Canada shaved a full percentage point off its annual inflation rate in May, but there are ample signs that restoring price stability will be a difficult and lengthy task for the Bank of Canada.
The Consumer Price Index rose 3.4 per cent in May from a year earlier, down from 4.4 per cent in April, Statistics Canada said Tuesday in a report. The slowdown met analyst expectations on Bay Street. Adjusted for seasonality, the CPI rose 0.1 per cent on a monthly basis.
The May result benefited from favourable comparisons to a year ago. Commodity prices surged after Russia’s invasion of Ukraine in early 2022, but those initial effects are no longer part of the year-over-year calculation of consumer price inflation.
For instance, gasoline prices – which peaked in the late spring of 2022 – fell 18.3 per cent on an annual basis.
Still, inflation is proving tricky to tame. The short-term trend for various measures of core inflation – which strip out volatile components of the CPI – is tracking just below 4 per cent annually.
The Bank of Canada has expressed concern that inflation could get stuck materially above its 2-per-cent target. This prompted the central bank to raise its policy rate to 4.75 per cent from 4.5 per cent earlier this month, ending a pause to changes in monetary policy.
“It looks almost like a done deal that the Bank of Canada will raise rates” again in July, said Royce Mendes, head of macro strategy at Desjardins Securities, in a note to clients.
Grocery costs are still climbing at robust rates. Those prices rose 9 per cent on an annual basis, down slightly from 9.1 per cent in April. Bakery products rose 15 per cent, while cereal products jumped 13.6 per cent. Price growth accelerated at restaurants.
In a report published Tuesday, the federal Competition Bureau said the country needed “more competition” in the grocery sector to improve products and help lower prices.
Mortgage interest costs rose nearly 30 per cent from a year earlier. The Bank of Canada’s rate-hike campaign is having a significant impact on this area of the CPI, particularly as homeowners renew their mortgages at higher rates or as they dedicate more of their monthly payments to the interest portion, rather than principal.
Excluding mortgage interest costs, the CPI rose 2.5 per cent in May from a year earlier, down from 3.7 per cent in April.
Canada’s affordability crisis is adding more pressure to the rental market, in which prices rose 5.7 per cent in May from a year earlier.
There is, however, major progress in some industries. Prices for durable goods rose 1 per cent in May on an annual basis, slowing from 2.2 per cent in April, as supply chains return to more normal operations. Prices for furniture fell 2.9 per cent, the most since the early stages of the COVID-19 pandemic.
The Bank of Canada is aggressively raising interest rates to tamp down demand and bring inflation under control. However, consumer spending has been exceptionally strong to start the year. This, along with other strong economic data, convinced the bank that monetary policy was not restrictive enough to subdue CPI growth.
The bank’s governing council “felt that a broad range of indicators had increased their concern that the disinflationary momentum needed to bring inflation back to the 2-per-cent target could be waning,” read a summary of deliberations for the June rate hike. That decision brought the benchmark interest rate to its highest level since 2001.
Back in April, the Bank of Canada projected that annual inflation would fall to around 3 per cent in the summer months, before declining to the 2-per-cent target in late 2024.
Andrew Grantham, senior economist at CIBC Capital Markets, said that inflation could soon fall below 3 per cent.
“However, inflation could accelerate slightly again after that, particularly if food prices continue to climb, and as the base effects from energy prices become less favourable,” he wrote in a research note. “Overall, today’s data don’t change the fact that inflation is running hotter” than the bank estimated in April.
The central bank will publish updated economic projections at its next rate decision on July 12. Financial analysts widely expect the BoC to hike its benchmark interest rate by another quarter percentage point, taking it to 5 per cent.
“Bank of Canada policymakers won’t breath a huge sigh of relief after this report as core inflation remains sticky and has yet to show signs of a durable slowdown,” Benjamin Reitzes, a rates and macro strategist at Bank of Montreal, said in a client note.
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.
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.
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.
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