KEY MARKET AND INDUSTRY INDICATORS FOR NORTH AMERICA – NOVEMBER 2016

BY: PAUL YOUNG, CPA, CGADATE – DECEMBER 23, 2016

This presentation will look at key market and industry indicators as part on assisting business as part of their business plans to support their customers.

AGENDA• Overall macro and micro indicators for the economy

• Key industry metrics/statistics

ECONOMIC TRENDS (OVERALL)

• GDP Growth Rates

• Canadian Manufacturing Sales

• Canada Trade Imbalance

• Canada Housing Starts

• Canada Employment

GDP GROWTH RATES

Source - Scotiabank

• “Finance Canada is giving business leaders a decidedly gloomy picture of the Canadian economy as part of the department's pre-budget consultations this fall.

• A Dec. 5 slide show, obtained by CBC News, projects weak annual growth of just 1.8 per cent on average until 2029, and cites full-time job losses of 1.9 per cent across Canada so far this calendar year.

• The slide show also notes that productivity is slowing, energy-sector investment is in sharp decline, and household indebtedness is at record levels. ”http://www.cbc.ca/news/politics/finance-liberals-economy-budget-morneau-consultations-jobs-1.3883770

Source – Stats Canada

GRAPH 1 – CANADA MANUFACTURING SALES PER DAY

Source – Stats Canada and http://www.canadianmanufacturing.com/manufacturing/manufacturing-sales-fell-0-8-per-cent-october-statistics-canada-says-180657/

• Statistics Canada says manufacturing sales fell 0.8 per cent to $51.0 billion in October, including declines in the primary metal, petroleum and coal products, and machinery industries.

• Economists had expected a gain of 0.4 per cent for the month, according to Thomson Reuters.

• October’s decline followed two consecutive monthly gains.

• Sales fell in 15 of the 21 industries tracked by Statistics Canada, representing 61 per cent of the manufacturing sector

• Durable goods fell 1.1 per cent, while non-durable goods sales dropped 0.4 per cent.

• Constant dollar sales fell 1.7 per cent in October, reflecting a lower volume of manufactured goods sold.

GRAPH 2 – TRADE IMBALANCE CANADA

Source – Stats Canada

GRAPH 3 – HOUSING STARTS (# OF UNITS)

Source – BMO, Reuters and Scotiabank

Canada housing market shows signs of slowing, but prices rise`

GRAPH #4 – JOB CREATION

Source – Stats Canada Youth joblessness remains high at 12.9% and many new jobs are part time

Source -http://www.cbc.ca/

JOB MARKET / NOVEMBER 2016• Family income for house today is $100K+

“The country added a net total of 11,000 jobs in the month, but all of the gain was in part-time work. Full-time employment fell by 8,700 positions, while part-time jobs grew by 19,400.In fact, over the past year, Canada has lost 30,500 full-time jobs, while gaining 213,700 part-time jobs. That likely helps to explain why wages in Canada are falling, when adjusted for inflation.”Source -http://www.huffingtonpost.ca/2016/12/02/unemployment-canada-november-2016_n_13369418.html

GRAPH 5 – WAGE GROWTH, INFLATION AND HOUSING PRICE CHANGES

Source – CBC, CTV, Stats Canada and Canadian Real Estate association

RETAIL SALES BY SEGMENT

Source – Stats Canada

INDUSTRY INDICATORS

• Automotive

• Class 8 Truck Sales

• Agriculture Equipment

• Metal Processing Centers

• Oil Rig Count

• Power Generation/Canada

COMMODITY INDEX / SCOTIABANK

Source - Scotiabank

COMMODITY PRICES / SELECTED

• Source - BMO

AUTOMOTIVE ANALYSIS

“CEO Mark Fields said Ford’s plan to move production of the Ford Focus from Michigan to Mexico will proceed, in part because US consumers demand low prices for small cars. The Focus starts at $16,775, which is less than half the average price that US consumers pay for new vehicles.” Source - http://www.plant.ca/general/ford-ceo-says-trump-threats-wont-change-small-car-plans-164160/

CLASS 8 TRUCK SALES – SALES PER DAY – UNITED STATES

Source – The Trucker

“Heavy-duty truck sales in the U.S. totaled 29,754 units in November, 22.4% below like-2015’s 35,279, according to WardsAuto data. Canada’s big-truck makers declined again, posting a combined Class 4-8 sales drop of 12.5% on 2,830 deliveries.” Source - http://fleetowner.com/equipment/us-big-truck-sales-plunge-november

AG EQUIPMENT SALES PER DAY

Source – Association of Equipment Manufacturers

• “The figures for the larger tractors however, reflect a volatile landscape of commodity prices and lower crop receipts.

• “Less than 100HP demand is linked to the livestock segment, hobby farmers and housing,” he said in the release. “The relatively strong incomes in the livestock sub-segment that helped support the demand are expected to become subdued over the next year.

• “The larger, production ag tractor sales (>100HP 2WD and 4WD) continue to show negative trends. With no improvement in crop receipts forecasted for 2016 compared to 2015, and subdued commodity prices, the USDA expects the current downturn to continue into 2017.”

• In Canada, tractor and combine sales seemed to be a little better with sales of tractors under 40HP and tractors between 40 and 100HP rising by 9.6 and 14.2 per cent, respectively, between November 2015 and 2016. But sales of 4WD tractors fell by 13.9 per cent during the same period. ” Source - http://www.farms.com/

METAL PROCESSING CENTERS (SALES PER DAY) – EXPRESS IN TONNE

Source – American Machinist

“Metals shipments increased modestly in November. Inventories continued to decline by substantial percentages.

”Source - http://www.msci.org/news-media/news-for-members/update-archive/news-detail/articleid/1343/metal-shipments-increase-in-november

OIL RIG COUNT

CANADA POWER GENERATION

Source - http://www.iea.org/media/statistics/surveys/electricity/mes.pdf

• “Adele Benoit doesn't have any Christmas lights on her house this year – it's an expense she says she can't afford.

• The Cambridge mother of three says her hydro electricity bill has gone from $250 every two months last year, to a bill this month for $550 for two months of power. ” http://www.cbc.ca/news/canada/kitchener-waterloo/cambridge-andrea-horwath-hydro-rates-wynne-1.3896095

STEEL PRODUCTION

Source - https://www.worldsteel.org

• “Rising demand and shrinking import competitiveness have the American steel market poised to enter a pricing sweet spot, Jefferies said in a research note published Monday.”

• “Rising steel prices in Asia have disincentivized the continent's steelmakers from exporting their products to the U.S., Jefferies analyst Seth Rosenfeld wrote.

• "Domestic steel consumers can find reasonable bargains from domestic suppliers," he added.”• Source -

https://www.thestreet.com/story/13922484/1/jefferies-sees-fertile-ground-for-steelmakers-like-u-s-steel-x-and-nucor-nue.html

DURABLE GOODS – UNITED STATES

Source – BMO

Source – CNBC

• Machinery purchases are still down 4.1% for YTD October 2016 as compare to YTD October 2015

• Electrical equipment is about 1% up YTD October 2016 as compare to YTD October 2015

• Overall, new orders are down 2% compare to YTD October 2015