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Black Friday discounts deeper than usual as retailers deal with excess inventory and inflation-weary shoppers

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High inflation has left Canadians counting their pennies far more than usual this year, making the job of retailers to convince them to spend this holiday season harder than ever.

Friday marks the unofficial start of the holiday shopping season, as U.S.-style Black Friday sales are now firmly entrenched in Canada, too.

The annual spending bonanza is different this year, however, as experts say that while there are more deals than usual, they’re coming against a backdrop of consumers who are more cost conscious than ever.

“It’s the year of the discount, it really is,” retail consultant Bruce Winder said in an interview. “Consumers have shown that they’re frugal, they’re stingy this year, and they’re not going to buy unless it’s on sale.”

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A lot of excess product

Excess inventory levels are a big reason why discounts may be deeper than usual this year.

In the early days of the pandemic, retailers struggled with supply chain issues that led to empty shelves in many product categories. But Winder says the pendulum has swung the other way now, as many retailers have far more inventory to move than they normally would this time of year — which is pushing them to discount it more deeply and earlier than they normally would.

“It went from being out of stock to having too much stock in some circumstances, but that bodes well for consumers,” Winder said.

Elliot Morris, grocery and consumer packaged goods leader at EY Canada, says retailers are caught between a rock and a hard place. “As the economy slows, there are areas of inventory which clearly have built up with retailers,” he said. “As we get through the balance of the holiday season, if that inventory continues to sit on shelves … you will see deeper discounts.”

Retailers themselves are keenly aware that customers are choosier than ever this year, which is pushing some new names to get into the Black Friday game.

Melissa Austria runs the clothing store GotStyle in Toronto. This year, she’s planning to offer some discounts during Black Friday sales for price-conscious consumers. (CBC)

Melissa Austria runs GotStyle, a unisex clothing store in Toronto. She typically doesn’t have across-the-board sales this time of year, but today her store will be offering some suits and sport jackets at 50 per cent off.

“We’re noticing we have to bring in things that are a little bit more price sensitive for the everyday casual customer that normally wouldn’t shop here,” she told CBC News in an interview.  “The more casual customer who wouldn’t normally buy a high-ticket item is definitely putting the brakes a little bit.”

Michelle Wasylyshen with the Retail Council of Canada says she’s optimistic about the outlook this year, but it’s clear that pricing will be the biggest consideration.

“I think everybody has concerns of a slowing economy, but it does look like consumers are still spending, they’re just spending more wisely,” she told CBC News in an interview.

Pradheepa Simonpillai was shopping for Christmas presents in Toronto when she spoke to CBC News. She says high inflation has made her more cost conscious than ever. (CBC)

On the streets of Toronto, shopper Pradheepa Simonpillai says she plans to spend less than she normally would this holiday season, even with a young child to care for.

“I don’t buy anything unless it’s absolutely necessary,” she said. “I’m going to find really creative ways not to spend money this season.”

Another shopper, Amir Ali, says he plans to be out shopping on Friday precisely because he thinks there will be deals to be had.

“You’ve just got to make different decisions [but] I’m still going to get some gifts for the kids and stuff like that,” he said.

Annie Titheridge also plans to brave the crowds this year because she likes to be able to touch and feel products before buying them, something she can’t do with online shopping.

“My husband and daughter think I’m mad going shopping on Black Friday,” said Titheridge, who will drive from King City north of Toronto to the Yorkdale Shopping Centre for the day. “But if the deals are good and something jumps out at me, what can I do?”

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Key inflation measure shows price pressures cooled off in November, but remain high – CNN

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New York
CNN
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Another key inflation measure shows price pressures cooled off but remained stubbornly high in November, despite the Federal Reserve’s monthslong efforts to fight inflation through higher interest rates.

The Producer Price Index, which measures prices paid for goods and services by businesses before they reach consumers, rose 7.4% in November compared to a year earlier, the Bureau of Labor Statistics reported Friday. That’s down from the revised 8.1% gain reported for October.

US stocks fell immediately after the report, as economists surveyed by Refinitiv had expected wholesales prices to have risen just 7.2%, annually. The higher-than-expected inflation readings raised concerns about whether the Fed will be able to slow the pace of rate hikes.

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But futures for the Fed funds rate still show a strong likelihood of a half-point increase at the central bank’s policymaking meeting next week, rather than the three-quarter point hike instituted at the last four meetings.

The PPI report generally gets less attention that the corresponding Consumer Price Index, which measures prices paid by US consumers for goods and services. But this is a rare month in which the PPI report came out before the CPI report, which is due out Tuesday.

That and the Fed meeting scheduled for Tuesday and Wednesday next week is making this inflation report of particular importance to investors.

