Statistics Canada is set to release its January consumer price index report on Tuesday and forecasters expect Canada’s inflation rate fell. A customer browses an aisle at a Metro grocery store In Toronto on Friday, Feb. 2, 2024. THE CANADIAN PRESS/Cole Burston
As the Bank of Canada waits for the right moment to start cutting interest rates, some economists are arguing that its decision shouldn’t hinge on the housing market.
Canada’s inflation rate has edged up and down over the last several months after dropping from its 2022 highs as global price pressures fade and the economy cools.
Statistics Canada is set to release its January consumer price index report on Tuesday and forecasters expect Canada’s inflation rate fell. RBC, CIBC and TD all project the annual rate eased to 3.2 per cent, down from 3.4 per cent in December.
Nathan Janzan, RBC’s assistant chief economist says the slowdown was likely driven by energy and food prices.
“Gasoline prices were lower than a year ago in January and food price growth probably continued to slow on a year over-year-basis,” he said.
“I think the attention will be more focused on the other components of CPI, just watching for signs that broader inflation pressures are continuing to slow, if only at a gradual pace.”
As high borrowing costs cause consumers and businesses to pull back on spending, inflation is expected to slowly inch closer to the two per cent target by the end of the year.
But unlike what’s typical when interest rates rise, the housing market won’t be helping the economy slow. Economists widely expect shelter costs to continue soaring this year, making the Bank of Canada’s job that much harder.
“Food and housing are really the ones that are growing at an uncomfortable level and still (remain) the thorn in the side of Bank of Canada,” said James Orlando, TD’s director of economics.
In December, shelter costs were up six per cent from a year ago and grocery prices rose 4.7 per cent annually.
Orlando argues the central bank shouldn’t hold off on cutting interest rates while waiting for the housing market to slow, given that high interest rates aren’t going to help get those costs down.
In a report on Friday, CIBC also noted the central bank isn’t well-positioned to help ease shelter costs.
“Planned reductions in the inflow of foreign students, and perhaps other (government) measures still to come, might be more potent than high interest rates in calming rising rents, while the mortgage interest cost component would be helped by Bank of Canada rate cuts,” the report said.
The Bank of Canada has recently emphasized the outsized role housing has played in propping up inflation. At the interest rate announcement last month, when it opted to continue holding its key interest rate at five per cent, it noted shelter costs are now the primary driver of above-target inflation.
RBC says mortgage interest costs — which are driven by the central bank’s rate hikes — account for a quarter of inflation. If those costs were removed,the bank says inflation would be in the one to three per cent target range.
The Canadian Real Estate Association recently reported home sales picked up in January for a second month in a row. And while prices fell, the association said rising activity suggests the market is starting to “turn a corner.”
The prospect of a rebound is clearly on the Bank of Canada’s mind. In its summary of the deliberations leading to its Jan. 24 rate decision, the central bank said its governing council is concerned that a housing market rebound this spring could keep inflation above its target, even as price growth elsewhere in the economy eases.
Orlando said if the central bank were to cut rates too early, it could cause extra froth in the housing market. But he said says the Bank of Canada should still focus on how the economy overall is faring, rather than fixating too closely on shelter.
“Are you willing to sacrifice the rest of the economy, to bring down shelter inflation? And our analysis shows that you’re not even going to be able to bring down shelter inflation, no matter what you do with interest rates,” he said.
Orlando said to get to two per cent inflation, prices for other goods and services would essentially have to stop growing to compensate for high housing costs.
In a recent speech, governor Tiff Macklem conceded that the central bank can’t do much when it comes to housing costs.
“Housing supply has fallen short of housing demand for many years. There are many reasons why — zoning restrictions, delays and uncertainties in the approval processes, and shortages of skilled workers. None of these are things monetary policy can address,” Macklem said on Feb. 6.
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.
