent of current managers have the talent required for their role.

In terms of engagement, the only 30 percent of workers fell dailled in to their job.

For managers, the number rises (slightly) to 35 percent, while 51 percent of managers are not engaged, and 14 percent are actively disengaged. Furthermore, Gallup says managers are responsible for at least 70 percent of the variance in employee engagement scores. In other words, all that bad management is prompting employees to check out.

Beyond just the psychological toll on workers, Gallup estimates the price tag for bad management in the U.S. economy somewhere between $319 billion and $398 billion per year.

Tom Turpin, president of staffing firm Randstad Canada, agrees that communication is key to a healthy work environment, but said there are other factors that make this a tough time for employee engagement.

“It’s been a trying five years,” he says.

In Canada, for instance, job growth has been sluggish, while in the U.S. there has been job growth, but little wage growth. This makes it tough for employees to see the potential long-term fruits of their labour.

“You can have a leader who communicates well. But if they’re not communicating how you’re going to grow in the future, that can create disengagement.”

Also, communication can mean different things to different age groups. While Generation Xers might like face-to-fact chats, millennials may prefer texting.

Ultimately, the message from all this seems to be that if you’re unhappy in your job, it’s your boss’s fault. And if you’re a lousy boss, you can blame YOUR boss for erroneously promoting you. Actually, I think that was in a Dilbert cartoon once.

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What’s next for Alberta’s economy?

Albertans are bracing for several more months of bad economic news and belt tightening amid depressed oil prices, but the province won’t fall into a recession as some economists predict, according to a local economic forecast.

ATB Financial’s second quarter outlook says the Alberta economy will slow to growth of 0.8 per cent this year, due to a rise in unemployment and drop of investment in the province’s key energy sector.

Fewer people will also move to the province for work,which means less consumer spending, and housing construction will cool off. 

Still, ATB isn’t forecasting a recession, saying there’s growth in other sectors such as agriculture, forestry and tourism thanks to the depreciating Canadian dollar and the rebounding U.S. economy.

“Even with the drag set to weigh on theeconomy, an outright contraction remains somewhat unlikely,” says the report from the largest Alberta-based financial institution.

ATB Financial chief economist Todd Hirsch says it will be a challenging year, but that Albertans “shouldn't panic." The province has seen much worse, he says, including during the 2008-09 global economic downtown. 

“There is some worry and anxiety in the province. People are uncertain about what comes next. There is insecurity around jobs. It’s normal and it’s unpleasant,” says Hirsch. “But for people who’ve been in Alberta for some period of time, there’s almost more of an eyeball roll rather than doom and gloom, because we’ve been through this before. People understand that this is a normal part of the cycle and that these things never last forever. The province generally comes out of it in better shape.”  

ATB is calling for Alberta’s GDP to increase 1.7 per cent in 2016 and rise 3.1 per cent in 2017, which compares to 3.7-per-cent growth last year. It expects the unemployment rate to rise to 6 per cent this year,  and then fall to 5.8 per cent in 2016 and 4.9 per cent in 2017. That compares to an unemployment rate of 4.7 per cent in 2014. The provincial unemployment rate is still expected to be among the lowest in the country. Others predict more doom than boom

ATB’s outlook for Alberta is rosier than some others that have cropped up in recent weeks.

CIBC said recently it expects a mild and short-lived recession in Alberta, forecasting the economy will shrink by 0.3 per cent this year, and unemployment will rise to 6.8 per cent. It then sees Alberta’s economy bouncing back to growth of 2.3 per cent in 2016, alongside an expected recovery in oil prices.

Others are more pessimistic.

The Conference Board of Canada is forecasting Alberta will experience a sharp “V”-shaped decline in the first half of 2015, followed by a “Lazy U”-shaped recovery into 2016. It’s calling for the province’s GDP to contract by 1.5 per cent this year.

"The party appears to be over in Alberta, at least over the medium term, as low oil prices send chills through the economy,” said Marie-Christine Bernard, associate director at the conference board, in a recent release.

"In the next couple of years, a return to 4 per cent-plus growth is not in the cards,” she added, saying oil prices will not return to triple-digits any time soon “under current market conditions.”

Crude prices have fallen by more than half since June, to around $50 (U.S.) per barrel, which has led to a huge drop in royalties and payments from the industry to the government. The provincial government said recently it expects royalties to fall to around $2.89 billion in the fiscal year starting April 1. That’s compared to $8.79 billion this fiscal year, according to its latest budget tabled last week.

