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Tag: Inflation

  • 4 reasons why the Trump tariffs haven’t caused U.S. inflation to soar

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    Despite a barrage of new tariffs imposed by the Trump administration this year on dozens of U.S. trade partners, the prices of goods and services across the U.S. have defied many economists’ expectations and remained relatively stable.

    Economists caution that just because tariffs have yet to trigger a renewed bout of inflation, there is no guarantee that prices won’t surge later this year. They note that recent data shows a modest rise in the cost of items including clothing, home furnishings and appliances. 

    Tariffs — meaning the rate importers must pay at the border for imported goods — also take a long time to seep into the economy. That’s because companies often trying to hold off on passing along higher costs to customers to avoid losing market share to rivals. 

    Yet experts acknowledge that tariffs have yet to unleash the kind severe inflationary pressures that could cause prices to spike. For their part, White House officials have consistently maintained that foreign exporters — not American consumers — will bear the brunt of added tariff costs. 

    “Despite the doom-and-gloom predictions of inflation and recession, it’s been months since Liberation Day, and inflation is trending towards an annualized rate not seen since President Trump’s first term, while a recent [Council of Economic Advisers] analysis found that prices of imported goods are actually declining,” White House spokesman Kush Desai said in a statement to CBS MoneyWatch, alluding to the baseline and other tariffs President Trump originally announced on April 2. 

    Here are four reasons economists say explain why inflation isn’t jumping despite the highest U.S. tariffs in decades. 

    Tariffs aren’t as high as many people expected

    Despite President Trump’s many threats to jack up levies on imports, the actual average tariff rate being charged on U.S. imports is not as high as what has been announced, data shows. 

    The average tariff rate on U.S. imports in June was 9% — well below the 15% that many economists were forecasting earlier this year following Mr. Trump’s slew of tariff announcements, according to investment advisory firm Capital Economics. 

    “It’s not so much that the reaction to tariffs has been low, it’s that the effective tariff rate increase has been relatively limited up until June,” Mark Cus, an economist at Barclays, told CBS MoneyWatch.

    Actual U.S. tariffs remain lower than earlier estimates in part because countries facing steeper levies are sending fewer goods to the U.S., according to Barclays and Capital Economics. By contrast, countries with below average tariff rates are shipping more goods to the U.S. 

    The upshot: Average tariff rates on imports are lower than many economists were projecting earlier this year. 

    Additionally, many goods imported into the U.S. have been exempted from steeper tariffs. Of the roughly $258 billion worth of imports that hit the U.S. retail market in June, only 48% were subject to tariffs, Barclays data shows. For example, pharmaceuticals, some electronics, and many imports from Canada and Mexico are exempt from any new tariffs.

    “While dutiable goods face elevated tariff rates, a substantial portion of U.S. imports remains duty-free,” Barclays analysts said in a recent report. “This is a major contributor to the low effective tariff rate.”

    Companies stocked up before higher tariffs kicked in

    U.S. retailers built up their inventories earlier this year in expectation that the Trump administration would hike tariffs on imported products and parts. Many retailers are still selling those non-tariffed products, allowing them to delay price hikes, experts said. 

    For example, “There was a big jump in imports of goods from Canada that would later be tariffed before the tariffs kicked in, and perhaps imports of those goods in May and June were relatively low, and that shows up as a smaller amount of dutiable goods,” Barclays’ Cus told CBS MoneyWatch.

    Eventually, experts warn, retailers will exhaust those lower-cost goods imported earlier in the year, which could lead to higher prices down the road. 

    Retailers are swallowing the costs — for now

    For now, many retailers are eating the additional tariff costs. 

    Businesses “have been willing to absorb the initial hit via lower margins, although we suspect that was mostly a temporary development as those firms waited for more clarity on where tariff rates would settle,” analysts with investment adviser Capital Economics said in a recent report. 

    “We doubt that is a sustainable outcome over the longer term, however. As the uncertainty over tariff levels eases over the next couple of weeks, giving retailers more clarity on rates over the next year or two, we would expect more firms to raise prices,” they said. 

    Tariffs tend to boost inflation gradually

    Tariffs typically take many months to seep into company supply chains and and show up in the prices consumers pay at the store. 

    The full impact of tariffs plays out not immediately but over an extended period of time, peaking roughly a year after they take effect, a June Federal Reserve Bank of Dallas report noted.  That means any U.S. tariffs imposed this year could would be unlikely to have much of an impact on inflation until later this year and into 2026.

    “Up to now there has been only limited passthrough from tariffs into final consumer prices, but we still expect the impact to gradually mount in the second half of this year,” Capital Economics analysts said in a report. 

    A final possibility is that the fears that the Trump administration’s turn toward protectionist trade policies would trigger another severe bout of inflation are overblown. The White House has maintained that such a shift will protect jobs, and make the U.S. more competitive globally.

    “The Administration has consistently maintained that the cost of tariffs will be paid by foreign exporters who rely on access to the American economy, the world’s best and biggest consumer market,” the White House’s Desai said in a statement. 

    Megan Cerullo

    Megan Cerullo is a New York-based reporter for CBS MoneyWatch covering small business, workplace, health care, consumer spending and personal finance topics. She regularly appears on CBS News 24/7 to discuss her reporting.

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  • Inflation fell to 1.7% in July – MoneySense

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    The annual rate of inflation fell to 1.7% in July, Statistics Canada said Tuesday (Aug. 19), down from 1.9% in June. The reading was a tenth of a percentage point below most economists’ expectations.

