1) “Unambiguously Good”: Inflation Slows In February As Price Growth Unexpectedly Eases

SLOWDOWN WAS DRIVEN BY LOWER PRICES FOR CELLULAR AND INTERNET SERVICES

Courtesy of Barrie360.com and Canadian PressPublished: Mar 19th, 2024

By Nojoud Al Mallees

Canada’s inflation figures came in softer than expected for a second consecutive month, suggesting to economists that the Bank of Canada will have ample grounds to begin cut interest rates in the coming months. 

Statistics Canada’s consumer price index report Tuesday showed the annual inflation rate fell to 2.8 per cent amid sharp declines in cellular and internet services, as well as slower grocery price growth.

Economists were widely expecting Canada’s inflation rate to have risen above the 2.9 per cent rate set in January, in part due to higher gasoline prices.

“This is an unambiguously good report from the Bank of Canada’s perspective. It essentially shows that high interest rates are working to tame inflation, which is what they’re looking for to start cutting interest rates,” Katherine Judge, a director and senior economist and CIBC Capital Markets, said in an interview. 

The federal agency says prices for wireless services were down 26.5 per cent and internet prices fell 13.2 per cent from a year ago.

Prices for food purchased at stores in February were up 2.4 per cent compared with a year earlier, marking the first time prices grocery prices rose more slowly than overall inflation since October 2021.

High interest rates and recovery from supply chain disruptions post-pandemic have helped slow inflation globally. In Canada, price growth has come down significantly from its peak of 8.1 per cent. 

But despite the progress, consumers are still stuck with much higher prices, particularly for groceries. 

Statistics Canada said grocery prices increased 21.6 per cent between February 2021 and February 2024.

Meanwhile, housing costs continue to put upward pressure on inflation, with mortgage interest costs up 26.3 per cent and rent up 8.2 per cent annually.

Still, the report Tuesday is encouraging for the Bank of Canada, which is looking for more evidence that inflation is sustainably headed back to the country’s two per cent target before it moves to lower interest rates. 

February marked the second straight month that inflation fell within the Bank of Canada’s one to three per cent target range. The central bank’s preferred core measures of inflation, which strip out volatility in prices, also fell last month.

“The core measures are the ones that are really important from the Bank of Canada’s perspective, because they exclude things that aren’t a good signal of underlying demand,” Judge said. 

“What makes it such an unambiguously good report is the fact that the weakness wasn’t in these volatile, supply-driven headline items. They were actually beneath the surface.”

Judge said the “last piece of the puzzle” for the central bank will be seeing more softness in the labour market and the economy overall. 

The Bank of Canada has held its key interest rate at five per cent since the summer, opting to give monetary policy more time to work its way through the economy and slow demand.

Recent progress on inflation and a slowdown in the Canadian economy has allowed the Bank of Canada to shift its messaging more recently, signalling that its next move is most likely a rate cut. 

But governor Tiff Macklem has also been clear that the central bank doesn’t want to move too quickly, only to reverse course later. 

“We’ve come a long way in our fight against high inflation. But it’s still too early to loosen the restrictive policy that has gotten us this far,” Macklem told reporters on March 6.

Economists continue to widely expect the Bank of Canada to begin cutting its key interest rate in June or July. 

“Overall, we continue to expect a persistently soft economic backdrop to further slow inflation readings in Canada in the months ahead, allowing for the BoC to start lowering interest rates around mid-year,” RBC economist Claire Fan wrote in a report.

The central bank’s next interest rate announcement is scheduled for April 10.

2) National Home Sales In February Up Nearly 20% Compared With Year Ago

Courtesy of Barrie360.com and Canadian PressPublished: Mar 18th, 2024

The Canadian Real Estate Association says February home sales jumped 19.7 per cent compared with a year ago.

The association says the increase in part reflected weakness last year, as the result for February 2023 was one of the lowest for the month in the past two decades.

On a month-over-month basis, CREA says seasonally adjusted home sales in February dipped 3.1 per cent compared with January.

CREA senior economist Shaun Cathcart says February could end being the “last relatively uneventful month of the year” for home sales, due to pent up demand that has been put on hold amid the high interest rate environment.

The number of newly listed properties was up 1.6 per cent month-over-month.

The actual national average home price was $685,809 last month, up 3.5 per cent from February 2023.

3) Credit Delinquincies Among Canadian Businesses On The Rise: Equifax

HIGHER INTEREST RATES, A SLOWDOWN IN CONSUMER SPENDING, AND PANDEMIC LOAN REPAYMENTS CITED

Courtesy of Barrie360.com and Canadian Press Published: Mar 19th, 2024

A report suggests credit delinquencies among Canadian businesses are on the rise.

Equifax Canada’s latest quarterly business credit trends report says there was a 14.3 per cent uptick in the number of businesses that missed a payment on a credit product between the fourth quarter of 2023 and the fourth quarter of 2022.

The report found a significant surge in installment loan delinquencies, with early−stage delinquencies up by 12.5 per cent and late−stage delinquencies up by 16.3 per cent year−over−year.

Business credit card and line−of−credit delinquencies grew by 1.3 per cent year−over−year.

The report comes on top of recent data showing a 41.4 per cent surge in business insolvencies in 2023 compared with 2022.

Equifax says Canadian businesses are struggling with the impact of higher interest rates, a slowdown in consumer spending and pandemic loan repayments.