The provincial government is coping with the lost revenue by proposing several fee and tax hikes and cuts to health care and education. Alberta Premier Jim Prentice said the province plans to post a budget deficit of nearly $5 billion for the fiscal year starting April 1, and $3.05 billion the following year. That’s in contrast to a $248 million surplus for fiscal year that just ended, according to a report on the budget from Reuters.

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Canada’s corporate profits margins hit 27-year high: CIBC

Corporate profit margins are at their highest point in nearly three decades, propped up in part by a lower Canadian dollar and cheaper labour costs, a new report shows.

CIBC says average corporate profit margins hit a 27-year high in the fourth quarter of last year and are expected to remain robust despite the recent downturn in the oil patch.

"By all measures, higher corporate profit margins are here to stay," said Benjamin Tal, CIBC’s deputy chief economist and author of the report.

The bank said the average profit margin of all non-financial corporations grew to 8.2 per cent of sales in the fourth quarter of 2014. When the embattled energy sector is stripped out, profit margins are at 7.6 per cent, their highest in almost three decades.

It also noted the gap between non-energy profit margins and real GDP growth is “about as large as in any non-recessionary period in the past 25 years.”

CIBC said corporate profit margins have averaged about 5 per cent throughout recent history, but have increased to 6 per cent over the past decade. Canada’s new economy

Tal cites a “fundamental structural shift” in the Canadian economy, which is boosting corporate margins.

“This shift has been driven by forces such as globalization, innovation, a lower cost of capital and high barriers to entry,” Tal says.

CIBC said profit margins have fallen in high-margin industries such as manufacturing, transportation, agriculture and forestry, and gained traction in low-margin sectors such as retail and construction.

“More recently, margins have also been elevated by softening labour costs and a sinking loonie, fueling the near-three-decade record high,” Tal says.

The Canadian dollar has depreciated by almost 25 per cent, and Tal estimates that is responsible for about a full percentage point increase in average profit margins since 2012.

Export sectors, such as agriculture and manufacturing, are the biggest beneficiaries, alongside a few others including forestry and transportation, the report notes. Labour costs decline

Meantime, the pace of growth in labour costs dropped from 3.5 per cent in 2012 to 1 per cent in 2014.

"No less than one third of Canadian GDP last year was produced by sectors with falling labour unit costs," Tal says.

United Steelworkers economist Erin Weir says lower labour costs aren’t something to cheer about.

He blames federal government policy decisions, such as the Temporary Foreign Worker Program, cuts to Employment Insurance, the “aggressive” use back-to-work legislation and the “onerous administrative requirements” being placed on unions during collective bargaining.

“To help employees negotiate a fair share of rising profit margins, policymakers should instead enact progressive labour laws,” which includes enabling more workers to form and join unions,” Weir said in an email to Yahoo! Finance.

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Borrowers lock in, lenders offer choice in competitive spring housing market

A growing number of Canadians are calling the bottom of the mortgage-rate market and choosing to lock in monthly payments, a new survey suggests.

A CIBC poll, conducted byNielsen, says 57 per cent of Canadians aren’t betting on mortgage rates to fall further and would choose a fixed-rate mortgage if they were to acquire, refinance or renew a mortgage today.

That’s up from 48 per cent of Canadians who said they’d choose fixed rates when the survey was done in 2014 and just 39 per cent in 2011.

The CIBC poll says 30 per cent of respondents would pick a variable-rate mortgage if they were to acquire, refinance or renew a mortgage today, while 11 per cent weren’t sure.

"The poll results confirm what many of our clients are telling us, that they don't expect rates to go any lower and, in today's housing market, they want the comfort and security of knowing exactly what their mortgage payments will be for the next four or five years," says Barry Gollom, a vice president at CIBC. He also cites the rising cost of housing as a good reason for consumers to choose a fixed rate. Mortgage wars heat up

The survey results come amid a renewed price war among mortgage lenders, many of which are offering rates of around 2.79 per cent for a five-year, fixed term.

Some lenders are also pushing special features. For example, RBC is once again offering employee pricing of 2.69 per cent for a five-year, fixed mortgage, according to the Globe and Mail, while PC Financial is advertising 2.75 per cent for a four-year mortgage and up to one million PC points.

Mortgage rates have dropped in recent weeks as part of the spring home-buying surge and since the Bank of Canada (BoC) cut its benchmark interest rate in late January. The BoC move was intended to help spur the economy hurt by the impact of lower oil prices. Some economists predicted rates would drop again in the weeks leading up to the last BoC rate announcement in early March. However, the BoC held steady.