    A 16.1% decline year-over-year in gas prices tied mainly to the removal of the consumer carbon price earlier this year fuelled the drop.

    BMO chief economist Doug Porter said in an interview that the July consumer price index was a “relatively favourable report” despite some stubbornness at the grocery store and in housing.

    Economists split on how July inflation may affect BoC’s next rate decision

    July’s consumer price index marks the first of two looks at inflation that the Bank of Canada will get before its next interest rate decision on Sept. 17. The central bank held its policy rate steady at 2.75% in July.

    The Bank of Canada has been looking for signs of how Canada’s tariff dispute is affecting inflation, and is particularly concerned with trends in core inflation that strip out influences from tax changes and other volatile inputs.

    Statistics Canada said the Bank of Canada’s preferred measures of core inflation held around 3% in July.

    Porter pointed out that another measure of core inflation that strips out influences from food and energy was lower in July, around 2.6%. Looking at those readings, he said the July CPI report “slightly turned the dial” toward a rate cut in September, aligning with BMO’s expectations.

    Financial market odds for a quarter-point rate cut in September increased modestly to around 40% as of Tuesday afternoon, according to LSEG Data & Analytics.

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    But with core inflation still elevated compared with the headline figure, Porter acknowledged BMO’s call for a cut next month was “a long shot” at this point. “We need some help in the inflation numbers. We probably need a relatively sluggish jobs number as well,” he said.

    CIBC senior economist Andrew Grantham said in a note that the lack of easing in core inflation can mostly be attributed to the base-year effect—the distortion from price movements last year on a particular month’s annual inflation comparisons. He said the shorter-term, three-month core inflation readings now show an annualized rate of 2.4% for July.

    Grantham said there’s still more data to come before the Bank of Canada’s next rate decision, but the July inflation figures support his call for a quarter-point cut in September.

    RBC, meanwhile, is maintaining its call for no more interest rate cuts from the Bank of Canada this year. Claire Fan, senior economist with RBC, said in a note that the monthly advance in core inflation was less than she was expecting. But she said pressure is still spread broadly through the consumer price index.

    What contributed to July’s inflation rate?

    Inflation on food from the grocery store accelerated to 3.4% annually in July, up from 2.8% in June.

    Confectionary prices rose 11.8% and coffee gained 28.6% to be among the biggest contributors to food inflation last month. Statistics Canada said poor growing conditions in countries that produce cocoa and coffee beans were to blame for higher costs.

    Prices for fresh grapes were up nearly 30%, driving the overall cost for fresh fruit up 3.9% in July compared with 2.1% in June.

    Porter said there are some hints that Canada’s tariff dispute with the United States is a factor keeping food inflation elevated, but he stopped short of blaming it for pain at the grocery store. “I think the bigger story is coffee prices … chocolate prices and beef prices, and those aren’t really a tariff story. Those are more climate issues,” he said.

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  • Inflation report spurs mixed narratives on US economy

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    Does the latest consumer price index report show that Americans are paying more or less for goods? You might be seeing mixed messaging based on the politicians you listen to or what your social media algorithms surface.

    Some say the numbers show President Donald Trump’s success. Others say the opposite. 

    Every month, the federal Bureau of Labor Statistics publishes the consumer price index, which measures price changes for goods and services including food, apparel, gasoline and housing. The report is used to assess economic stability and inform policy decisions.

    Sen. Rick Scott, R-Fla., celebrated the July report the day of its release.

    “Another month of inflation coming in lighter than expected. That’s GREAT NEWS for Florida families, and another reminder to trust in Pres. Trump!” Scott posted Aug. 12 on X, alongside a short Fox Business clip about energy and gas price decreases.

    U.S. Rep Kathy Castor, D-Fla., had a different take. 

    “Trump is raising your grocery bill to line the wallets of his billionaire friends. Nothing great about this for American families across the country,” Castor wrote in an Aug. 12 X post that included a link to a CBS News story that said in its headline that the index rose in July by 2.7% on an annual basis.

    Economists told PolitiFact this muddled framing isn’t new and people from different political tribes use varying metrics to reinforce their views. They said the full picture on the economy’s health and trajectory needs more time to come into focus.

    Overall, the report’s numbers are “another dose of modest bad news,” said Douglas Holtz-Eakin, president of the center-right policy institute American Action Forum. “It’s not dramatic yet, it’s not a crisis, but it’s not positive.”

    Sign up for PolitiFact texts

    Trump’s tariffs, widely watched to see how they affect consumer prices and inflation, are still new and some just went into effect in August. 

    “Since at least 2021 the CPI reports have become a partisan battle ground with both sides cherry picking the data to best support their argument,” said Jason Furman, an economist and professor at Harvard University’s John F. Kennedy School of Government who previously served as an economic adviser to former President Barack Obama. “And there is so much data in the CPI report that there is always some way to slice and dice it to support just about any view.”

    The consumer price index report and its meaning

    For July, the consumer price index increased 0.2% compared with the previous month and 2.7% from a year ago. That’s slightly cooler than the 2.8% rise economists had forecast, thanks to declines in gasoline and energy prices.

    Gary Burtless, senior fellow at the Brookings Institution, said the 2.7% 12-month rise in consumer prices for all items is a “bit lower than it was at the start of 2025,” to Trump’s advantage. But the number is also a bit higher than it was from March to July, he said, an advantage for Trump’s critics.  

