Canada’s annual headline inflation rate came in at 3.4 per cent in December while core inflation measures rose unexpectedly, leaving economists split on when to expect rate cuts.
“It’s a bit disappointing that we’re seeing a little more inflation pressure than anticipated,” Sal Guatieri, senior economist at BMO Capital Markets, told BNN Bloomberg in a Tuesday interview following the release of Statistics Canada’s monthly Consumer Price Index (CPI) report.
He noted that while the headline number was on par with economists’ expectations, the core trim and median measures, which are closely watched by the Bank of Canada, notched a surprise increase, instead of the expected decline.
Guatieri said the print demonstrates that there’s still a ways to go before the Bank of Canada feels confident that inflation will reach its two per cent target – reinforcing his team’s view that the central bank likely won’t cut rates until June.
Core trim and median inflation measures filter out components with more volatile price fluctuations.
Averaged together, they increased 3.65 per cent last month, from an upwardly revised 3.55 per cent a month earlier. That’s faster than the 3.35 per cent pace expected by economists.
ECONOMISTS SPLIT ON TIMING OF RATE CUT
Economists were surprised by the figures, but some were still calling for rate cuts earlier in the year.
The Bank of Canada’s trendsetting interest rate is currently set at five per cent, with most economists expecting rate cuts at some point in 2024.
“There wasn’t a lot of good news in the inflation print today,” said Randall Bartlett, senior director of Canadian economics with Desjardins Group.
“When you unpack what’s underneath the hood of this re-acceleration in headline inflation, you can see that underlying inflation, by a bunch of different measures, moved considerably higher.”
Despite the unfavourable data, Bartlett told BNN Bloomberg that he believes inflation will soon resume a downward trend, and he expects the Bank of Canada to cut rates in the spring.
“Today’s print hasn’t changed our call for a rate cut coming in April of this year,” he said in a television interview.
“We expect inflationary pressures to continue to trend lower and we think that the Canadian economy is likely to tip into a short and shallow recession in the first half of 2024, so those pieces combined, we think, are going to be sufficient to help the Bank of Canada justify moving rates lower.”
Tu Nguyen, economist with tax and consultancy firm RSM Canada, said the Bank of Canada “should begin slashing interest rates as early as April,” arguing that at this point, inflation is mostly being driven by shelter costs.
“Keeping rates higher for longer will not help. Shelter inflation occurs due to two factors; high rent growth due to the housing shortage and rising mortgage interest payments,” Nguyen said in a written statement.
“The housing shortage is a structural problem that will take many years to address … and high mortgage interest payments are directly caused by monetary policy.”
Rising rent prices are another inflationary factor impacting the CPI. They rose 7.7 per cent year-over-year in December following a 7.4 per cent increase in November, Statistics Canada said in their report, noting that high rates are keeping would-be-buyers in the rental market.
“Among other factors, a higher interest rate environment, which can create barriers to homeownership, put upward pressure on the index,” the agency said.
WAGE GROWTH, LAGGING PRODUCTIVITY
Bartlett flagged that productivity in Canada is lagging behind wage growth, creating a significant source of inflationary pressure he predicted will be difficult to overcome.
“What we need to see is more investment across the board, whether it’s in digital technologies, whether it’s in manufacturing equipment, to start increasing Canada’s overall productivity,” he said.
On the other hand, increases to Canada’s population will likely continue to outpace hiring going forward, Bartlett said, increasing the unemployment rate and lessening wage pressures, which should help to ease inflation.
Guatieri acknowledged that there were some signs of slowing inflation in Tuesday’s CPI, with some adjusted measures “removing the sting” from an otherwise negative report.
The headline inflation rate with food and energy excluded saw a lower rate of inflation in December, Guatieri noted.
“(It’s) a bit of a mixed bag. Really it’ll come down to what the Bank Canada continues to pay the most attention to,” he said.
The Bank of Canada’s next interest rate decision is scheduled for Jan. 24.
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.
