Business

Rapidly cooling housing market helps to quell Canadian inflation

Published

2 years ago

January 27, 2023

Housing costs, and Canada’s unique way of capturing them in inflation, suggest that consumer price gains may slow rapidly in coming months.

As the largest expense for most households, shelter makes up 30 per cent of Canada’s consumer price index — a similar proportion to the U.S. But unlike its southern neighbor, Canada’s inflation metrics capture these costs in a way that’s more sensitive to changes in interest rates and home prices.

That means Canadian inflation measures are influenced by both the rise in mortgage costs as the Bank of Canada aggressively raises rates and by the resulting slowdown in the housing market.

Embedded Image

While inflation was still 6.3 per cent in December, price pressures in Canada are expected to lose momentum thanks to base effects and continued cooling in the Canadian real estate market, which features shorter-duration mortgages than the U.S. and a higher share of variable-rate home loans.

Those differences are one reason economists say the Bank of Canada — which said this week it intends to pause its tightening campaign — won’t have to raise borrowing costs as high as the Federal Reserve.

“One way Canada actually stands out from a lot of other countries is that when the Bank of Canada raises interest rates, there’s a temporary boost to inflation because of this mortgage interest rate effect,” Stephen Brown, an economist at Capital Economics, said by phone.

CROSS-BORDER DIFFERENCES

The U.S. calculates housing inflation using owners’ equivalent rent, or the price a property owner would have to pay to rent to live there. Canada calculates it through a formula that includes mortgage interest, replacement cost, property taxes and maintenance.

Shelter has been a major driver of Canadian inflation in recent months, and was up 7 per cent in December. The mortgage interest and rent sub-indexes saw year-over-year jumps of 18 per cent and 5.8 per cent, respectively.

But with rates now on hold, Brown expects mortgage interest costs to peak before dropping sharply in the second half of this year. Other inflation inputs, such as commissions on home sales, are already easing.

His forecast is for increases in the shelter component of CPI to fall to 3.5 per cent by June and to 1.5 per cent by December. With energy, food and goods prices also expected to fall sharply, Brown said the Bank of Canada may be “underestimating how quickly overall inflation will decline.”

Macklem’s rapid interest-rate hikes, to 4.5 per cent from an emergency pandemic low of 0.25 per cent in March, have dramatically cooled the real estate market. Prices have fallen more than 13 per cent since their peak last year. Higher mortgage costs are also squeezing some of the world’s most indebted households, forcing them to tighten their purse strings.

“The bank might be feeling like they’ve done enough on housing, and that the effect is going to unravel over the coming months,” said Rishi Mishra, an analyst at Futures First Canada Inc. “They don’t want to press down too hard, just because how large the exposure is to housing market in Canada.”

Source link

Business

Netflix’s subscriber growth slows as gains from password-sharing crackdown subside

Published

1 day ago

October 17, 2024

Anne Joseph

Netflix on Thursday reported that its subscriber growth slowed dramatically during the summer, a sign the huge gains from the video-streaming service’s crackdown on freeloading viewers is tapering off.

The 5.1 million subscribers that Netflix added during the July-September period represented a 42% decline from the total gained during the same time last year. Even so, the company’s revenue and profit rose at a faster pace than analysts had projected, according to FactSet Research.

Netflix ended September with 282.7 million worldwide subscribers — far more than any other streaming service.

The Los Gatos, California, company earned $2.36 billion, or $5.40 per share, a 41% increase from the same time last year. Revenue climbed 15% from a year ago to $9.82 billion. Netflix management predicted the company’s revenue will rise at the same 15% year-over-year pace during the October-December period, slightly than better than analysts have been expecting.

The strong financial performance in the past quarter coupled with the upbeat forecast eclipsed any worries about slowing subscriber growth. Netflix’s stock price surged nearly 4% in extended trading after the numbers came out, building upon a more than 40% increase in the company’s shares so far this year.

The past quarter’s subscriber gains were the lowest posted in any three-month period since the beginning of last year. That drop-off indicates Netflix is shifting to a new phase after reaping the benefits from a ban on the once-rampant practice of sharing account passwords that enabled an estimated 100 million people watch its popular service without paying for it.

The crackdown, triggered by a rare loss of subscribers coming out of the pandemic in 2022, helped Netflix add 57 million subscribers from June 2022 through this June — an average of more than 7 million per quarter, while many of its industry rivals have been struggling as households curbed their discretionary spending.

Netflix’s gains also were propelled by a low-priced version of its service that included commercials for the first time in its history. The company still is only getting a small fraction of its revenue from the 2-year-old advertising push, but Netflix is intensifying its focus on that segment of its business to help boost its profits.

In a letter to shareholder, Netflix reiterated previous cautionary notes about its expansion into advertising, though the low-priced option including commercials has become its fastest growing segment.

“We have much more work to do improving our offering for advertisers, which will be a priority over the next few years,” Netflix management wrote in the letter.

As part of its evolution, Netflix has been increasingly supplementing its lineup of scripted TV series and movies with live programming, such as a Labor Day spectacle featuring renowned glutton Joey Chestnut setting a world record for gorging on hot dogs in a showdown with his longtime nemesis Takeru Kobayashi.

Netflix will be trying to attract more viewer during the current quarter with a Nov. 15 fight pitting former heavyweight champion Mike Tyson against Jake Paul, a YouTube sensation turned boxer, and two National Football League games on Christmas Day.

Source link

Business

All Magic Spells (TM) : Top Converting Magic Spell eCommerce Store

Published

2 days ago

October 17, 2024

Sven Eggers

Product Name: All Magic Spells (TM) : Top Converting Magic Spell eCommerce Store

Click here to get All Magic Spells (TM) : Top Converting Magic Spell eCommerce Store at discounted price while it’s still available…

All orders are protected by SSL encryption – the highest industry standard for online security from trusted vendors.

All Magic Spells (TM) : Top Converting Magic Spell eCommerce Store is backed with a 60 Day No Questions Asked Money Back Guarantee. If within the first 60 days of receipt you are not satisfied with Wake Up Lean™, you can request a refund by sending an email to the address given inside the product and we will immediately refund your entire purchase price, with no questions asked.

(more…)

Business

CPC Practice Exam

Published

2 days ago

October 17, 2024

Sven Eggers

Product Name: CPC Practice Exam

Click here to get CPC Practice Exam at discounted price while it’s still available…

All orders are protected by SSL encryption – the highest industry standard for online security from trusted vendors.

CPC Practice Exam is backed with a 60 Day No Questions Asked Money Back Guarantee. If within the first 60 days of receipt you are not satisfied with Wake Up Lean™, you can request a refund by sending an email to the address given inside the product and we will immediately refund your entire purchase price, with no questions asked.