A person fills up their tank at a gas station in La Puente, Calif., on Sept. 7.FREDERIC J. BROWN/AFP/Getty Images
U.S. consumer prices increased by the most in 14 months in August as the cost of gasoline surged, but the annual rise in underlying inflation was the smallest in nearly two years, likely giving the Federal Reserve cover to leave interest rates unchanged next Wednesday.
The mixed report from the Labor Department on Wednesday was published a week before the Fed’s policy meeting and followed data this month showing an easing in labour market conditions in August. Economists, however, believe officials at the U.S. central bank will continue to signal an additional rate hike this year given the stickiness in services inflation.
“There is nothing here to seriously put a Fed rate hike on the table next week, but there is enough to keep the debate about the need for one more hike in 2023 alive,” said Conrad DeQuadros, senior economic adviser at Brean Capital in New York.
The consumer price index increased by 0.6 per cent last month, the largest gain since June 2022, after rising 0.2 per cent for two straight months. August’s increase in the CPI was in line with economists’ expectations.
Gasoline prices, which jumped 10.6 per cent after climbing 0.2 per cent in July, accounted for more than half of the increase in the CPI. Gasoline prices accelerated in August, peaking at $3.984 per gallon in the third week of the month, according to data from the U.S. Energy Information Administration. That compared to $3.676 per gallon during the same period in July.
The cost of shelter continued to rise, though rents are moderating. Food prices gained 0.2 per cent for the second straight month. Grocery food prices rose 0.2 per cent, slowing from June’s 0.3 per cent advance as more expensive meat, fish and eggs were partially offset by cheaper dairy products, fruit and vegetables.
In the 12 months through August, the CPI accelerated 3.7 per cent after climbing 3.2 per cent in July. While that marked the second straight month of a pickup in annual inflation, year-on-year consumer prices have come down from a peak of 9.1 per cent in June 2022.
Stocks on Wall Street rose. The dollar was steady against a basket of currencies. U.S. Treasury yields were mostly lower.
“As long as the economy remains resilient and inflation doesn’t reignite, the market can rally into year-end, once we get past the seasonally weak months of September and October,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina.
Excluding the volatile food and energy components, the CPI increased 0.3 per cent. A 1.2 per cent drop in prices of used cars and trucks was offset by higher costs for motor vehicle insurance, hospital services, prescription medication as well as household furnishings and operations. The so-called core CPI had increased 0.2 per cent for two consecutive months.
New motor vehicle prices rebounded 0.3 per cent, the largest gain since March, helping to slow down the pace of goods deflation. Core goods prices dipped 0.1 per cent after decreasing 0.3 per cent in July.
The small decline suggests that progress towards low inflation would be slow. That was underscored by core services, which rose 0.4 per cent for the second month in a row.
Services were mostly lifted by a 0.3 per cent rise in the cost of shelter. Owners’ equivalent rent (OER), a measure of the amount homeowners would pay to rent or would earn from renting their property, climbed 0.4 per cent after rising 0.5 per cent in July.
A further cooling in rents is expected as more apartment buildings come on the market. Airline fares rebounded 4.9 per cent, reflecting higher jet fuel prices. But the cost of hotel and motel accommodation declined 3.6 per cent. Services less rents jumped 0.5 per cent after gaining 0.2 per cent in July.
In the 12 months through August, the core CPI increased 4.3 per cent. That was the smallest year-on-year rise since September 2021 and followed a 4.7 per cent gain in July. The core CPI advanced at a 2.4 per cent annualized rate in the last three months, the slowest pace since March 2021, a sign of progress towards the Fed’s 2 per cent target.
Financial markets continued to see less than a 50 per cent chance of the Fed raising rates again this year, according to CME Group’s FedWatch tool. Since March 2022, the central bank has raised its benchmark overnight interest rate by 525 basis points to the current 5.25 per cent-5.50 per cent range.
Some economists believe inflation risks are tilted to the upside in the near term, citing rising insurance costs, especially for motor vehicles. Health insurance costs in the CPI report are expected to rise from October through next spring after the Labor Department’s Bureau of Labor Statistics, which compiles the report, recently announced changes to its methodology for measuring these costs.
A strike in the automobile sector could disrupt supply chains and boost motor vehicle prices if it lasted more than a month, with auto inventories already lean.
United Auto Workers union President Shawn Fain said on Wednesday the union was still seeking significant pay hikes as talks continued with the Detroit Big Three automakers, a day before four-year labour deals were set to expire.
A wage agreement would follow on the heels of recent hefty union contracts, including one at United Parcel Service. But economists were not convinced that would boost wage inflation, noting that a small fraction of workers were union members.
“If a strike is averted, and auto workers see large wage gains, the impact on aggregate earnings and inflation would be negligible given the number of workers affected, who comprise just 0.1 per cent of the private payroll employment,” said Michael Pearce, lead U.S. economist at Oxford Economics in New York.
“Disruptions to supply would likely delay the recovery in supply chain conditions and put further upward pressure on new vehicle prices in the meantime.”
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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