This presentation will look at both industry metrics as well as economic trends related to Canada and United States.
The presentation will provide information on the economy as part of companies looking for growth options within their business segments.
Key Market and Economic Indicators for Canada and United States - September 2016
1. KEY MARKET AND INDUSTRY
TRENDS FOR NORTH
AMERICAN – SEPTEMBER 2016
BY: PAUL YOUNG, CPA, CGA
OCTOBER 23, 2016
2. AGENDA• GDP Growth
• Commodity Index
• Durable goods
• Automotive
• AG Equipment
• Oil Rigs
• Electrical Production – Canada
• Electrical Production – United States
• Class 8 Truck Sales
• Metal Centers
• Steel Production
• PMI Index – USA
• PMI Index – Canada
• Productivity
• Machine Tools Orders
• Housing Starts
• Employment – Canada
• Manufacturing Sales by Province
• Manufacturing Sales by Segment
• Retail Sales / Canada
• Retail Sales / United States
4. USA GDP
• Real GDP rose 2.9% annualized in Q3, a bit above the consensus and our
estimates. This was the fastest growth in two years and a marked
improvement on the 1% average of the previous three quarters. The
standout (and most surprising) driver was exports, up a blistering 10%. With
imports rising a more subdued 2.3%, trade added a meaty 0.8 ppts to Q3
growth. Also helping with a 0.6-ppts contribution was a rebound in
inventory investment following a rare outright decline in Q2. However, the
relatively small increase ($13 billion) suggests inventory rebuilding will
support production in coming quarters.
• Another expenditure area returning from the dead was investment in
structures, fueled by oil drilling, which gushed 5.4% higher, the first
significant increase in nearly two years. Investment in intellectual products
remains a bright light, rising 4% after jumping 9% the prior quarter. Good
news for future productivity.
• On the downside, consumer spending growth moderated to 2.1% on
weakness in nondurables, though this followed a hearty 4.3% bounce.
• Business investment in equipment remained in the doghouse, shrinking for
a fourth straight quarter, possibly because of heightened political
uncertainty ahead of the election.
• State and local governments, facing slower revenues and rising expenses for
Medicaid and public employee pensions, cut expenditures for the third time
in four months.
• Residential construction slid for a second straight quarter, though partly
because of a particularly wet August. A recent spike in building permits
points to a better fourth quarter.
• All in, the healthy rebound in Q3 GDP sets the stage for growth holding
above 2% in Q4, with inventory rebuilding offsetting a likely pullback in
exports.
• The rebound weighs toward a December Fed rate hike. Still, year-over-year
GDP growth of just 1.5% and ongoing weakness in capex likely ensures a
turtle-like pace of tightening.
6. DURABLE GOODS / USA
Source - https://www.census.gov/manufacturing/m3/adv/pdf/durgd.pdf
For the 21st straight month, Core
Durable Goods Orders contracted
YoY - the longest in US history
outside of a recession. Business
spending proxy segment of the
report, New Orders non-defense,
ex-aircraft plunged 1.2%
MoM (much worse than the -0.1%
expectation) and down 3.6% YoY.
Source -
http://www.zerohedge.com/news
/2016-10-27/core-durable-goods-
orders-extend-longest-non-
recessionary-streak-us-history-
business
14. CLASS 8 TRUCK SALES
Source: The Trucker and Ward Automotive
15. METAL PROCESSING CENTERS
Source: American Machinist
After increasing their steel and aluminum delivery volumes during August, U.S. metals service
centers turned in much lower totals during September, and Canadian centers showed slight
increases in steel shipments but a small decline in aluminum deliveries. Those results reflect the
month to month change in activity, while the year to year results declined “across the board,”
according to the Metals Service Center Institute.
20. PRODUCTIVITY
• If you listen to the wrong people, the North American manufacturing industry is doomed.
• There is no denying that the U.S. and Canada have been losing jobs to offshore competition for almost half a century. From 2000 to 2010
alone, 5.6 million jobs disappeared.
• Interestingly, though, only 13 percent of those jobs were lost due to international trade. The vast remainder, 85 percent of job losses,
stemmed from “productivity growth” — another way of saying machines replacing human workers.
