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Hearth & Home October 2018

Logging in the northern reaches of the country.

Canada: An Introduction

By Richard Wright

The Canadian economy appears to be doing well, and the 15% tax imposed on foreign homebuyers in Vancouver seems to be having a positive effect.

It has been the second worse wildfire season in British Columbia. There were over 2,051 fires reported, and presently there are over 500 burning. The air in Vancouver has been worse than that of Beijing (and that’s saying something!). Airlines have had to cancel some flights due to lack of visibility in the area.

As of Saturday, Sept. 1, 2018, more than 1,000 properties were under evacuation order, and 10,000 more were placed on alert. So far this season, over 1.252 million hectares have been burned in British Columbia – that equals 4,834 square miles.

The past two years have marked the worst wildfire seasons in B.C.
Photo COURTESY: ©2018 public safety canada. www.securitepublique.gc.ca.

Ed. Note: We read a number of newspapers each day, plus three or four weekly newsmagazines and, at the beginning and end of each day, get news from CNN and perhaps a few other channels. Yet we had no idea of the extent of the problem being experienced by our friends in British Columbia, until we interviewed Martin Miles, CEO of Valor/Miles Industries, for this issue.

Are we in the U.S. so parochial that we care little about our geographic neighbors?

A Canadian movement is in place and growing each day. It’s called “Buy Canadian,” and it’s the result of the U.S. president imposing strict tariffs on some Canadian goods – lumber, aluminum, and steel – and treating the Canadian Prime Minister, Justin Trudeau, with disrespect.

In hearth, patio and barbecue shops throughout Canada, many owners are now buying only Canadian products. Why? Mainly because their customers will not purchase U.S. goods – at least for the time being.

MARTIN MILES

CEO, Valor/Miles Industries

Martin Miles.

Tariffs: “The U.S. and Canada are huge trading partners, and our economies have done well through a lot of free trade. I think, among Canadian consumers, there is a feeling of hurt about our perceived treatment especially since Canada’s trade is basically in balance. Overall, I think the U.S. benefits more than Canada when you consider services and goods. It is very balanced. It has worked out to everyone’s benefit.

“I hear it among friends and acquaintances when they talk about supporting French’s ketchup instead of Heinz ketchup, issues like that. So there is a general awareness of where products are made, and supporting Canadian products. I don’t know that it has extended into the fireplace business, but in general there is a sentiment or concern.”

Competition: “Things like the exchange rate of the dollar often affects the competitiveness of U.S.-made products in Canada, so when the dollar becomes stronger, the products tend to be more competitive. It is one of those top of mind things; it’s in the news and in the face of consumers.”

Economy: “Right now it’s very strong in pretty well all sectors, and I guess that is the concern: Is there going to be a downturn because of these factors. One of which is we’ve had this unrealistic, unforeseeable boom in housing, in prices and sales particularly in some of the major urban centers such as Vancouver and Toronto. There have been measures brought in to try to control some of the foreign buyers who are buying housing speculatively. That seems to be having an impact.

“In Vancouver, a 15% tax was imposed on foreign buyers, and, particularly in the high end and even with some of the condos, it appears to be working. A lot of buildings were selling out two years before they were built.

“There has been an impact in sales in the last couple of months, and that is one of the things that everybody is watching, whether there is a retrenchment on housing prices and whether that will have an affect. Will consumers suddenly feel that their main asset is depreciating rapidly? Certainly we don’t have a bubble that is going to burst, but we may have a slowdown in housing that could have an affect on this business.

“But currently, it is going very strong. Just finding employees is noticeably more difficult because the prime rates are low and the economy is currently very strong in most sectors. Currently, dealers are busy, and they seem to be anticipating going forward into the fall season and having a good year.”

Monthly High/Low for U.S. Dollar to Canadian Dollar
Spot Exchange Rate 2018
U.S. Sales of Hearth Products Year to Year 2005 to 2016

Recently, the U.S. dollar has been worth around $1.30 or so in Canada. That’s a range that has been prevalent for many years, with a few anomalies.

U.S. Sales of Hearth Products Year to Year 2005 to 2016
U.S. Sales of Hearth Products Year to Year 2005 to 2016

Zero Net: (Ed. Note: A year ago, there was great concern that natural gas would be eliminated from the Metro Vancouver area as the local government attempted to become one of the Greenest cities on the planet.)

