On Tuesday, Statistics Canada announced that the Consumer Price Index (CPI) measured inflation at 2.5% for July, down from 2.7% in June and the bottom inflation rate since 2021.
Downturn in headline inflation driven by housing component, 12-month percentage change
| CPI basket items | June 2024 | July 2024 |
|---|---|---|
| Consumer price index for all items | 2.7% | 2.5% |
| Eat | 2.8% | 2.7% |
| Shelter | 6.2% | 5.7% |
| Housekeeping, furnishings and equipment | -0.9% | -0.1% |
| Clothing and shoes | -3.1% | -2.7% |
| transport | 2% | 2% |
| Health and private care | 3.0% | 2.9% |
| Leisure, education and reading | 0.6% | -0.2% |
| Alcoholic beverages, tobacco products and recreational cannabis | 3.1% | 2.7% |
If you ignore the query of security, we are literally approaching near-zero inflation. And that is important for 2 reasons:
- The housing inflation rate (primarily a measure of rent and mortgage costs) fell significantly between June and July.
- When the Bank of Canada (BoC) cuts rates of interest, the inflation component of the Consumer Price Index (CPI) is sure to fall because Canadians could have access to lower-interest mortgages.
In particular, passenger automobile prices fell by 1.4% in July. Clothing and shoes were also cheaper by 2.7%. Food and gasoline prices rose by 2.7% and 1.9% respectively. British Columbia and New Brunswick recorded the very best inflation increases, while Manitoba and Saskatchewan recorded the bottom.
It’s pretty clear that there isn’t any longer a general inflation crisis in Canada. It’s now just a house affordability issue. Economists generally predicted that this continued trend of falling inflation would clear the best way for more rate cuts in the approaching months. Money markets are actually forecasting a cut of not less than 0.25% on September 4, with a 4% likelihood that the cut might be 0.50%. Looking ahead, those self same markets are forecasting a 76% likelihood that we’ll see a 2% drop by October 2025.
I hope you snapped up those guaranteed investment certificates (GICs) or bonds when you could possibly still get those high rates of interest. Check out MoneyDown’s list of the perfect GIC rates in Canada and my article on Low-risk investments at MillionDollarJourney.com.
A direct hit for Target
Target Corporation significantly exceeded its earnings forecast on Wednesday and shareholders were capable of record a rise in value of 11.20%. The Minneapolis-based discount retailer is the seventh largest within the USA.
Retail earnings highlights
All figures are in US dollars.
Target’s sales rose 3% last quarter after five consecutive quarters of declining sales. An increase in purchases of essential items similar to clothing was accountable for the positive turnaround.
However, Target COO Michael Fiddelke was very cautious. “While we are pleased with our performance so far this year, our view of the consumer remains largely unchanged. The range of opportunities and the macroeconomic backdrop in consumer data and in our business remain unusually strong.” And Target CEO Brian Cornell cited price reductions and a price-conscious consumer as reasons for the increased footfall within the quarter.
For Lowes, nevertheless, it was a quite mediocre earnings report, as the corporate significantly exceeded earnings expectations but revised its full-year forecast downward. Shares lost about 1% on Tuesday after the outcomes were announced.
Lowe’s CEO Marvin Ellison said consumers are waiting for rate of interest cuts before tackling major home improvement projects. Since 90% of Lowe’s customers are homeowners (not builders), they’re particularly sensitive to rate of interest fluctuations, he explained. Store sales fell 5.1% 12 months over 12 months.
