Propelled by surging costs for gas, food and housing, U.S. consumer inflation jumped 7.9 per cent over the past year, the sharpest spike since 1982 and likely only a harbinger of even higher prices to come.
The increase reported Thursday by the Labour Department reflected the 12 months ending in February and didn’t include most of the oil and gas price increases that followed Russia’s invasion of Ukraine on Feb. 24.
Since then, average gas prices nationally have jumped about 62 cents US a gallon to $4.32, according to the American Automobile Association (AAA).
Even before the war accelerated price increases, robust consumer spending, solid pay raises and persistent supply shortages had sent U.S. consumer inflation to its highest level in four decades. What’s more, housing costs, which make up about a third of the government’s consumer price index, have risen sharply, a trend that’s unlikely to reverse anytime soon.
For most Americans, inflation is running far ahead of the pay raises that many have received in the past year, making it harder for them to afford necessities like food, gas and rent. As a consequence, inflation has become the top political threat to President Joe Biden and congressional Democrats as the midterm elections draw closer. Small business people say in surveys that it’s their primary economic concern, too.
Seeking to stem the inflation surge, the Federal Reserve is set to raise interest rates several times this year, beginning with a modest hike next week. The Fed faces a delicate challenge, though: if it tightens credit too aggressively this year, it risks undercutting the economy and possibly triggering a recession.
WATCH | Canada is raising interest rates, too:
Bank of Canada hikes interest rate in attempt to curb inflation
8 days ago
Duration 2:00
The Bank of Canada is raising interest rates for the first time since 2018 to try to curb inflation, but the rate hike could add to the financial strain of people already struggling. 2:00
Energy prices, which soared after Russia’s invasion of Ukraine, jumped again this week after Biden said the U.S. would bar oil imports from Russia. Oil prices did retreat Wednesday on reports that the United Arab Emirates will urge fellow OPEC members to boost production. U.S. oil was down 12 per cent to $108.70 US a barrel, though still up sharply from about $90 US before Russia’s invasion.
Yet energy markets have been so volatile that it’s impossible to know if the decline will stick. If Europe were to join the U.S. and the United Kingdom in barring Russian oil imports, analysts estimate that prices could soar as high as $160 a barrel.
The economic consequences of Russia’s war against Ukraine have upended a broad assumption among many economists and at the Fed: that inflation would begin to ease this spring because prices rose so much in March and April of 2021 that comparisons to a year ago would show declines.
Rate likely headed higher
Should gas prices remain near their current levels, Eric Winograd, senior economist at asset manager AllianceBernstein, estimates that inflation could reach as high as nine per cent in March or April.
The cost of wheat, corn, cooking oils and metals such as aluminum and nickel have also soared since the invasion. Ukraine and Russia are leading exporters of those commodities.
Food costs have risen sharply in recent months, due in part to higher costs for energy. (Drazen Zigic/Shutterstock)
Even before Russia’s invasion, inflation was not only rising sharply but also broadening into additional sectors of the economy. Many prices have jumped over the past year because heavy demand has run into short supplies of items like autos, building materials and household goods.
Rent headed higher, too
Even for some services unaffected by the pandemic, like rents, costs are surging at their fastest pace in decades. Steady job growth and high home prices are encouraging more people to move into apartments, elevating rental costs by the most in two decades. Apartment vacancy rates have reached their lowest level since 1984.
In the final three months of last year, wages and salaries jumped 4.5 per cent, the sharpest such increase in at least 20 years. Those pay raises have, in turn, led many companies to raise prices to offset their higher labour costs.
Soaring energy costs pose a particularly difficult challenge for the Fed. Higher gas prices tend to both accelerate inflation and weaken economic growth. That’s because as their paycheques are eroded at the gas pump, consumers typically spend less in other ways.
That pattern is akin to the “stagflation” dynamic that made the economy of the 1970s miserable for many Americans. Most economists, though, say they think the U.S. economy is growing strongly enough that another recession is unlikely, even with higher inflation.
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.