“That issue seems to have resolved into something that is workable. We have to credit the approach of the industry (Hearth, Patio & Barbecue Association Canada) in bringing awareness to the issue because some of the original proposals were not just floated, but almost instituted without consultation. A lot of people were very concerned.

“Since then there has been an awareness campaign that the industry mounted, and it has had an affect; there have been many more consultations with the City of Vancouver and it has resulted in much more reasonable regulations, at least in the short to medium term. It looks like that issue has been resolved without any major damage or hardship to the industry. It really shows the value of engagement and dialogue.

“We need to be proactive as an industry. We need to anticipate. We need to be ready to engage and be consistent with our solutions.”

LAURA LITCHFIELD

Executive Director, HPBAC

Laura Litchfield.

Zero Net: “That issue now has spread beyond Vancouver, and into the entire Province of British Columbia (BC). The BC government has put out intention papers for comments regarding measures that would “electrify the Province.” They want to reduce or eliminate the use of natural gas for residential and commercial use.

“That is a long-term goal, and it’s to please the Green Party which is the party that keeps them in power because it is a minority government. We (HPBAC) have provided comments against those measures. Now, nothing has been proposed yet as far as regulations. It’s more like strategic plans moving forward.

“But now we’re not talking just about Vancouver anymore. We’re potentially talking about the Province of BC, and it’s not so much Zero Net anymore as it is eliminating the use of natural gas and other fossil fuels. I’m sure it would be a phased approach, beginning with new builds, but ultimately that is their goal.

Canada Unemployment Rate
U.S. Sales of Hearth Products Year to Year 2005 to 2016

As in the U.S., Canada’s rate of unemployment is extremely low, and the economy is doing well.

Canada Housing Starts
U.S. Sales of Hearth Products Year to Year 2005 to 2016

Canadian seasonally adjusted housing starts decreased to 206,000 units in July of 2018 from a downwardly revised 246,000 units in June.

“At that point, electricity would be the only choice, and the Provincial government has approved the Site C dam in, I believe, northern British Columbia. That was very controversial, and will create a greater capacity for hydroelectric power in the Province.

“I don’t like the way the government is making choices for people without the general public being informed as to what it will mean for them. I believe that greenhouse gas (GHG) emission reduction can be achieved through energy efficiency, and through conservation. I don’t think they have given enough time and effort toward figuring out how to do it using current infrastructure.

“I have to believe that building infrastructure on the scale of the Site C dam that they are proposing will have a major effect on GHG emissions. And there are all kinds of other environmental effects as well. So jumping into a course of action without really investigating the potential consequences is not helpful.

“In the short term, we (HPBAC) have had success, and we hope to have success in the long term as well. We are encouraging people to vote the Vision party out of office.”

Housing: “From what I’ve been reading and hearing lately, a lot of people, in particular the Millennials, are giving up on home ownership. One of the major Toronto papers ran an article recently that said now renters are moving out of the city because rental fees have become exorbitant.

“I live in a small town, and Millennials are struggling to buy homes there; the prices of homes are $300,000 to $500,000, and those homes are snapped up very quickly. There is usually a bidding war. It’s getting depressing.”

More Stories in this Issue

Perspective: O Canada

When the word “tariff” was first raised, all heads turned toward China. After all, they’re the country that plays fast and loose with its currency, and treats other patents as if they were their own.

» Continue

Not Too Bad

By Tom Lassiter

Currency imbalance, Trump’s tariffs, the “Buy Canadian” movement – patio manufacturers are smiling, retailers not so much.

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Canadian I-Que

By Lisa Readie Mayer

Pizza ovens, built-in grills, and Outdoor Rooms are hot; Prop. 65, and tariffs are lurking.

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Shrine of Barbecue

By Lisa Readie Mayer

In Ottawa, partners have created a retail juggernaut with in-depth staff training, great customer service, and a fun atmosphere, and now they're heading south (Florida?).

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2018 August Business Climate

In early September, Hearth & Home faxed a survey to 2,500 specialty retailers of hearth, patio, and barbecue products, asking them to compare August 2018 sales to August 2017. The accompanying charts and selected comments are from the 196 useable returns.

» Continue