BUSINESS NOTES

January 14 1985

BUSINESS NOTES

January 14 1985

BUSINESS NOTES

Bucking a trend

Even though experts expect Canada's overall economic growth to slow to about three per cent in 1985 after increasing by an estimated four per cent in 1984, retailers in most parts of the country may buck that trend. Last week Leonard Kubas, president of Kubas Research Consultants of Toronto, reported that retail spending by Canadians on everything from cars to clothing rose by 9.6 per cent last year to $116.5 billion and

that it should rise by nine per cent in 1985 to a total of $127 billion. Kubas said auto sales will increase by more than 11 per cent in 1985 after soaring by 15.5 per cent last year, and he predicted that department store sales will continue an upward trend,achieving a 6.9-per-cent gain this year.Retailers, who suffered a small decline in sales in 1982, welcomed the report but some cautioned that it might be overly optimistic. Said Richard Sharpe, chairman of Sears in Toronto: “There is still a high level of uncertainty among Canadians.”

Mobil’s runaway gusher

After incurring more than $40 million in recovery costs over the past four months, Mobil Oil Canada Ltd. is still wrestling with the maverick N-91 gas well. Located 170 nautical miles east of Halifax in the West Venture gas field near Sable Island, the well, known as the Zapata Scotian, has been idle since Sept. 20 when a pressure buildup forced the crew to evacuate. An emergency team then plugged the well with special blowout prevention equipment. Last week Mobil, the well’s operator, continued to monitor pressure in the well in an effort to determine what to do next. Still, company spokesman Thomas Cooney said that the troublesome well will not affect the overall program for development of the field by Mobil and its partners, Petro-Canada Inc. (30 per cent), Texaco Canada Resources Ltd. (18 per cent), Nova Scotia Resources Ltd. (nine per cent) and East Coast Energy Ltd. (one per cent). Nova Scotia Resources president Peter Outhit said that an underground blowout is always a serious and costly matter. But he added that it will not “affect the pace of exploration in any way.”

A matter of choice

Less expensive telephones will soon become a reality for Nova Scotians. The provincial public utilities board recently ruled that, as of Jan. 1, homeowners can buy their own extension telephones—whether it is a $15 plain black box or a fancy $99 clock-radio phone—instead of leasing them from Halifaxbased Maritime Telegraph & Telephone Ltd.(MT&T). Starting in March, businesses also will be able to shop for competitive packages of switchboards, handsets and servicing agreements from the handful of national and local “interconnect” firms which analysts expect to enter the new market. Said Don Farmer, MT&T’S vice-president of corporate affairs: “We are going to have to look over our shoulders. Before, we had 100 per cent of the market.” Several established firms from Central Canada, including Canadian Telecommunications Group and Telecommunications Terminal

Systems, both based in Toronto, are expected to set up shop in Nova Scotia. Elisabeth Angus, research director for Torontobased consultants, Angus TeleManagement Group Inc., says that several Halifax-based paging and intercom companies will also go into the phone-selling business. Not all will survive, however. Since 1982 (competition first came to Quebec and Ontario in 1980 and British Columbia in 1981) 55 firms have dropped out of the telephone industry, which now has 125 companies. New Brunswick is expected to follow Nova Scotia’s lead later this year, leaving telephone subscribers in Saskatchewan, Manitoba and part of Newfoundland as the only Canadians without the freedom to choose where to buy their phones.

End of a golden era

Gold, the precious metal that entranced the pharoahs and transfixed hordes of modern-day prospectors, has fallen into at least temporary disfavor. Last week bullion prices dropped below the $300 (U.S.) level in London for the first time since 1982. Hapless investors who bought gold near its record high of $875 (U.S.) an ounce on Jan. 21, 1980, have watched their investment decline by as much as 65 per cent in the intervening years. Traditionally, investors bought gold as a haven against international tensions and rising inflation. But according to Donald McEwen, president of Goldcorp Investments Ltd. of Toronto, historically high interest rates—the prime rate remains at 11.25 per cent in Canada —have made other investments such as bonds and bankterm deposits more attractive. As well, fears of rising inflation have subsided in the near-term. Still, bullion’s supporters point out that since 1971, when gold was $40 an ounce, its price has far outstripped inflation. And McEwen says that the current decline has bottomed out. Said McEwen: “I certainly would encourage people to buy gold at this point.”

Sticking with a winner

Home computers, apparently, are no match for the cuddly Cabbage Patch doll. Last week Coleco Industries Inc., the Hartford, Conn.-based toy manufacturer,announced that it would stop production of its 18-month-old Adam computer and concentrate on selling the very low-tech dolls — of which it has sold 20 million in North America since June, 1983.Even though the production halt will cost Coleco $110 million, analysts

said the company behaved rationally by abandoning a failing market. Coleco’s withdrawal left only two companies, Atari Corp. and Commodore International Ltd., in the lower-priced end of the home computer business. Those companies sell their computers for less than $500 in Canada. At the same time, demand for the cheaper computers has declined as consumers have turned to more sophisticated machines selling in the $l,000-and-up range. Said Allan Wilson, director of research for Evans Research Corp. in Toronto: “People bought lower-priced machines and found that they were not good for anything but games.” With a home computer disaster behind it, Coleco spokesmen say that they are confident that Cabbage Patch dolls will have a more lasting appeal than the Adam.