Bombardier Inc. said Wednesday it would after the final stages of validating the plane’s overall systems and its software integration took longer than expected, reports the Financial Post‘s Scott Deveau. It is unclear at this point when the Montreal manufacturer intends to fly the CSeries for the first time, but Bombardier said it expected the maiden flight to occur in the “coming weeks.” It is the latest delay in the CSeries program after the company pushed out the first flight by up to a month in late June due to software upgrades on the plane taking longer than expected. Bombardier had insisted the plane would fly by the end of July, however, at that time. Walter Spracklin, RBC Capital Markets analyst, said management was starting to develop a bit of a creditability issue. “We are concerned that management credibility may be impacted with each subsequent delay and should additional issues crop up over the course of the CSeries program, the benefit that investors are willing to provide could diminish,” he said in a note to clients on Wednesday.
More Canadians in debt this year, poll says
A new poll suggests that more Canadians are in debt this year and taking longer to settle their accounts.The study released Wednesday by the Bank of Montreal found that 83% of Canadians surveyed admit to having some form of debt, an increase from 74% a year earlier. But the poll also found that the average amount of monthly debt repayment has fallen by 13% from a national average of $ 1,138 to $ 986. Regionally, those in Alberta had the highest amount of debt payments each month at $ 1,225, while those who live in Quebec reported the least amount at $ 768.BMO vice-president Janet Peddigrew says these results could indicate two things: either people are having more trouble making high monthly payments, or they’re in no hurry to pay down their debt due to current low interest rates.
Earnings bonanza
A raft of Canadian companies reported earnings Wednesday morning. Loblaw kicked off the busy day, posting higher retail sales and profits in the second quarter. The country’s biggest grocery chain, which announced the largest deal in its history last week with the proposed purchase of drug chain Shoppers Drug Mart Ltd., raised its 2013 operating income outlook to mid-single digit growth from an earlier forecast of low-single digit operating income growth. CP Rail delivered a strong second-quarter result, but fell short of expectations as a series of derailments and floods dragged on the fluidity of its network during the quarter. The company reported net income of $ 252-million, or $ 1.43 a diluted share. That was a sizeable improvement over last year when the company delivered earnings of $ 103-million, or 60¢ a share, as its restructuring efforts takes hold. Rogers Communications Inc. said Wednesday it attracted more new mobile subscribers than expected in the second quarter but spending on promotions to attract customers cut into revenues at its wireless division. Other earnings out today: Encana, Cenovus Energy, Boeing.
How Apple plans to return to growth
Apple Inc. Chief Executive Officer Tim Cook, after making do with an aging lineup of phones and tablets last quarter, will need to look to updated devices and fresh ways to distribute its products to return to growth. Apple, which hasn’t refreshed its iPhone and iPad since last year, managed to top analysts’ earnings projections in its fiscal third quarter, even as profit declined from a year earlier and sales were largely flat. The company reported earnings of US$ 7.47 a share in the period, beating the US$ 7.30 average estimate compiled by Bloomberg. The challenge now is using new products and markets to get Apple back on the offensive. The company is slated to release updated versions later this year of its iPhone and iPad, Apple’s top-selling devices. Cook also aims to wring more revenue from Apple’s services, applications and 408-store retail network. Concern about the lack of a new hit product since the death of former CEO Steve Jobs and falling phone prices had helped push Apple’s shares down 40% from their record in September.
In the video segment below, Benedict Evans, strategy consultant at Enders Analysis, argues that Apple has moved to a very safe product model.
Is trade deal about to reignite Europe’s interest in oil sands?
A pending trade agreement between Canada and the European Union includes an increase in the threshold, now at $ 1-billion, at which foreign investment deals are reviewed by Ottawa. While more symbolic than substantial, the new threshold for Europeans, expected to be set at $ 1.5-billion, along with other provisions, and open a new market there for Canadian oil and gas, most recently the target of Asian state-owned enterprises after Canada’s historic trade partner, the United States, stepped back, reports the Financial Post‘s Claudia Cattaneo. “This is a diplomatic handshake of welcome,” said Brian Felesky, Calgary-based vice-chairman of investment banking at Credit Suisse. While he doesn’t expect the deal to result in a rush of new European investment just yet, he said the symbolism is important.
China’s manufacturing engine may be running out of steam
China’s manufacturing , according to a preliminary survey of purchasing managers that casts further doubt on the government’s ability to meet its annual economic growth target. The reading of 47.7 for an index released today by HSBC Holdings Plc and Markit Economics, if confirmed in the final report Aug. 1, would be the lowest in 11 months. Readings below 50 indicate contraction. A separate euro-area gauge showed manufacturing unexpectedly expanded this month. After facing down banks with a funding squeeze, China’s leaders yesterday pledged a five-year ban on construction of new office buildings for the government, the Communist Party and state enterprises. Premier Li Keqiang’s efforts to rein in credit, property prices, and officials’ extravagant spending risk worsening a slump even as state media say 7.5 percent growth is the lower limit for this year.
Meanwhile, Europe’s recession may be coming to an end
Euro-area manufacturing unexpectedly expanded in July for the first time in two years, led by Germany, adding to signs the currency bloc’s economy is emerging from a record-long recession. A manufacturing index based on a survey of purchasing managers rose to 50.1 from 48.8 in June, London-based Markit Economics said today. That exceeds the median estimate of 49.1 in a Bloomberg News survey of 39 economists. A reading above 50 indicates growth. The encouraging news from Europe contrasted with China, the world’s second-largest economy, where manufacturing weakened more than estimated in July, a separate Markit report showed, casting further doubt on the government’s ability to meet its annual economic growth target. “Today’s better-than-expected PMI figures clearly support the notion that the eurozone economy as a whole is leaving recession behind,” said Martin van Vliet, an economist at ING Bank NV in Amsterdam.