    A separate measure, core inflation — which excludes food and energy because they are considered volatile measures prone to large, rapid fluctuations — increased 0.3% for July and 3.1% from a year ago. This is the first time annual core inflation, which officials use to monitor underlying, longer-term inflation trends, has risen above 3% in several months. This outpaces Federal Reserve projections before the 2024 election, which projected 2.2% median core inflation for 2025.

    “Economists tend to focus on the core because it is less erratic than food and energy prices,” said Dean Baker, co-founder of the liberal Center for Economic and Policy Research. “Food and energy prices are very important, but big changes in either direction tend to be reversed. Therefore it is often more useful if we are looking for future trends to look at the core index.”

    Despite the uptick, the report was mild enough for investors, as U.S. stocks closed near a record high Aug. 12. The stock market appears, for now, to be focusing on the likelihood that the Federal Reserve will cut interest rates in September given concerns about a cooling labor market. Central bank officials, to Trump’s disapproval, have held rates steady in 2025 as they wait to see tariffs’ effect on the economy.

    The July data comes amid a Bureau of Labor Statistics shakeup. After the agency’s downward revision of May and June employment data, Trump fired bureau Commissioner Erika McEntarfer, accusing her of political bias. Trump nominated E.J. Antoni, an economist at the conservative Heritage Foundation who has criticized the bureau, as the agency’s new commissioner.

    The long and winding road of Trump’s tariffs

    As the Trump administration highlights the collection of nearly $130 billion from the new tariffs so far, many economists expect that businesses will begin passing on the additional costs to U.S. customers.

    Goldman Sachs estimated in an analysis shared with Bloomberg that U.S. companies have so far absorbed the bulk of tariff costs — around two-thirds of the levies — while consumers absorbed around 22% of the costs through June.

    But Goldman Sachs said it expects the consumer share of the costs to soar to 67% by October if the tariffs follow previous patterns of how import levies affected prices.

    Trump wrote in an Aug. 12 Truth Social post that Goldman Sachs CEO David Solomon should replace its economist. “It has been proven, that even at this late stage, Tariffs have not caused Inflation, or any other problems for America, other than massive amounts of CASH pouring into our Treasury’s coffers,” Trump wrote.

    Some U.S. companies have avoided passing along higher prices by stockpiling goods ahead of the tariffs’ implementation. Others have absorbed costs to avoid losing customers or are holding off in hopes that courts nix the tariffs.

    “That’s just businesses making business decisions,” said Holtz-Eakin, from the American Action Forum. “But there will be a point if the tariffs stay in place at the current levels where that just won’t be feasible anymore.”

    Many studies of past tariffs have found that they harm the economy and raise consumer prices.

    For now, however, experts agreed that the U.S. economy is in a wait-and-see moment.

    Burtless, from Brookings, believes that the effects of tariffs on consumer prices are modest so far, and that price increases across different categories of goods and services appear “inconsistent with the idea that tariffs are the main driver of overall inflation.”

    “That may turn out to be the case in the future,” he said, “but not yet.”

    Holtz-Eakin also warned about putting too much stock in a single report.

    “Never believe one month’s data,” he said. “That’s a rule of life if you’re doing policy work.”

    RELATED: New Trump tariffs could put even more downward pressure on economy because they’re less targeted 

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  • US stocks rally to records on hopes for cuts to interest rates

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    NEW YORK (AP) — The U.S. stock market rallied to records on Tuesday after data suggested inflation across the country was a touch better last month than economists expected.

    The S&P 500 rose 1.1% to top its all-time high set two weeks ago. The Dow Jones Industrial Average climbed 483 points, or 1.1%, and the Nasdaq composite jumped 1.4% to set its own record.

    Stocks got a lift from hopes that the better-than-expected inflation report will give the Federal Reserve leeway to cut interest rates at its next meeting in September.

    Lower rates would give a boost to investment prices and to the economy by making it cheaper for U.S. households and businesses to borrow to buy houses, cars or equipment. President Donald Trump has angrily been calling for cuts to help the economy, often insulting the Fed’s chair personally while doing so.

    AP AUDIO: Wall Street rises toward records on hopes for lower interest rates

    AP business correspondent Seth Sutel reports markets are leaning higher.

    But the Fed has been hesitant because of the possibility that Trump’s tariffs could make inflation much worse. Lowering rates would give inflation more fuel, potentially adding oxygen to a growing fire. That’s why Fed officials have said they wanted to see more data come in about inflation before moving.

    Tuesday’s report said U.S. consumers paid prices for groceries, gasoline and other costs of living that were overall 2.7% higher in July than a year earlier. That’s the same inflation rate as June’s, and it was below the 2.8% that economists expected.

    The report pushed traders on Wall Street to increase bets that the Fed will cut interest rates for the first time this year in September. They’re betting on a 94% chance of that, up from nearly 86% a day earlier, according to data from CME Group.

    The Fed will receive one more report on inflation, as well as one more on the U.S. job market, before its next meeting, which ends Sept. 17. The most recent jobs report was a stunner, coming in much weaker than economists expected.

    Some economists warn that more twists and turns in upcoming data could make the Fed’s upcoming decisions not so easy. Its twin goals are to get inflation to 2% while keeping the job market healthy. Helping one with interest rates, though, often means hurting the other.

