Business
Bank of Canada’s hawkish message bolsters case for another large rate hike
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OTTAWA, Oct 6 (Reuters) – The Bank of Canada made clear on Thursday it will not yet be pivoting away from its rapid pace of interest rate increases, with Governor Tiff Macklem saying there were no signs underlying inflation might be easing.
Macklem, in a speech to a business audience in Halifax, said domestic sources of inflation have not eased and are becoming more important, while global pressures are showing signs of cooling.
Canada’s headline inflation rate dropped to 7.0% in August, with core inflation running at about 5%, which Macklem said was too high.
“We have yet to see clear evidence that underlying inflation has come down. When combined with still-elevated near-term inflation expectations, the clear implication is that further interest rate increases are warranted,” he said.
“Simply put, there is more to be done. We will need additional information before we consider moving to a more finely balanced decision-by-decision approach.”
Macklem added that while forward-looking indicators suggest Canada’s economy is starting to slow, labor markets remain tight and demand is still outstripping supply.
That message swung money market bets more heavily toward a 50-bp increase at the Bank of Canada’s next decision on Oct 26. The central bank has so far this year hiked its policy rate by 300 basis points to 3.25%, a 14-year high.
Economists said the tone was clear even though some data in recent weeks that could have shifted the central bank to a less hawkish stance.
“Don’t expect the Bank of Canada to shy away from outsized interest rate increases any time soon,” said Royce Mendes, head of macro strategy at Desjardins Group.
Macklem later said whether the central bank can cool the economy enough to tame inflation without triggering a recession will depend, in part, on how sticky price increases are in Canada.
“There is a path to a soft landing, but it is a narrow path and there are risks,” he said, answering audience questions.
CORE INFLATION
Macklem earlier said the central bank would watch core measures of inflation closely “for clear evidence of a turning point,” particularly as attention shifts to domestic price pressure.
The bank’s focus will be on the two measures known as CPI-trim and CPI-median, he explained, noting CPI-common was becoming more difficult to use due to large historic revisions.
Reuters reported this week that economists and markets were scrambling for a reliable measure of underlying inflation as those same large and frequent revisions have dented the credibility of CPI-common.
“We are reassessing CPI-common,” Macklem said.
He also gave some details on the rate decision summaries the central bank will start publishing next year, saying they would include key points of focus in the deliberations and options discussed, along with clarity around how governing council reached a consensus decision.
“We’ve been doing this to some extent in the (MPR) opening statement. The summary of deliberations will be an opportunity to do this in a more fulsome way and hopefully that can add transparency to our thinking,” he said.
The Canadian dollar was trading about 1% lower at 1.3750 to the greenback, or 72.73 U.S. cents.
Reporting by Julie Gordon and David Ljunggren in Ottawa; Additional reporting by Fergal Smith in Toronto; Editing by Mark Porter, Andrea Ricci and David Gregorio
Our Standards: The Thomson Reuters Trust Principles.
TORONTO – Roots Corp. may have built its brand on all things comfy and cosy, but its CEO says activewear is now “really becoming a core part” of the brand.
The category, which at Roots spans leggings, tracksuits, sports bras and bike shorts, has seen such sustained double-digit growth that Meghan Roach plans to make it a key part of the business’ future.
“It’s an area … you will see us continue to expand upon,” she told analysts on a Friday call.
The Toronto-based retailer’s push into activewear has taken shape over many years and included several turns as the official designer and supplier of Team Canada’s Olympic uniform.
But consumers have had plenty of choice when it comes to workout gear and other apparel suited to their sporting needs. On top of the slew of athletic brands like Nike and Adidas, shoppers have also gravitated toward Lululemon Athletica Inc., Alo and Vuori, ramping up competition in the activewear category.
Roach feels Roots’ toehold in the category stems from the fit, feel and following its merchandise has cultivated.
“Our product really resonates with (shoppers) because you can wear it through multiple different use cases and occasions,” she said.
“We’ve been seeing customers come back again and again for some of these core products in our activewear collection.”
Her remarks came the same day as Roots revealed it lost $5.2 million in its latest quarter compared with a loss of $5.3 million in the same quarter last year.
The company said the second-quarter loss amounted to 13 cents per diluted share for the quarter ended Aug. 3, the same as a year earlier.
In presenting the results, Roach reminded analysts that the first half of the year is usually “seasonally small,” representing just 30 per cent of the company’s annual sales.
Sales for the second quarter totalled $47.7 million, down from $49.4 million in the same quarter last year.
The move lower came as direct-to-consumer sales amounted to $36.4 million, down from $37.1 million a year earlier, as comparable sales edged down 0.2 per cent.
The numbers reflect the fact that Roots continued to grapple with inventory challenges in the company’s Cooper fleece line that first cropped up in its previous quarter.
Roots recently began to use artificial intelligence to assist with daily inventory replenishments and said more tools helping with allocation will go live in the next quarter.
Beyond that time period, the company intends to keep exploring AI and renovate more of its stores.
It will also re-evaluate its design ranks.
Roots announced Friday that chief product officer Karuna Scheinfeld has stepped down.
Rather than fill the role, the company plans to hire senior level design talent with international experience in the outdoor and activewear sectors who will take on tasks previously done by the chief product officer.
This report by The Canadian Press was first published Sept. 13, 2024.
Companies in this story: (TSX:ROOT)
The Canadian Press. All rights reserved.
VANCOUVER – Mediated talks between the union representing HandyDART workers in Metro Vancouver and its employer, Transdev, are set to resume today as a strike that has stopped most services drags into a second week.
No timeline has been set for the length of the negotiations, but Joe McCann, president of the Amalgamated Transit Union Local 1724, says they are willing to stay there as long as it takes, even if talks drag on all night.
About 600 employees of the door-to-door transit service for people unable to navigate the conventional transit system have been on strike since last Tuesday, pausing service for all but essential medical trips.
Hundreds of drivers rallied outside TransLink’s head office earlier this week, calling for the transportation provider to intervene in the dispute with Transdev, which was contracted to oversee HandyDART service.
Transdev said earlier this week that it will provide a reply to the union’s latest proposal on Thursday.
A statement from the company said it “strongly believes” that their employees deserve fair wages, and that a fair contract “must balance the needs of their employees, clients and taxpayers.”
This report by The Canadian Press was first published Sept. 12, 2024.
The Canadian Press. All rights reserved.
MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.
The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.
The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.
This report by The Canadian Press was first published Sept. 12, 2024.
Companies in this story: (TSX:TRZ)
The Canadian Press. All rights reserved.
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