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U.S. inflation rate cools to 4.9% but consumer prices still stubbornly high

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Consumer prices in the United States rose again in April, and measures of underlying inflation stayed high, suggesting that rising costs could persist for months to come.

Prices rose 0.4 per ent from March to April, the government said Wednesday, up from 0.1 per cent from February to March. Compared with a year earlier, prices climbed 4.9 per cent, down slightly from March’s year-over-year increase.

The nation’s inflation rate has steadily cooled since peaking at 9.1 per cent last June, but remains far above the Federal Reserve’s two per cent target rate.

The Fed is paying particular attention to so-called core prices, which exclude volatile food and energy costs and are regarded as a better gauge of longer-term inflation trends.

Core prices rose 0.4 per cent from March to April, the same as from February to March. It was the fifth straight month that core prices have risen by 0.4 per cent or more. Increases at that pace are far above the Fed’s two per cent target.

Compared with a year ago, core prices rose 5.5 per cent, just below a yearly increase of 5.6 per cent in March.

Economists say the overall slowdown in U.S. inflation since last summer might turn out to have been a relatively easy phase of the nation’s drive to conquer inflation.

The supply chain snarls that left many grocery shelves bare and delayed the delivery of furniture, cars, electronics and numerous other goods have been resolved. Gas prices have dropped since topping $5 US a gallon nationally after Russia’s invasion of Ukraine, though they rose again in April after OPEC agreed to cut oil output.

Service prices still up

Yet unlike goods prices, the costs of services — from restaurant meals to auto insurance, dental care to education — are still surging.

A major reason is that companies have had to raise pay in those industries to find and retain workers. Federal Reserve officials say that fast-rising wages, while good for workers, have contributed to higher costs in services industries, because labour makes up a significant portion of those industries’ expenses.

Last week, the Fed signaled that it might pause its rate increases after imposing 10 straight hikes, so that it could take time to assess how higher borrowing costs have affected the economy. The full economic impact of the hikes, though, might not become evident for months.

For more than two years, high inflation has been a significant burden for America’s consumers, a threat to the economy and a frustrating challenge for the Fed. The central bank has raised its key interest rate by a substantial five percentage points since March 2022.

Besides making borrowing far more expensive for consumers and businesses, those higher rates have contributed to the collapse of three large banks in the past two months and to a likely pullback in bank lending. The result could be a further weakening of the economy.

Even more ominously, the government’s debt ceiling may be breached by early June, and Republicans in Congress are refusing to raise the cap unless President Joe Biden and congressional Democrats agree to sharp spending cuts. If the debt ceiling isn’t raised in time, the nation would default on its debt, a scenario that could ignite a global economic crisis.

When they met last week, the Fed’s policymakers agreed to raise their benchmark rate by a quarter-point, to about 5.1 per cent — the highest level in 16 years.

That means that for the first time since the pandemic started, the central bank rate is now higher than the official inflation rate.

Most economists think the rate hikes will, over time, have their intended effect. Yet most also worry that the hikes will weaken the economy so much as to tip it into a recession sometime this year.

 

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Japan’s SoftBank returns to profit after gains at Vision Fund and other investments

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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.

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Yuri Kageyama is on X:

The Canadian Press. All rights reserved.

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Trump campaign promises unlikely to harm entrepreneurship: Shopify CFO

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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.

Companies in this story: (TSX:SHOP)

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RioCan cuts nearly 10 per cent staff in efficiency push as condo market slows

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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.

Companies in this story: (TSX:REI.UN)

The Canadian Press. All rights reserved.

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