• For many, this scenario is even worse. China and Mexico may be “taking our jobs,” but at least they’re going to other humans. Robots, on
the other hand, allegedly threaten to wipe entire sectors, like manufacturing, right off the map. The level of fear-mongering here is high:
“How to Keep Your Job When Robots Take Over.” “Is a robot about to take your job?” “What Governments Can Do When Robots Take Our
Jobs.” It’s enough to make anyone a little nervous.
• The facts, however, tell a different story. Over the last 20 years, inflation-adjusted U.S. manufacturing output has increased by almost 40
percent, and annual value added by U.S. factories has reached a record $2.4 trillion. While there are fewer jobs, more is getting done.
Manufacturing employees are better educated, better paid and producing more valuable products — including the technology that
enables them to be so much more productive.
• In fact, there are currently two million jobs going unfulfilled in the manufacturing sector, largely due to an aging workforce — the
average age of a manufacturing worker is almost 45, two and a half years above the national non-farm median — and negligible interest
in those jobs from younger generations.
Source: https://techcrunch.com/2016/10/09/industrial-robots-will-replace-manufacturing-jobs-and-thats-
a-good-thing/
23. BUILDING PERMITS/CANADA
Source: Stats Canada
• Municipalities issued
$7.3 billion worth of
building permits in
August, up 10.4% from
July. This marked the
second consecutive
monthly increase.
• The gain in August was
mainly attributable to
higher construction
intentions in Quebec,
Ontario and British
Columbia
29. RETAIL SALES BY SEGMENT
• Source – Stats Canada
• Sales at motor vehicle and parts dealers
were down 0.5% in August, in large part
because of weaker sales at new car dealers
(-1.1%) and, to a much lesser extent, used
car dealers (-0.6%).
• Following declines in July, sales rose at
other motor vehicle dealers (+5.4%) and
automotive parts, accessories and tire
stores (+1.1%). The gains at automotive
parts, accessories and tire stores were
concentrated in Ontario and Quebec.
• General merchandise stores (-0.9%)
recorded their third decline in four months.
• After increasing 1.5% in July, sales at
building material and garden equipment
and supplies dealers were down 0.5% in
August
Source: Stats Canada
30. SUMMARY
• Sales at U.S. retail stores rebounded in September, with auto dealers and gas stations racking up the biggest gains, in a sign consumers are
still spending enough to keep the economy on a slow but steady growth path. Retail sales have grown more slowly for a year and a half,
partly because much cheaper gas allowed Americans to save on fuel. Yet shoppers are still frugal, seeking out deals and relying more on
cheaper Internet sites such as Amazon AMZN, -0.76% rather traditional store-front retailers such as Macy’s M, -3.34% - Source:
http://www.marketwatch.com/story/us-retail-sales-climb-06-in-september-2016-10-14-81033311
• Years of increased hiring and a slow acceleration in worker pay have laid a foundation for steady household spending. While third-quarter
purchases will probably fall short of the vigorous pace from April through June, the broad-based pickup across the retail spectrum shows
household demand may be gathering pace. Source: https://www.businessoffashion.com/articles/news-analysis/us-retail-sales-rose-in-
september-by-the-most-in-three-months
• Friday’s retail-sales report showed sales rose last month across the majority of segments, though it didn’t track spending on most services,
including health care and housing. Spending at restaurants and bars jumped 0.8% from August, the largest one-month jump for the
category since February. Americans last month continued to shift their spending to e-commerce platforms likeAmazon.com from
traditional brick-and-mortar retailers. Sales in the nonstore category, including online retailers, were up 11% in the first nine months of
2016 compared with a year earlier. Sales at department stores were down 4.8% over the same period. Sales at electronics and appliance
stores fell 0.9% in September despite the release ofApple Inc.’s new iPhone 7. The release of new iPhone models in September 2015 had
coincided with the only monthly sales increase for the electronics category during the second half of last year. But Ms. Rosner said a
delayed sales boost could materialize in the coming months. Source: http://www.wsj.com/articles/u-s-retail-sales-rose-0-6-in-september-
1476448594
31. RETAIL SALES BY KEY SECTORS
Source:
https://www.census.go
v/retail/marts/www/m
arts_current.pdf
32. ISSUES FACING THE ECONOMY
• CETA and Canada
• Softwood Lumber
• Drywall tariff
• Sluggish retail sales
• Sluggish wage growth
• Sluggish employment/Canada
• Household Debt
• Slow global economy
• New government policies (CPP hikes and Carbon Taxation/Pricing