    Even Tuesday’s better-than-expected inflation report had some discouraging undertones. An underlying measure of inflation, which economists say does a better job of predicting where inflation may be heading, hit its highest point since early this year, noted Gary Schlossberg, market strategist at Wells Fargo Investment Institute. That helped cause some up-and-down swings for Treasury yields in the bond market.

    “Eventually, tariffs can show up in varying degrees in consumer prices, but these one-off price increases don’t happen all at once,” said Brian Jacobsen, chief economist at Annex Wealth Management. “That will confound the Fed and economic commentators for months to come.”

    Other central banks around the world have been lowering interest rates, and Australia’s on Tuesday cut for the third time this year.

    On Wall Street, Intel’s stock rose 5.6% after Trump said its CEO has an “amazing story,” less than a week after he had demanded Lip-Bu Tan’s resignation.

    Circle Internet Group, the company behind the popular USDC cryptocurrency that tracks the U.S. dollar, climbed 1.3% despite reporting a larger loss for the latest quarter than analysts expected. It said its total revenue and reserve income grew 53% in its first quarter as a publicly traded company, which topped forecasts.

    On the losing side of Wall Street was Celanese, which sank 13.1% even though the chemical company delivered a better profit than expected. It said that customers in most of its markets continue to be challenged, and CEO Scott Richardson said that “the demand environment does not seem to be improving.”

    Cardinal Health dropped 7.2% despite likewise reporting a stronger profit for the latest quarter than analysts expected. Its revenue fell short of forecasts, and analysts said the market’s expectations were particularly high for the company after its stock had already soared 33.3% for the year coming into the day.

    Critics say the broad U.S. stock market is looking expensive after its surge from a bottom in April. That’s putting pressure on companies to deliver continued growth in profit.

    All told, the S&P 500 rose 72.31 points to 6,445.76. The Dow Jones Industrial Average climbed 483.52 to 44,458.61, and the Nasdaq composite jumped 296.50 to 21,681.90.

    In stock markets abroad, indexes edged up in China after Trump signed an executive order late Monday that delayed hefty tariffs on the world’s second-largest economy by 90 days. The move was widely expected, and the hope is that it will clear the way for a possible deal to avert a dangerous trade war between the United States and China.

    Japan’s Nikkei 225 jumped 2.1%, and South Korea’s Kospi fell 0.5% for two of the world’s bigger moves.

    In the bond market, the yield on the 10-year Treasury rose to 4.28% from 4.27% late Monday.

    The yield on the two-year Treasury, which more closely tracks expectations for the Fed, fell to 3.73% from 3.76%.

    ___

    AP Business Writers Yuri Kageyama and Matt Ott contributed.

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  • Federal Reserve is set to cut rates again while facing a hazy post-election outlook

    Federal Reserve is set to cut rates again while facing a hazy post-election outlook

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    WASHINGTON — No one knows how Tuesday’s presidential election will turn out, but the Federal Reserve’s move two days later is much easier to predict: With inflation continuing to cool, the Fed is set to cut interest rates for a second time this year.

    The presidential contest might still be unresolved when the Fed ends its two-day meeting Thursday afternoon, yet that uncertainty would have no effect on its decision to further reduce its benchmark rate. The Fed’s future actions, though, will become more unsettled once a new president and Congress take office in January, particularly if Donald Trump were to win the White House again.

    Trump’s proposals to impose high tariffs on all imports and launch mass deportations of unauthorized immigrants and his threat to intrude on the Fed’s normally independent rate decisions could send inflation surging, economists have said. Higher inflation would, in turn, compel the Fed to slow or stop its rate cuts.

    On Thursday, the Fed’s policymakers, led by Chair Jerome Powell, are on track to cut their benchmark rate by a quarter-point, to about 4.6%, after having implemented a half-point reduction in September. Economists expect another quarter-point rate cut in December and possibly additional such moves next year. Over time, rate cuts tend to lower the costs of borrowing for consumers and businesses.

    The Fed is reducing its rate for a different reason than it usually does: It often cuts rates to boost a sluggish economy and a weak job market by encouraging more borrowing and spending. But the economy is growing briskly, and the unemployment rate is a low 4.1%, the government reported Friday, even with hurricanes and a strike at Boeing having sharply depressed net job growth last month.

    Instead, the central bank is lowering rates as part of what Powell has called “a recalibration” to a lower-inflation environment. When inflation spiked to a four-decade high of 9.1% in June 2022, the Fed proceeded to raise rates 11 times — ultimately sending its key rate to about 5.3%, also the highest in four decades.

    But in September, year-over-year inflation dropped to 2.4%, barely above the Fed’s 2% target and equal to its level in 2018. With inflation having fallen so far, Powell and other Fed officials have said they think high borrowing rates are no longer necessary. High borrowing rates typically restrict growth, particularly in interest-rate-sensitive sectors such as housing and auto sales.

    “The restriction was in place because inflation was elevated,” said Claudia Sahm, chief economist at New Century Advisors and a former Fed economist. “Inflation is no longer elevated. The reason for the restriction is gone.”

    Fed officials have suggested that their rate cuts would be gradual. But nearly all of them have expressed support for some further reductions.

    “For me, the central question is how much and how fast to reduce the target for the (Fed’s key) rate, which I believe is currently set at a restrictive level,” Christopher Waller, an influential member of the Fed’s Board of Directors, said in a speech last month.

