The cost of living is increasing at its fastest pace in almost 40 years right now, with data out of the U.S. on Friday showing the country’s inflation rate hit 6.8 per cent last month.
The U.S. Bureau of Labour Statistics said Friday that higher costs for gasoline, shelter, food and new and used vehicles were the biggest factors in pushing the rate to its highest point since June of 1982.
Canadian data for November is not yet available, but it, too, is expected to rise from the 18-year high of 4.7 per cent it hit last month.
While the number was in line with what economists were expecting, the figure is nonetheless eye-popping. The reasons for why inflation is rising around the world are complex, but they boil down to a combination of unprecedented government stimulus cash and record low interest rates colliding with booming consumer demand for goods and services at a time when some supplies are stretched thin.
The pandemic made it harder to produce and ship goods, but after more than a year of lockdowns around the world, consumers are sitting on record amounts of cash and in a mood to spend it.
High inflation means the cost of just about everything is going up, and incomes aren’t going up by nearly enough to offset it, yet.
Wage data from the same U.S. labour department shows that the average full time private sector worker in the U.S. was earning $29.61 an hour in November of 2020, and that figure has risen to $31.03 last month.
That’s an increase of about 4.7 per cent, which means the cost of living for the typical salaried worker is going up 40 per cent faster than their pay packet is.
In Canada over that same period, Statistics Canada reports that the average worker was making $29.60 an hour last November, and $30.40 this year. That’s an increase of 2.7 per cent — and inflation is almost twice that, at 4.7 per cent.
Alex Pelle with investment bank Mizuho says it’s telling to see demand remaining elevated even as the price of just about everything increases.
WATCH | Economist says consumers are in the mood to spend
Prices for cars and airline tickets rising
2 hours ago
Duration 1:09
Economist Alex Pelle with investment bank Mizuho says a big factor pushing up inflation is that strong consumer demand for goods and services coming out of the pandemic. 1:09
“The consumer has a lot of spending power, and that is a serious driver of inflation,” he said.
“When we look a year from now, two years from now, we don’t expect the pace of price increases to stay this high, but prices also won’t go back down to where they were before.”
Rate hikes now more likely
Economist Sal Guatieri with Bank of Montreal agrees that inflation will stick around a while yet, saying “there’s little near-term relief in sight,” and noting that even the so-called core rate that strips out volatile items like food and energy prices is rising at an almost five per cent pace right now.
Normally, an inflation rate this high would compel a central bank to ratchet up its lending rate to cool things down. But that isn’t happening right now because the U.S. Federal Reserve is worried about taking away the stimulus from an economy still vulnerable to the ongoing COVID-19 pandemic.
But Guatieri says Friday’s numbers will almost certainly force higher rates to come sooner rather than later.
“The Fed has little choice but to … prepare for the possibility of much earlier rate hikes than it was planning just a few months ago,” he said.
Inflation hasn’t been this high since Michael Jackson’s Thriller was topping the charts, economist Leslie Preston noted. (TIFF)
Leslie Preston at TD Bank agrees with that assessment, saying in a note to clients that while some of the inflation may be temporary, in that it is coming from short term surges in demand for things like travel, there are still “strong price pressures across a broad array of categories.”
“Not since the release of Thriller have inflation pressures been this strong in the U.S.,” she said, referring to Michael Jackson’s zombie-themed 1982 hit.
And that means debt-laden consumers should prepare themselves for something equally scary lurching its way toward them soon.
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.
