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Analysts shocked as we open wallets

OTTAWA -- Canadian consumers went on a shopping spree in May, triggering a stunning jump in retail sales that will almost certainly help boost second-quarter economic growth beyond expectations.

The raw numbers stunned economists who had expected a modest 0.4 per cent bump. Instead, Statistics Canada said the retail sector boosted sales five times that by 1.9 per cent during the month to $40.4 billion.

Manitoba posted the third monthly increase in retail sales in the last five months with a healthy 2.3 per cent increase from April to May to $1.48 billion.

According to Statistics Canada, only Saskatchewan and Quebec has stronger growth than Manitoba.

Particularly meaningful for gross domestic product growth, sales in volume terms also expanded by 1.9 per cent, meaning the increase was not related to currency fluctuations.

"It's hard to say what happened, everything went right it seems," said Jimmy Jean, an economist with Desjardins Capital Markets.

"We're probably seeing a little bit of catch-up because since 2011, sales have been almost flat. In the first quarter we had consumer spending rising 0.9 per cent (annualized). It was one of the weakest numbers since the recession."

For the second quarter that began in April, however, retail sales are tracking at an eight per cent clip in volume terms.

Jean said the report puts in jeopardy the Bank of Canada's bleak expectation for a meagre one per cent growth number in the second quarter. For GDP to drop that low after the first quarter's 2.5 per cent expansion -- and given relatively rosy numbers since -- the bank would need to be proven prescient in estimating a 1.3-point hit from the Alberta floods and Quebec construction strike in June.

Other economists also doubted the quarter would show such weakness. CIBC chief economist Avery Shenfeld, who is rarely counted among the bulls on growth, believes the retail number likely means his 1.6 per cent forecast is likely a couple of ticks too low.

"With sales up 1.9 per cent in real terms, forecasts for May GDP will be revised higher, as will our forecast for Q2," he said in a note to clients.

The Canadian dollar was ahead 0.56 of a cent to 97.23 cents, strengthened on the retail-sales news.

 

Buhler secures $20M in credit

BUHLER Industries Inc. has finalized a $20-million line of credit with Export Development Canada to assist its sales growth of Versatile tractors to its overseas customers.

The Winnipeg-based farm implement manufacturer is the only Canadian manufacturer of tractors.

Since the majority interest in the company was purchased by Russian combine manufacturer Rostselmash Ltd. in 2007, exports of Buhler's powerful Versatile tractors to eastern Europe have grown.

Buhler's new EDC credit facility is in addition to the company's $60-million line of credit with the Bank of Montreal and a $7.5-million line of credit has with CIBC.

Under the terms and conditions of the agreement, the company may take advantage of the credit facility and draw down funds depending on its financial position.

The company has manufacturing facilities and warehouses in both Canada and the United States.

 

Costly cities for expats

TORONTO -- A new study says Vancouver is the most expensive city in Canada, but it doesn't crack the Top 10 as one of the costliest cities for expatriate employees to be transferred to because of their jobs.

Mercer's 2013 Cost of Living Survey says Canadian cites, overall, moved down in the ranking this year due to a slight decrease in the Canadian dollar against the U.S. dollar.

The city of Luanada in Angola is the world's most expensive city for expats, followed by Moscow where a cup of coffee can cost $8.29.

The study also says the cost of housing for expats is usually the biggest expense for employers. A luxury two-bedroom unfurnished apartment in Moscow costs $4,600 a month.

 

-- from the news services

 

Republished from the Winnipeg Free Press print edition July 24, 2013 B7

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