    Jonathan Pingle, an economist at Swiss bank UBS, said that Waller’s phrasing reflected “unusual confidence and conviction that rates were headed lower.”

    Next year, the Fed will likely start to wrestle with the question of just how low their benchmark rate should go. Eventually, they may want to set it at a level that neither restricts nor stimulates growth — “neutral” in Fed parlance.

    Powell and other Fed officials acknowledge that they don’t know exactly where the neutral rate is. In September, the Fed’s rate-setting committee estimated that it was 2.9%. Most economists think it’s closer to 3% to 3.5%.

    The Fed chair said the officials have to assess where neutral is by how the economy responds to rate cuts. For now, most officials are confident that at 4.9%, the Fed’s current rate is far above neutral.

    Some economists argue, though, that with the economy looking healthy even with high borrowing rates, the Fed doesn’t need to ease credit much, if at all. The idea is that they may already be close to the level of interest rates that neither slows nor stimulates the economy.

    “If the unemployment rate stays in the low 4’s and the economy is still going to grow at 3%, does it matter that the (Fed’s) rate is 4.75% to 5%?” said Joe LaVorgna, chief economist at SMBC Nikko Securities, asked. “Why are they cutting now?”

    With the Fed’s latest meeting coming right after Election Day, Powell will likely field questions at his news conference Thursday about the outcome of the presidential race and how it might affect the economy and inflation. He can be expected to reiterate that the Fed’s decisions aren’t affected by politics at all.

    During Trump’s presidency, he imposed tariffs on washing machines, solar panels, steel and a range of goods from China, which President Joe Biden maintained. Though studies show that washing machine prices rose as a result, overall inflation did not rise much.

    But Trump is now proposing significantly broader tariffs — essentially, import taxes — that would raise the prices of about 10 times as many goods from overseas.

    Many mainstream economists are alarmed by Trump’s latest proposed tariffs, which they say would almost certainly reignite inflation. A report by the Peterson Institute for International Economics concluded that Trump’s main tariff proposals would make inflation 2 percentage points higher next year than it otherwise would have been.

    The Fed could be more likely to raise rates in response to tariffs this time, according to economists at Pantheon Macroeconomics, “given that Trump is threatening much bigger increases in tariffs.”

    “Accordingly,” they wrote, “we will scale back the reduction in the funds rate in our 2025 forecasts if Trump wins.”

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  • Federal Reserve is set to cut rates again while facing a hazy post-election outlook

    Federal Reserve is set to cut rates again while facing a hazy post-election outlook

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    WASHINGTON — No one knows how Tuesday’s presidential election will turn out, but the Federal Reserve’s move two days later is much easier to predict: With inflation continuing to cool, the Fed is set to cut interest rates for a second time this year.

    The presidential contest might still be unresolved when the Fed ends its two-day meeting Thursday afternoon, yet that uncertainty would have no effect on its decision to further reduce its benchmark rate. The Fed’s future actions, though, will become more unsettled once a new president and Congress take office in January, particularly if Donald Trump were to win the White House again.

    Trump’s proposals to impose high tariffs on all imports and launch mass deportations of unauthorized immigrants and his threat to intrude on the Fed’s normally independent rate decisions could send inflation surging, economists have said. Higher inflation would, in turn, compel the Fed to slow or stop its rate cuts.

    On Thursday, the Fed’s policymakers, led by Chair Jerome Powell, are on track to cut their benchmark rate by a quarter-point, to about 4.6%, after having implemented a half-point reduction in September. Economists expect another quarter-point rate cut in December and possibly additional such moves next year. Over time, rate cuts tend to lower the costs of borrowing for consumers and businesses.

    The Fed is reducing its rate for a different reason than it usually does: It often cuts rates to boost a sluggish economy and a weak job market by encouraging more borrowing and spending. But the economy is growing briskly, and the unemployment rate is a low 4.1%, the government reported Friday, even with hurricanes and a strike at Boeing having sharply depressed net job growth last month.

    Instead, the central bank is lowering rates as part of what Powell has called “a recalibration” to a lower-inflation environment. When inflation spiked to a four-decade high of 9.1% in June 2022, the Fed proceeded to raise rates 11 times — ultimately sending its key rate to about 5.3%, also the highest in four decades.

    But in September, year-over-year inflation dropped to 2.4%, barely above the Fed’s 2% target and equal to its level in 2018. With inflation having fallen so far, Powell and other Fed officials have said they think high borrowing rates are no longer necessary. High borrowing rates typically restrict growth, particularly in interest-rate-sensitive sectors such as housing and auto sales.

    “The restriction was in place because inflation was elevated,” said Claudia Sahm, chief economist at New Century Advisors and a former Fed economist. “Inflation is no longer elevated. The reason for the restriction is gone.”

    Fed officials have suggested that their rate cuts would be gradual. But nearly all of them have expressed support for some further reductions.

    “For me, the central question is how much and how fast to reduce the target for the (Fed’s key) rate, which I believe is currently set at a restrictive level,” Christopher Waller, an influential member of the Fed’s Board of Directors, said in a speech last month.

    Jonathan Pingle, an economist at Swiss bank UBS, said that Waller’s phrasing reflected “unusual confidence and conviction that rates were headed lower.”

    Next year, the Fed will likely start to wrestle with the question of just how low their benchmark rate should go. Eventually, they may want to set it at a level that neither restricts nor stimulates growth — “neutral” in Fed parlance.