BoC governor Stephen Poloz said the drop in oil prices is having an "atrocious" effect on the Canadian economy, according to a report in the Financial Times on Monday. Poloz also said the lower dollar and growing U.S. economy could help prop up other sectors across Canada, such as manufacturing. Rates to rise

Economists are less convinced these days that the BoC will cut rates again this year.

“The odds of another rate cut coming in April are lower than we previously thought, though we still wouldn't rule it out completely,” said Capital Economics Canada economist David Madani in a recent note.

RBC said recently it expects the overnight rate to stay at 0.75 per cent for the remainder of this year. Many economists see interest rates rising again in 2016.

Among respondents in the CIBC poll, 44 per cent expect mortgage rates to increase next year, which compares to 47 per cent surveyed last year and 61 per cent in 2011.

Gollum says today’s historically-low rates are an opportunity for first-time homebuyers, as well as homeowners looking to refinance their mortgage.

Still, he encourages consumers to think beyond rates when making a decision on a mortgage. That includes their financial situation, other monthly payments, and their retirement saving goals.

“You want to be able to sleep at night and not worry that you won't be able to make your monthly payments,” he says..

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Broker booted from RateHub as gloves come off in mortgage wars

Mortgage wars; it’s probably the best soap opera going.

It wasn’t long ago that we had the big banks undercutting each other to the point that former Finance Minister Jim Flaherty stepped inand told them to quit it. That was two years ago, and with rates now even lower, the drama has spread down to the smaller brokers jostling for space at the table.

In the latest installment, mortgage website RateHub.ca has kicked broker Spin Mortgage off of its platform, accusing the Vancouver operation of dangling a 2.44 per cent loan that was just bait to get customers to its own site.

What both sides agree is that RateHub indeed booted Spin Mortgage. The why is a point of dispute.

“We believe in financial transparency and not allowing teaser rates or bait-and-switch rates being posted that gets someone on the phone and then … transitioned into another products,” says Kerri-Lynn McAllister, chief marketing officer at RateHub.

She says the 2.44 five-year fixed mortgage – which is certainly low, but not the lowest broker rate out there – has restrictive conditions such as a 30-day close that makes it unachievable for 90 per cent of people who check it out. In other words, click bait.

This is a hassle for RateHub, which gets angry calls when people click through a rate on their site and find out they don’t qualify.

McAllister also takes issue with Spin putting the offer on RateHub sporadically, sometimes for just an hour or two a day, spurring more confused calls.

“Then our reputation is put at risk,” she says.

Spin Mortgage counters that the restrictions on the loans are a condition imposed by the lender, Industrial Alliance, and not unique in a market that has seen the traditional mortgage morph into a specialized product geared to get the interest rate as low as possible.

“My belief would be they don’t like how aggressive we were,” says Spin co-founder Steve Pipkey, noting that RateHub owns broker CanWise Financial, which is not set up to offer the Industrial Alliance Loan.

He maintains the 2.44 per cent mortgage is a legitimate product they want to sell, and says the practice of only posting the rate for a few hours at a time is due to economics.

Pipkey says Spin pays RateHub $50 every time someone clicks through and fills out an information form, becoming a “lead” for Spin to pursue. A backlog of traffic can mean it stops making sense to pay for more leads.

“You’re paying $50 a pop on the lead. The type of people that do those leads, if you’re not back to them in 5 minutes, forget about it. You just wasted your money,” he says.

He also disputes the idea that the vast majority of people can’t qualify for the loan, saying they have sold four or five in the past month.

If nothing else, the dispute offers a window into the sometimes confusing world of mortgage brokers, which take commissions from lenders to hawk their mortgages to the public for them, usually at prices better than you can get from the lenders themselves, which is a bit of a head-scratcher.

Indeed, Pipkey says the 2.44 per cent mortgage from Industrial Alliance actually pays a better commission than some higher-rate loans from other providers.

Under Finance Minister Joe Oliver, the government has been a bit more laissez faire on the mortgage issue, preferring to let the lenders police themselves.

So you’re probably not going to see one of the big six hawking mortgages at the 2.5 per cent level, but the loans are out there if you can jump through the hoops, just a click (and an information form) away.

