On Tuesday, Statistics Canada said the Consumer Price Index (CPI) measured inflation at 2.5% in July. That's down from 2.7% in June, and the lowest rate of inflation on record since 2021.
Headline inflation led by housing sector, 12% monthly change
| CPI basket items | June 2024 | July 2024 |
|---|---|---|
| All-items Consumer Price Index | 2.7% | 2.5% |
| Food | 2.8% | 2.7% |
| Shelter | 6.2% | 5.7% |
| Housework, furniture and equipment | -0.9% | -0.1% |
| Clothes and shoes | -3.1% | -2.7% |
| Transportation | 2% | 2% |
| Health and personal care | 3.0% | 2.9% |
| For recreation, education and learning | 0.6% | -0.2% |
| Alcoholic beverages, tobacco products and recreational cannabis | 3.1% | 2.7% |
In fact, if you escape the equation, we are approaching zero inflation. And that's important for two reasons:
- The rate of housing inflation (primarily the ratio of rent to housing costs) fell sharply between June and July.
- As the Bank of Canada (BoC) lowers interest rates, the inflation component of the CPI will inevitably decline as Canadians will have access to lower-priced debt.
Notably, passenger car prices fell by 1.4% in July. Clothing and footwear also fell by 2.7%. Food and gas increased by 2.7% and 1.9% respectively. British Columbia and New Brunswick had the highest rate of inflation, while Manitoba and Saksatchewan had the lowest.
It is clear that there is no longer a problem of inflation in Canada. Now it's a matter of not being able to afford the home right now. Economists widely predicted that this continued downward trend in inflation would pave the way for further interest rate cuts in the coming months. Money markets are now predicting a smaller cut of 0.25% on September 4, with a 4% chance that the cut will be 0.50%. On the downside, those same markets predict a 76% chance we'll see a 2% drop in October 2025.
I hope you locked in those guaranteed investment certificates (GICs) or bonds while you can still beat those high rates. Check out MoneySense's list of the best GIC rates in Canada, and my article on low-risk investments at MillionDollarJourney.com .
Target bull
Target Corporation posted a massive dividend on Wednesday and shareholders saw its shares rise in value by 11.20%. The Minneapolis-based discount retailer is the seventh largest in the US
Salary highlights
All numbers are in US dollars.
- Target (TGT/NYSE): Earnings per share of $2.57 (vs. $2.18 forecast). Revenue of $25.45 billion (vs. $25.21 billion average).
- Lowe's Companies (LOW/NYSE): Earnings per share of $4.10 (versus the $3.97 forecast), and revenue of $23.59 billion (vs. $23.91 billion).
Target's same-store sales grew 3% last quarter, after five consecutive quarters of declining sales. More purchases of discretionary items such as clothing were responsible for a positive reversal of the downward trend in sales.
Target COO Michael Fiddelke struck a cautious tone, however. “Although we are pleased with our performance this year, our view of the consumer remains very similar. The range of opportunities and the underlying macroeconomics in consumer data and our business remains extraordinarily high.” And Target CEO Brian Cornell cited price reductions and a value-seeking consumer as reasons for the increase in foot traffic in the quarter.
It was quite the earnings report for Lowes, however, as it beat earnings expectations but lowered its full-year forecast. Shares fell about 1% on Tuesday after the earnings announcement.
Lowe's CEO Marvin Ellison said buyers were waiting for interest rates to drop before taking on major home improvement projects. Because 90% of Lowes' customers are homeowners (as opposed to contractors), they are more sensitive to movements in interest rates, he shared. Same-store sales fell 5.1% year over year.
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