    Powell and other Fed officials acknowledge that they don’t know exactly where the neutral rate is. In September, the Fed’s rate-setting committee estimated that it was 2.9%. Most economists think it’s closer to 3% to 3.5%.

    The Fed chair said the officials have to assess where neutral is by how the economy responds to rate cuts. For now, most officials are confident that at 4.9%, the Fed’s current rate is far above neutral.

    Some economists argue, though, that with the economy looking healthy even with high borrowing rates, the Fed doesn’t need to ease credit much, if at all. The idea is that they may already be close to the level of interest rates that neither slows nor stimulates the economy.

    “If the unemployment rate stays in the low 4’s and the economy is still going to grow at 3%, does it matter that the (Fed’s) rate is 4.75% to 5%?” said Joe LaVorgna, chief economist at SMBC Nikko Securities, asked. “Why are they cutting now?”

    With the Fed’s latest meeting coming right after Election Day, Powell will likely field questions at his news conference Thursday about the outcome of the presidential race and how it might affect the economy and inflation. He can be expected to reiterate that the Fed’s decisions aren’t affected by politics at all.

    During Trump’s presidency, he imposed tariffs on washing machines, solar panels, steel and a range of goods from China, which President Joe Biden maintained. Though studies show that washing machine prices rose as a result, overall inflation did not rise much.

    But Trump is now proposing significantly broader tariffs — essentially, import taxes — that would raise the prices of about 10 times as many goods from overseas.

    Many mainstream economists are alarmed by Trump’s latest proposed tariffs, which they say would almost certainly reignite inflation. A report by the Peterson Institute for International Economics concluded that Trump’s main tariff proposals would make inflation 2 percentage points higher next year than it otherwise would have been.

    The Fed could be more likely to raise rates in response to tariffs this time, according to economists at Pantheon Macroeconomics, “given that Trump is threatening much bigger increases in tariffs.”

    “Accordingly,” they wrote, “we will scale back the reduction in the funds rate in our 2025 forecasts if Trump wins.”

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  • How will the outcome of the U.S. election affect financial markets? – MoneySense

    How will the outcome of the U.S. election affect financial markets? – MoneySense

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    “Depending what sector, what area you’re in, you’re going to have a favourite.” 

    While Trump may be pro-business and focused on cutting red tape and taxes — and markets had a good run during his last presidency — Harris presents less of a concern when it comes to geopolitical risks, said Mona Heidari, senior financial advisor at BlueShore Financial. 

    This “contributes to stronger investor sentiments and stronger investor confidence to invest in the stock market,” Heidari said. 

    Could the proposed policies drive inflation?

    On conference call to discuss Gildan Activewear Inc.’s latest results, chief executive Glenn Chamandy said Thursday that tariffs factor into costs and can create inflation, but it’s still unclear what their overall effect would be. He expressed optimism that Gildan won’t be disadvantaged.

    “If tariffs come in, they come in for everybody, so we’ll be in the same position that we’re in today,” he told investors on the call. 

    Higher spending from the government—which both candidates are likely to do—can be inflationary, making price growth stickier, said Kevin Headland, chief investment strategist at Manulife Investment Management. So can tariffs and tax cuts, he added. 

    A TD Economics report from mid-October said the Democrats “have a historical edge when it comes to stock market performance,” but that this is likely a reflection of the state of the economy when they take office. 

    Currie noted that the health-care sector usually does worse in U.S. election years, and that’s no exception this time around. Both parties like to say leading up to an election that they will fight big drug companies and insurance companies, but their promises are usually overhyped, he said. 

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  • Making sense of the markets this week: November 3, 2024 – MoneySense

    Making sense of the markets this week: November 3, 2024 – MoneySense

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    Amazon earnings highlights

    Share prices were up 5% in after-hours trading on Thursday after the strong earnings beat.

    • Amazon (AMZN/NASDAQ): Earnings per share of $1.43 (versus $0.14 predicted) and revenues of $134.4 billion (versus $131.5 billion predicted).

    Amazon Web Services (AWS) remains the golden goose, even though very few of Amazon’s retail customers know it exists. Revenues climbed 19% during the quarter, and totalled $27.4 billion. Amazon’s advertising revenues were another highlighted area of the report, as they were up 19%. Overall operating profits grew 56% year over year to $17.4 billion, mostly credited to the 27,000 jobs cut by the company since 2022.

    Founder, executive chairman and former president and CEO of Amazon, Jeff Bezos was in the headlines this week in his role as owner of the Washington Post. He refused to allow the Post’s editorial team to print their endorsement of Kamala Harris for president, and it was met with widespread outrage from Post readers. As of Tuesday, more than 250,000 subscriptions were cancelled as a result. 

    Source: The Sporting News

    Fortunately for Bezos, he purchased the Washington Post (one of the world’s premier news brands) for “chump change”—$250 million (roughly a mere 1.2% of his net worth). So, if he drives it into the ground, I don’t think he’ll shed tears.

    No doubt co-founder and CEO of Tesla, Elon Musk, is making similar calculations with his luxury purchase two years ago of Twitter (which he rebranded as X). Critics say he has turned the social platform into an echo chamber for Republican presidential candidate Donald Trump. What are the billions for, if a person can’t even enjoy themselves by buying a little media, am I right? (That’s sarcasm.)

    So far we’ve yet to see analysis to show Bezos’ editorial decision affecting Amazon’s share price or revenue numbers. Apparently Republicans buy Amazon Prime, too.

