If you’re wondering what inflation will be like in 2022, economists have a go-to answer: it really depends on just how the Omicron wave of COVID-19 evolves.
“We’re pretty comfortable with the notion that if we can get the global supply chain unglued … inflation will come down over time from where it is now,” says Avery Shenfeld, chief economist at CIBC.
“The problem is, unless you have a crystal ball on COVID and know when we’re going to have enough of the world’s population vaccinated so we don’t keep getting these disruptions to manufacturing and shipping around the world, it’s very difficult to predict how long that’s going to take,” he adds.
Canada’s inflation rate held steady at 4.7per cent in November, matching the reading from October, which was the highest since February 2003, Statistics Canada said on Dec. 15.
Bank of Canada governor Tiff Macklem has called the current bout of rapidly rising prices “transitory but not short-lived.” The central bank has attributed inflation to worldwide supply snarls that are pushing up the prices of anything from food to new vehicles, a rebound in the price of some goods that had become cheaper in the earlier stages of the pandemic, and soaring energy costs.
The federal government’s fall fiscal update, which Deputy Prime Minister and Finance Minister Chrystia Freeland tabled on Dec. 14, warns the rapid spread of the Omicron variant “clouds” the outlook for inflation.
“The path forward will depend on a number of tailwinds and headwinds, which could either bolster the recovery or push it off course. Of concern, the global health situation has deteriorated in recent weeks, with resurgences of COVID-19 in some regions and the emergence of a new variant, Omicron,” the update reads.
Rising case counts tied to the new variant could further complicate global supply chain challenges but also slowed energy demand, temporarily dampening energy prices, economists told Global News.
4:31 Omicron and travel restrictions
Omicron and travel restrictions
Inflation likely to remain elevated next year
Another spike in COVID-19 cases could throw a wrench in the process of getting factory production and global shipping capacity back to normal, Shenfeld says.
Still, some of the factors that drove up prices in 2021 might “ebb somewhat” in 2022, says Doug Porter, chief economist at BMO.
Auto prices, for example, are unlikely to rise as much as they did this year amid the global chips shortage, he says. And Canada’s home prices are also unlikely to replicate the gravity-defying climb of 2021, he adds.
In a report released on Dec. 15, Royal LePage said it expects the aggregate price of a home in Canada to rise 10.5 per cent year-over-year in 2022. While significant, that price gain would be smaller than the year-over-year increases recorded throughout 2021.
In November, for example, Canada’s average home sale price was $720,850, up nearly 20 per cent from the same month last year, according to the latest available data from the Canadian Real Estate Association.
Still, food inflation may yet get worse before it gets better due to the global supply chain logjams, high energy prices and extreme weather events that have curtailed crop yields.
Food prices are expected to rise between five and seven per cent in 2022, the steepest increase yet forecasted by Canada’s Food Price Report, which has been estimating food inflation for the past 12 years. Restaurant meals, dairy, vegetable and bakery prices will deliver the biggest hit to Canadians’ bottom lines, with the average family of four expected to spend an additional $1,000 a year on groceries over the next 12 months.
Overall, BMO expects inflation to average around 3.5 per cent in 2022, much higher than what Canadians have become accustomed to over the past 20 years, but lower than the rate seen over the past few months.
0:48 Bank of Canada renews inflation target, Freeland says
Bank of Canada renews inflation target, Freeland says
Omicron could temporarily result in lower gas prices
The spread of Omicron could temporarily lower prices at the pump by once again depressing global demand for travel and delaying the return to the office for commuters around the world, says Rory Johnston, founder of the Commodity Context newsletter.
Oil prices dropped to around US$73 ($94) a barrel on Tuesday after the International Energy Agency predicted Omicron would dent global demand recovery.
But any dip in gas prices would likely be short-lived, Johnston adds.
OPEC+, which includes members of the Organization of the Petroleum Exporting Countries and other producers like Russia, plans to boost supply every month by 400,000 barrels per day after sharply cutting output last year.
On the other hand, U.S. oil production likely won’t increase as much as it has done in the past in response to previous increases in oil prices, Johnston says.
U.S. oil producers seem keen to reward stockholders with share buybacks and dividend increases rather than spending cash to invest and boost output, he adds.
While motorists may see a bit of a reprieve in the first three months of the year, Johnston says gasoline prices are likely to climb back up later on in the year, making for an expensive driving season in 2022.
3:39 How inflation could impact the housing market in 2022
How inflation could impact the housing market in 2022
Interest rate still likely in the spring
Despite the economic uncertainty tied to Omicron, economists still expect the Bank of Canada to go ahead with interest rate hikes starting in the spring of 2022.
Higher interest rates make it more expensive to borrow, cooling down economic activity and putting downward pressure on inflation.
“We still think that the Bank of Canada can start raising interest rates in the spring,” Shenfeld says.
Still, Canada’s central bank can “afford to take it slowly,” he adds. Interest rates will likely climb by less than a percentage point in 2022, with a few further hikes expected in 2023, according to Shenfeld.
Higher rates would likely dampen inflation quickly, Porter says.
“It might take 18 months (for a rate hike) to fully work its way through the system, but I suspect that rate increases could be having a real effect within six months.”
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.