U.S. housing starts hit 5-year high
Sales of new U.S. homes rose more than forecast in June to the highest level in five years, a sign builders are benefiting from a lack of supply of existing properties. Purchases climbed 8.3% to an annualized pace of 497,000 homes, highest level since May 2008, the Commerce Department said today in Washington. The median estimate of 77 economists surveyed by Bloomberg called for a gain to 484,000.The gains will keep propelling residential construction and home values, giving the world’s largest economy a boost. Growing employment and the desire to take advantage of historically low borrowing costs before they rise further will probably release pent-up demand from consumers who had held off during the recession and early stages of the expansion.
A second look at surcharging Maybe retailers will be allowed to charge extra fees for premium credit card users after all. Finance Minister Jim Flaherty said he is “carefully reviewing” Tuesday’s ruling by the Competition Tribunal that allowed Visa and MasterCard to continue charging merchants higher fees for so-called “premium” cards, reports the Financial Post‘s Gordon Isfeld. The long-awaited ruling also upheld the restriction on retailers from imposing surcharges on customers who use those cards. “I will be carefully reviewing the Competition Tribunal’s decision and also monitoring any potential appeal,” Mr. Flaherty said, adding that because of “the importance of this issue to all involved,” he has called for a special government committee to look into the issue of payment systems. The committee will include representatives from the credit card industry, small business, retailers and consumers “to discuss this matter and next steps,” the minister said in a statement. Merchants currently face credit card fees from 1.5% for basic credit cards to nearly 3% for those premium cards that offer customers incentives, such as travel points. Those fees amount to about $ 5-billion a year.
New safety rules for railways
If railway companies weren’t legally required to do it before, they are now. Transport Canada on Tuesday announced an emergency directive aimed at increasing rail safety in the wake of the Lac-Mégantic disaster earlier this month, including the immediate halting of one-person crews on trains carrying dangerous goods, reports the Financial Post‘s Scott Deveau. The ministry said although the cause of the derailment of a Montreal, Maine & Atlantic crude train in Lac-Mégantic, which led to at least 42 deaths in the Quebec town, was not known, it would press ahead with the changes. “The safety of Canadians is Transport Canada’s top priority. The department is committed to working with the rail industry to examining any other means of improving rail safety,” the ministry said in a statement. It added that the ministry had been in contact with those in the rail industry, including Canadian National Railway Co., Canadian Pacific Railway Ltd., and the Railway Association of Canada, about the changes.
Consumers are spending again…
Retail therapy is apparently very much alive and very well. The biggest rise in retail sales in more than three years surprised economists Tuesday, with many saying they now expect stronger GDP growth in the second quarter, writes the Financial Post‘s John Shmuel. “Reports of the death of the Canadian consumer have been greatly exaggerated,” said Emanuella Enenajor, economist with CIBC Capital Markets. Ms. Enenajor said the 1.9% jump in retail sales from April to May adds upside to CIBC’s May GDP forecast. More importantly, she said the surprise number “could peg Q2 growth closer to 2% than our earlier 1.6% estimate.” The growth in May retail sales was the biggest month-over-month jump since March 2010, according to Statistics Canada. ”Everything was selling like hotcakes in May, perhaps even hotcakes,” Avery Shenfeld of CIBC WM Economics wrote in a note to clients on Tuesday. The largest sales increase in dollar terms among all subsectors was a 4.3% gain at motor vehicle and parts dealers, reflecting higher sales of light trucks as well as recreational vehicles, motorcycles and boats.
…just not necessarily online
Online spending will account for 8% of overall retail in this country in five years, , according to a new report from Forrester Research. As the Financial Post‘s Hollie Shaw reports, the agency predicts online retail spending in Canada will climb to $ 33.8-billion in 2018 from a level of $ 20.6-billion this year. The news comes as many more bricks and mortar retailers, including those based in the U.S., set up a dedicated Canadian website or extend shipping to this country. High-profile U.S. department store chains such as Macy’s, Bloomingdale’s and J.C. Penney have started shipping to Canada this year, with easy-to-understand shipping policies and prices in Canadian dollars. Traditional bricks and mortar retailers have also been bulking up their online channels, eyeing rival Amazon Canada’s entry into a slew of categories such as toys, electronics, health and cosmetics, entertainment and tools.
Muskrat madness
Notwithstanding the construction crews now swarming Labrador’s Muskrat Falls power dam site, sunk costs in excess of $ 1 billion and a federal loan guarantee standing behind the project, the future of the Newfoundland & Labrador (NFLD) government’s pet megaproject suffered two blows Monday so grave that they threaten the entire thing, writes the Financial Post‘s Tom Adams. Muskrat Falls is seen as a Newfoundland’s new destiny project. The project involves building a new 824 MW power dam on the Lower Churchill River near the town of Goose Bay. The power would be transmitted to the island of Newfoundland by means of a transmission line tunnelled under the Strait of Belisle. Another submarine transmission line would link the island of Newfoundland to Nova Scotia’s Cape Breton. But Hydro Quebec on Monday filed a motion with the Quebec Superior Court seeking clarification of its rights under the Quebec’s existing 1969 Churchill Falls Contract. The core of Hydro Quebec’s case is to claim that it has an exclusive right to purchase virtually all of the power and energy produced by Churchill Falls Generating Station until August 31, 2041, and that Hydro Quebec has the right to control the output of Churchill Falls to optimize the operation of its own power needs.
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