“Next Tuesday’s CPI release will be more important than today’s data, but with traders on edge, any indication that prices remain elevated and that inflation is more sticky than currently believed is a negative for markets,” said Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance.

Overall prices rose a seasonally adjusted 0.3% compared to October — the same monthly increase as was reported in both September and October — but were slightly higher than the 0.2% rise forecast by economists.

Stripping out volatile food and energy prices, core PPI rose 6.2% for the year ending in November, down from the revised 6.8% increase the previous month. Economists had forecast only a 5.9% increase.

Core PPI posted a 0.4% increase from October, a far bigger rise than the revised 0.1% month-over-month rise in that previous month, and twice as big as the 0.2% rise forecast by economists.

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Keystone pipeline temporarily closed following Kansas oil spill

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The energy company in charge of the pipeline has not said what caused the spill or how much oil was released.

The Keystone pipeline has halted operations following an oil spill into a creek in the United States state of Kansas. The pipeline carries more than 600,000 barrels of oil from Canada to the Texas Gulf Coast each day.

Canada-based TC Energy said in a press release that it shut down the pipeline on Wednesday night in response to a drop in pipeline pressure. The company has yet to offer information on the scale and cause of the spill.

“The system remains shut down as our crews actively respond and work to contain and recover the oil,” the release said.

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The spill resulted in oil leaking into a creek in northeastern Kansas and the company has said they were using machinery to prevent the oil from moving further downstream. Pipelines have long spurred concerns about the destructive potential of oil spills.

Another pipeline previously proposed by TC, the Keystone XL pipeline, would have been 1,930 kilometres (1,200 miles) long and cut across US states such as Montana, South Dakota and Nebraska.

That proposal spurred strong opposition from advocates who said it would increase the chance of spills, undermine the rights of Indigenous communities and worsen climate change.

Former President Donald Trump approved a permit for the contentious project in 2017 but a court halted construction in 2018 before the permit was cancelled by President Joe Biden’s administration last year.

TC finally abandoned the effort in June 2021 but has since filed a claim seeking remuneration for losses it says it faced because of the cancellation.

The spill on Wednesday occurred several years after the Keystone pipeline leaked about 1.4m litres (383,000 gallons) of oil in eastern North Dakota in 2019.

As word of the shutdown spread on Wednesday, oil prices ticked upwards by about five percent.

“It’s something to keep an eye on, but not necessarily an immediate impact for now,” said Patrick De Haan, head of petroleum analysis at GasBuddy, which tracks gasoline prices, according to the Associated Press. “It could eventually impact oil supplies to refiners, which could be severe if it lasts more than a few days.”

In their statement, Keystone said their primary focus was the “health and safety of onsite staff and personnel, the surrounding community, and mitigating risk to the environment through the deployment of booms downstream as we work to contain and prevent further migration of the release”.

Previous Keystone spills have resulted in stoppages that lasted up to two weeks. However, analysts have noted that the current stoppage could possibly last longer because it involves a body of water.

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Bank of Canada policy will ‘hit home’ in 2023: David Rosenberg

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The Bank of Canada may be signalling a possible end to its months-long aggressive interest-rate hike cycle, but economist David Rosenberg said next year will see the lagging impact of 2022’s monetary policy “hit home” for Canadians.

“Next year is the payback,” Rosenberg, chief economist and strategist at Rosenberg Research and Associates Inc., said in an interview with BNN Bloomberg.

“2022 was the year of the sharp run-up in rates, 2023 will be the year where the policy lags from those rising rates hit home.”

He made the comments Thursday, a day after the Bank of Canada raised its overnight lending rate by 50 basis points to 4.25 per cent, as the central bank continued with its approach to bringing down inflation.

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Rosenberg predicted a “severe recession” for Canada next year based on the rate hike cycle, calling for a “triple whammy” with economic impacts compounded by high levels of household debt, a housing bubble and ripples in the global economy.

Possible spillover effects from the interest rate cycle could be felt, Rosenberg said, as banks may constrain the availability of credit and spending drops across various sectors.

Based on the latest rate increase, Rosenberg said he predicts at potentially one more rate hike from the bank before a pause. Once inflation starts to come down, Rosenberg said he thinks the central bank may start to cut rates, possibly in the second half of 2023.

“The next stage is going to be waiting for the inflation to come down, which I think it will, and the recession is going to catch a lot of people by surprise,” he said.

A similar pattern may play out in the U.S., but Rosenberg said Canadians are more exposed to higher interest rates through variable-rate mortgages and because more consumer credit is tied to short-term interest rates.

“As bad as it’s going to be in the U.S., and believe me, it’s not going to be a pretty picture there, I think the Canadian situation in the next year is going to be clouded at best,” he said.

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