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New Ontario real estate rules to take some of the nuttiness out of bidding wars

Stop me if this sounds familiar: You scour MLS for the semi that will rescue you from a life in a high-rise. Mortgage pre-approval in place, you bid well above asking, because you live in Toronto and that’s how it works. The selling agent comes back and says there’s another stronger bid, and couldn’t you do a bit more? You swallow hard and cough up another $10,000, sealing the deal, and only later wondering if there really was a competing offer in the first place.

It’s tough to know how often this happens, but with interest rates still rock-bottom and bidding wars turning post-war bungalows into million-dollar properties, the Ontario government is bringing in new rules to crack down on unethical real estate agents that try to pump up housing prices with “phantom” offers.

“It’s all in the context of these bidding wars, and the idea is a potential buyer knowing ‘am I in competition, and how many people am I in competition with?’” says Bruce Matthews, deputy registrar of the Real Estate Council ofOntario (RECO), which oversees real estate agents and is responsible for enforcing the new rules.

Matthews says misleading a bidder as to the number or existence of rivals is already against the rules, but that the new standards will essentially force realtors to keep better records that can then be used to confirm that a purchase was above board.

“We’re making it certainly harder to fudge the truth,” he says.

So instead of wanna-be homeowners just throwing big numbers down a hole and hoping a house pops up, someone will start actually taking notes.

Specifically, selling agents will have to keep records on successful bids for six years and on unsuccessful bids for one year. As well, agents will only be able to claim they have other bidders if they’ve received a formal offer in writing.

So if you’re strong-armed to cough up more dough because there’s apparently a higher bid than yours, you can follow up later to make sure there actually was one. If it turns out there wasn’t, RECO can step in and take action, including potentially revoking an agent’s registration.

Of course, this isn’t going to move the needle too far on cooling down the housing market in the GTA and to a lesser degree in places like Ottawa and Hamilton. Agents will continue to list houses low to spur the mad scramble that every seller dreams about.

The most recent data show that Toronto home sales in February grew 11 percent from a year ago, while prices jumped nearly 8 percent. And that was during the coldest February since 1875. So the home buying crowd is a committed bunch.

Matthews acknowledges the housing scene, in the GTA at least, is driven by an imbalance that won’t go away any time soon.

“I think the nature of this hot housing market is very much an issue of diminished supply, rather than just excessive demand,” he says. “So… even in past hot housing markets you didn’t get bidding wars quite to the extent that you’re getting today.”

And with mortgage rates at the bottom end of the historical scale, don’t expect the bidding frenzy to stop any time soon.

But starting July, when the rules take effect, at least there will be a paper trail.

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Higher cost of imported goods to eat up Canadian gas savings: report

Canadians may be rubbing their hands with glee at the money they’re saving at the gas pumps, but there are consequences of lower oil prices that could hit other parts of their budgets, a TD Bank report notes.

Canadian households will save an average of up to $800 this year on gasoline as a result of oil’s 50-per-cent plunge since last summer, TD economists say. 

However, roughly two-thirds of those savings could be eaten up by the higher cost of imported consumer goods, such as food, clothing and health care products, now that the Canadian dollar has depreciated amid oil’s decline.

“The weaker dollar is likely to put offsetting upward pressure on a number of consumer prices. By our calculations, this pass-through impact may be as much as $600 per household,” says the report, written by TD economists Craig Alexander, Derek Burleton and Randall Bartlett.

Even gasoline prices are starting to creep higher, in part because Canada imports some fuel from U.S. refineries.

“However, on a net basis, households are still likely to end up ahead and to largely spend the savings,’ the report states.

The estimate comes as part of the bank’s updated forecast for the Canadian economy. TD expects economic growth to slow in the first quarter before picking up later this year. Cost of imported goods to rise

TD economists predict the Canadian dollar will remain suppressed, possibly falling to around 75 cents U.S. in the coming months, a 20-per-cent drop from mid-2014, before the price of oil started to tank.

The lower loonie’s impact is already showing up in consumer prices such as fresh fruits and vegetables, but could take months to creep into the cost of other consumer goods amid stiff competition in the retail sector, said Bartlett of TD Bank.

“A lot of retailers will absorb some of the increase in the short term,” he said.

However, the longer the loonie stays low the more likely costs of imported goods will increase. 

“It takes time, but it ultimately it does start feeding into the cost of goods, as retailers are no longer able to absorb the higher costs,” Bartlett says.

Statistics Canada reported last week that the Consumer Price Index (CPI) rose by only 1 per cent in February, compared to a year earlier, thanks to lower gas prices. When gas prices were taken out of the equation, the CPI rose 2.2 per cent year-over-year.