    Canada’s best dividend stocks

    Microsoft, Meta and Google: Predictably incredible earnings

    While not having quite as large a market cap as Nvidia and Apple, other mega tech stocks in the U.S. are no slouches. For example, Microsoft is also as valuable as the entirety of Canada’s stock exchanges at $3.2 trillion. Alphabet and Meta clock in at $2.1 trillion and $1.5 trillion respectively. (All figures in this section are in U.S. dollars.)

    Other Big Tech stock news highlights

    Here’s what these companies announced this week.

    • Alphabet (GOOGL/NASDAQ): Earnings per share came in at $2.12 (versus $1.51 predicted) on revenues of $88.27 billion (versus $86.30 billion predicted).
    • Microsoft (MSFT/NASDAQ): Earnings per share of $3.30 (versus $3.10 predicted), and revenues of $65.59 billion (versus $64.51 predicted).
    • Meta (META/NASDAQ): Earnings per share coming in at $6.03 (versus $5.25 predicted) and revenues of $40.59 billion (versus $40.29 predicted).

    All three companies crushed earning estimates across the board. However, shareholders’ reactions to these earnings beats were still muted. Meta shares were down 2.5% in after-hours trading on Wednesday, and it was a similar situation for Microsoft. Alphabet fared better as its shares were up 3%.

    It’s hard to put these numbers into the massive context into which they belong, because the world has never seen anything like these companies before. Here are highlights from the earnings calls. (Scroll the chart left to right with your fingers or press shift, as you use scroll wheel on your mouse to read.)

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    Kyle Prevost

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  • Mortgage rates are rising. Experts cite economic strength, inflation and possible Trump win

    Mortgage rates are rising. Experts cite economic strength, inflation and possible Trump win

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    In September, the Federal Reserve lowered its benchmark interest rate for the first time since 2020, giving hope to prospective home buyers that mortgage rates would follow suit.

    But instead of declining, home loan costs marched higher.

    On Thursday, mortgage giant Freddie Mac reported the average rate on a 30-year home loan rose to 6.72%, up from 6.54% a week earlier. It was the fifth consecutive week of increases.

    “People are confused,” said Jeff Lazerson, president of Mortgage Grader in Laguna Niguel. “They are saying ‘What’s going on?’”

    The fact that mortgage rates have gone up despite the cut underscores that while the Federal Reserve influences mortgage rates, it does not set them.

    Instead, rates are determined by what institutional investors who purchase bundles of mortgages are willing to pay for them and a variety of factors influence those investors.

    One is the benchmark rate the Fed cut in September, which sets a floor on borrowing costs throughout the economy. Another is expectations for inflation. That’s because when purchasing 30-year mortgages, investors don’t want to see the value of their investment eaten away as the years march on.

    Mortgage rates fell in advance of the Fed’s decision in September, because investors priced in the expectation the Fed would be able to cut because inflation had eased.

    Experts said one major reason rates have risen since is because economic data has come in stronger than expected. That’s convinced investors inflation will stay higher for longer and the Fed won’t be able to cut rates as much as they otherwise could have. Similarly, if the job market is stronger, there’s less of a need to cut rates to spur growth.

    “You see a lot of positive economic surprises,” said Kara Ng, an economist with Zillow, who cited a strong jobs report in September as one example.

    Political factors could be at play as well as presidential election polls have tightened in recent weeks.

    Chen Zhao, an economist with real estate brokerage Redfin, said it appears investors increasingly believe former President Trump will best Vice President Kamala Harris and retake the White House.

    According to a recent survey from the Wall Street Journal, most economists predict inflation and interest rates would be higher under policies proposed by Trump, who among other measures has called for sweeping tariffs on imported goods.

    “The link between tariffs and inflation is just very stark,” Zhao said. “There is not a lot of controversy there.”

    As rates rise, home buyers feel the pinch.

    Lazerson, the Orange County mortgage broker, said he’s seen business slow to a “trickle” after an initial burst when rates dropped around the Fed announcement.

    The reason is simple math.

    When rates hit their recent bottom of 6.08% in September, the monthly principal and interest payment on a $800,000 house would have been $3,870. It’s now $4,138.

    According to the weekly Freddie Mac survey, rates are still below 7%, a level last seen in May. However, a daily tracker from Mortgage News Daily puts them above that threshold.

    Zhao said what happens with rates next depends on a variety of factors, including who wins the election and what policies they actually enact.

    If there isn’t a policy shift, she would expect mortgage rates to come down next year because inflation is easing. On Thursday, an inflation measure closely watched by the Federal Reserve dropped to near pre-pandemic levels.

    Even so, economists say borrowers shouldn’t expect pandemic-era mortgage rates of 3% and below. Those rates were the byproduct of a massive federal effort to revive an economy where unemployment hit levels last seen in the Great Depression.

    “We are talking about [mortgage rates in] the high fives, low sixes” Zhao said. “If President Trump does win, there is certainly a lot more risk that rates could be higher.”

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    Andrew Khouri

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  • Canada’s economy news: Are we growing enough? – MoneySense

    Canada’s economy news: Are we growing enough? – MoneySense

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    What is slowing Canada’s economy down? What’s growing?

    The manufacturing sector was the largest drag on the economy, followed by utilities, wholesale and trade and transportation and warehousing. The Stats Can report noted shutdowns at Canada’s two largest railways contributed to a decline in transportation and warehousing.

