Food and shelter proceed to drive inflation
While falling gasoline prices led to a moderate annual inflation rate of 1.6% in September, Statistics Canada said the annual inflation rate had risen back to 2% in October.
Although gas prices proceed to fall, food and shelter make up such a big portion of Canadians’ spending that they dominate the general inflation picture. Shelter accounts for 28.6% of Canadians’ spending, and the share for food has now risen to 16.7%. So while items like clothing and transportation don’t actually increase, food and shelter increase the annual average to 2%. While housing inflation is slowly falling, it continues to be an issue for a lot of Canadians.
| CPI systems | September 2024 | October 2024 |
|---|---|---|
| All | 1.6% | 2.0% |
| Eat | 2.8% | 3.0% |
| Shelter | 5.0% | 4.8% |
| Household operations, furnishings and equipment | -0.2% | -0.1% |
| Clothing and shoes | -4.4% | -2.3% |
| transport | -1.5% | 0.2% |
| Health and private care | 3.1% | 3.1% |
| Recreation, education and reading | 0.0% | -0.9% |
| Alcoholic beverages, tobacco products and recreational cannabis | 3.0% | 3.0% |
While services prices rose 3.6% annually in October, goods prices rose just 0.1%. (Generally, the service includes items akin to haircuts, home services, or dental care. Goods include the whole lot from televisions to shoes.) Property tax increases are all the time the main focus of the October inflation report because they’re then recalculated annually. This yr, property taxes rose 6% (in comparison with a 4.9% increase last yr).
This rise in inflation will make it tougher for the Bank of Canada (BoC) to justify large rate cuts in the long run. If inflation stays stubbornly high, the BoC may cut back its forecast rate cuts. Given the US election results we commented on last week, “higher for longer” rates of interest may possibly be the brand new likely path.
Canada’s Best Dividend Stocks
Missing the goal
One of the most important surprises on Wall Street this week was Target’s massive earnings miss. Shares fell 21% on Wednesday after Target said it was struggling to generate sales despite a powerful discounting strategy.
American Retailer Earnings Highlights
It’s been an enormous week for major US retailers. All figures below are in US dollars.
- Walmart (WMT/NYSE): Earnings per share of $0.58 (versus $0.53 forecast). Revenue of $169.59 billion (vs. $167.72 billion forecast).
- Target (TGT/NYSE): Earnings per share of $1.85 (versus $2.30 forecast). Revenue of $25.45 billion (versus estimate of $25.21 billion).
- Lowe’s (LOW/NYSE): Earnings per share of $2.89 (vs. $2.82 billion forecast) and revenue of $23.59 billion (vs. $23.91 billion forecast).
Target CEO Brian Cornell blamed the poor quarter on “ongoing weakness in discretionary categories” in addition to poor inventory management. Target incurred increased shipping costs because it paid high fees to bring goods into its warehouses within the run-up to the October port strike. These costs, combined with stagnant demand, led to costly inventory build-up. Shares are actually at a 52-week low.
In stark contrast to Target’s big profit drops, its big blue competitor continued to indicate why the corporate is best in school. Walmart once more beat earnings, showing the financial stability that investors love. Aside from higher inventory management, the principal reason for Walmart’s higher sales is probably going the 2 retailers’ different product mixes. At this point, Walmart is a big food market with a big everything-else store attached 60% of Walmart’s U.S. business is grocery (while only 23% of Target’s sales are grocery).
While online sales rose 10% at Target, they rose 22% at Walmart. John David Rainey, Walmart’s chief financial officer, said customers remain “price and value focused.” He added that tariffs could force Walmart to boost prices, but that it was too early to say which goods could be most affected by the tariffs.
Shares of Lowe’s fell about 3% on Tuesday as the corporate announced an increase in profits but a slight decline in sales. CEO Marvin Ellison said management expects customers to delay home improvement projects until rates of interest fall. They assume that sales will increase in 2025.
