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.
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
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Yuri Kageyama is on X:
The Canadian Press. All rights reserved.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
Companies in this story: (TSX:SHOP)
The Canadian Press. All rights reserved.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
Companies in this story: (TSX:REI.UN)
The Canadian Press. All rights reserved.
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