Business

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

Published

1 year ago

May 10, 2023

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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Business

Roots sees room for expansion in activewear, reports $5.2M Q2 loss and sales drop

Published

1 day ago

September 13, 2024

Anne Joseph

TORONTO – Roots Corp. may have built its brand on all things comfy and cosy, but its CEO says activewear is now “really becoming a core part” of the brand.

The category, which at Roots spans leggings, tracksuits, sports bras and bike shorts, has seen such sustained double-digit growth that Meghan Roach plans to make it a key part of the business’ future.

“It’s an area … you will see us continue to expand upon,” she told analysts on a Friday call.

The Toronto-based retailer’s push into activewear has taken shape over many years and included several turns as the official designer and supplier of Team Canada’s Olympic uniform.

But consumers have had plenty of choice when it comes to workout gear and other apparel suited to their sporting needs. On top of the slew of athletic brands like Nike and Adidas, shoppers have also gravitated toward Lululemon Athletica Inc., Alo and Vuori, ramping up competition in the activewear category.

Roach feels Roots’ toehold in the category stems from the fit, feel and following its merchandise has cultivated.

“Our product really resonates with (shoppers) because you can wear it through multiple different use cases and occasions,” she said.

“We’ve been seeing customers come back again and again for some of these core products in our activewear collection.”

Her remarks came the same day as Roots revealed it lost $5.2 million in its latest quarter compared with a loss of $5.3 million in the same quarter last year.

The company said the second-quarter loss amounted to 13 cents per diluted share for the quarter ended Aug. 3, the same as a year earlier.

In presenting the results, Roach reminded analysts that the first half of the year is usually “seasonally small,” representing just 30 per cent of the company’s annual sales.

Sales for the second quarter totalled $47.7 million, down from $49.4 million in the same quarter last year.

The move lower came as direct-to-consumer sales amounted to $36.4 million, down from $37.1 million a year earlier, as comparable sales edged down 0.2 per cent.

The numbers reflect the fact that Roots continued to grapple with inventory challenges in the company’s Cooper fleece line that first cropped up in its previous quarter.

Roots recently began to use artificial intelligence to assist with daily inventory replenishments and said more tools helping with allocation will go live in the next quarter.

Beyond that time period, the company intends to keep exploring AI and renovate more of its stores.

It will also re-evaluate its design ranks.

Roots announced Friday that chief product officer Karuna Scheinfeld has stepped down.

Rather than fill the role, the company plans to hire senior level design talent with international experience in the outdoor and activewear sectors who will take on tasks previously done by the chief product officer.

This report by The Canadian Press was first published Sept. 13, 2024.

Companies in this story: (TSX:ROOT)

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Business

Talks on today over HandyDART strike affecting vulnerable people in Metro Vancouver

Published

2 days ago

September 12, 2024

Anne Joseph

VANCOUVER – Mediated talks between the union representing HandyDART workers in Metro Vancouver and its employer, Transdev, are set to resume today as a strike that has stopped most services drags into a second week.

No timeline has been set for the length of the negotiations, but Joe McCann, president of the Amalgamated Transit Union Local 1724, says they are willing to stay there as long as it takes, even if talks drag on all night.

About 600 employees of the door-to-door transit service for people unable to navigate the conventional transit system have been on strike since last Tuesday, pausing service for all but essential medical trips.

Hundreds of drivers rallied outside TransLink’s head office earlier this week, calling for the transportation provider to intervene in the dispute with Transdev, which was contracted to oversee HandyDART service.

Transdev said earlier this week that it will provide a reply to the union’s latest proposal on Thursday.

A statement from the company said it “strongly believes” that their employees deserve fair wages, and that a fair contract “must balance the needs of their employees, clients and taxpayers.”

This report by The Canadian Press was first published Sept. 12, 2024.

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Business

Transat AT reports $39.9M Q3 loss compared with $57.3M profit a year earlier

Published

2 days ago

September 12, 2024

Anne Joseph

MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.

The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.

The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.

Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.

On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.

Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.

This report by The Canadian Press was first published Sept. 12, 2024.

Companies in this story: (TSX:TRZ)

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