Food prices increased the most, by 3.9 per cent in the 12 months to February, which included a 12.4-per-cent increase in meat costs, 8.4 per cent for fresh vegetables and 3.5 per cent for fresh fruit. Prices for food purchased from restaurants rose 2.8 per cent year-over-year in February, StatsCan reported.

In separate report released last week, TD economist Diana Petramala noted food prices in the U.S. had also been rising until late last year, due in part to drought and disease in some growing regions that has cut global production of various crops.

“This changed in January when food prices decelerated in the U.S., but accelerated in Canada,” Petramala wrote. “Global food price pressures are still the dominant force keeping food price gains elevated in Canada.”

She estimates a third of the increase in January can be attributed to the lower Canadian dollar.

TD is forecasting food prices in Canada to increase by about 3 per cent overall in 2015.

Prices for personal items such as toothpaste and bathroom tissues are also “highly sensitive to changes in the Canadian dollar,” Petramala notes, adding those costs could increase by about six per cent over the next year thanks again to the falling loonie.

TD also expects clothing and footwear prices to see an immediate increase, and rise by about 2 per cent this year, “which in our estimates could be fully chalked up to Canadian dollar pass through,” Petramala wrote.

She said overall prices for recreation, reading and education goods and services will rise by just over 1 per cent, about half of which is due to the depreciating loonie, some taking longer than others to take effect.

“Since the Canadian dollar tends to impact most prices with a four-to-six quarter lag, the full effect of the weaker exchange rate is likely to be felt through the first half of 2015,” she wrote. “The impact of the currency will be largest on items with high import content, which we estimate account for almost half of consumer spending.”

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Someone please tell the jobs market we’re not in a recession

Canada may not be in a recession, but the employment market is sure acting like it is. The headlines have been bad enough, with oil sands players like Suncor and Nexen slashing payrolls, and Target Canada unloading 17,000 workers as it slumps its way out of town.

But the economic data shows it, too. Annual employment growth, as measured by Statistics Canada, has been below 1 per cent for the past 15 months, which is the first time that’s happened outside of recessionary times in about four decades.

But hey, at least Spring’s finally here, right?

You have to go back to the height of the 2008-09 financial crisis and ensuing recession to see a worse jobs performance. And things were even darker back in the early 90s, when that recession led to three years of declines.

We’re certainly not there, but the books may not be closed on the whole recession thing, either, as the price of oil bumps along at $47 a barrel. You might be celebrating that fact as you fill your SUV for a song, but in terms of national jobs figures, it’s bad news. More pain to come?

For now, forecasters seem to be calling for better times, but they’re being cautious about it.

“In 2015, the employment outlook is expected to be slightly brighter, although some factors will likely drag on jobs growth as well,” says Julie Ades, senior economist at Conference Board.

She says the picture isn’t likely to get worse, thanks in large part to the bump we should be getting from the stronger economy south of the border. But the Conference Board’s projection of 0.95 per cent jobs growth for 2015 is hardly bullish, either, continuing to tread below the Canadian population growth rate.

Other observers are also signaling a slightly optimistic tone.

In its closely-watched forecast, Manpower said Canadian employers expect a “modest” hiring climate over the second quarter, with 18 per cent of companies expecting to add workers in the second quarter, while 5 per cent expect to cut back.

Deloitte, in a survey of chief financial officers, found that expectations for domestic hiring among Canadian companies rose 2.2 per cent in the fourth quarter, although that was down from a 3.5 per cent increase in the prior three months.

So the sentiment seems to be that things have to get better, but that there aren’t any clear signs it’s happening yet. Oil price continues to be the elephant in the room

And then there’s that oil price, which has cut the legs out of the once-mighty prairie job machine.

Ades says weak oil will help keep a lid on jobs growth for the next little while, although some of the damage should be offset by a weaker Canadian dollar, which should give a boost to the manufacturers that drive the economic bus in Ontario and Quebec.

“Manufacturing exports grew at a strong pace in 2014 and the good news is that this pace is expected to be maintained this year which should create some momentum hiring,” she says. Of course, the Conference Board factors in an oil price of $55 a barrel for its calculation, so it’s still a moving target.

Looking farther out, the Conference Board expects jobs growth to rebound in a big way in 2017, responding to an oil price that should gradually rise over the next two years, sparking a wave of non-residential construction.

So things should start looking up, assuming we have the cooperation of a certain important commodity.