    A preliminary estimate for September suggests real gross domestic product grew by 0.3%.

    Statistics Canada’s estimate for the third quarter is weaker than the Bank of Canada’s projection of 1.5% annualized growth.

    Are there more Bank of Canada rate cuts to come?

    The latest economic figures suggest ongoing weakness in the Canadian economy, giving the central bank room to continue cutting interest rates. But the size of that cut is still uncertain, with lots more data to come on inflation and the economy before the Bank of Canada’s next rate decision on Dec. 11.

    “We don’t think this will ring any alarm bells for the (Bank of Canada) but it puts more emphasis on their fears around a weakening economy,” TD economist Marc Ercolao wrote.

    The central bank has acknowledged repeatedly the economy is weak and that growth needs to pick back up. Last week, the Bank of Canada delivered a half-percentage point interest rate cut in response to inflation returning to its 2% target.

    Governor Tiff Macklem wouldn’t say whether the central bank will follow up with another jumbo cut in December and instead said the central bank will take interest rate decisions one a time based on incoming economic data.

    The central bank is expecting economic growth to rebound next year as rate cuts filter through the economy.

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  • Here’s what could decide the election: How battleground state voters perceive inflation

    Here’s what could decide the election: How battleground state voters perceive inflation

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    In a tight presidential race in which Americans cite the state of the economy as the most important issue, one aspect of the country’s performance could prove decisive: How voters in battleground states currently perceive inflation.

    Americans rank the economy and inflation as their top two issues in the November 5 election, according to CBS News and other polls. But perhaps even more important than current price levels is how voters in key states interpret their experience with inflation, according to Bernard Yaros, lead economist at Oxford Economics. 

    All eyes on Pennsylvania

    Yaros notes that voters’ views on inflation are particularly important in Pennsylvania, a state experts say could be a tipping point in the contest between Vice President Kamala Harris and former President Donald Trump. Pennsylvanians appear to be more sensitive to inflation than people in many other states, with Yaros’ research finding that every 1 percentage point increase in inflation before a presidential election is linked to tens of thousands of Pennsylvanians voting against the incumbent and for the challenger. 

    That dynamic could be due to the state’s lower median annual household income of about $73,000, which is slightly below the U.S. median of $75,000. The Keystone State also tends to have an older population, at an average age of 41, compared with 39 years old for the U.S., Census data shows. Older, less affluent Americans 

    “Lower-income people devote more of their income to essentials — they will react more negatively” to inflation shocks, Yaros told CBS MoneyWatch. Pennsylvania “also has a slightly older demographic, so people on fixed incomes are going to feel the bite from high inflation.”

    With new CBS News polling showing a statistical dead heat between Harris and Trump in Pennsylvania, the path to victory in the state may boil down to whether voters experience inflation in one of two ways, Yaros said. 

    Overall U.S. prices jumped 22% between January 2020 and September of this year, forcing consumers to shell out more for everything from groceries to car insurance. But in the past year, inflation has cooled to an annual rate of 2.4%, approaching the Federal Reserve’s target of 2%.

    Given these trends, a key question that could tilt the balance in Pennsylvania, as well as in other battleground states, is whether local voters focus on the cumulative rise in prices since 2020 or instead take cheer from how inflation has cooled over the last year, Yaros said.


    If voters fixate on how prices for many goods and services remain significantly higher than before the pandemic — what Yaros calls the “sticker-shock model” — Trump is forecast to win Pennsylvania by more than 90,000 votes, the economist’s analysis found. If, by contrast, voters zero in on the more recent descent in prices, Harris is projected to secure the state by 70,000 votes. 

    Why inflation leaves scars

    Some battleground states have experienced a higher rate of inflation since 2020 than the nation more broadly, especially those in Sun Belt states like Arizona. While those areas are now seeing a step-down in prices, prices in the Middle Atlantic states, which includes Pennsylvania as well as New Jersey and New York, rose 3.4% last month — a full percentage point higher than the national rate, government data shows.

    Yaros’ model shows that voters in other battleground states like Arizona, Georgia and Wisconsin — states won by Biden in 2020 — could also swing in favor of Trump if voters there view inflation through the sticker-shock model. Meanwhile, Americans typically dislike high inflation more than other economic shocks, such as rising unemployment, he said.

    “You have a rich history of literature that shows people disliking inflation much more than they dislike other negative macroeconomic outcomes, such as higher unemployment,” Yaros said, pointing to a 1997 paper from Nobel-prize winning economist Robert J. Shiller.

    He added, “Unemployment affects only a subset of the economy, but when you have periods of high inflation, that affects everyone.”

    It’s difficult to predict which outlook will prevail in the battleground states, Yaros said. But, he added, “The research we’ve done, which has shown how lower-income folks have seen their share of spending toward discretionary spending permanently reduced because of the inflation shock, that would argue in favor of people fixating on the high price levels, still being upset with the political status quo.”

    Inflation: How do you view it?

    The Consumer Price Index measures the change in prices over time of a typical basket of goods and services. But many Americans tend to conflate inflation with the actual prices they’re paying at the store. 

    In other words, even though inflation has cooled, prices remain high; what’s more, they’ll stay high unless there’s a period of deflation, which typically only occurs when there’s a steep economic downturn. It also explains why more than 1 in 4 people polled by YouGov in August said they think the current inflation rate is over 10%, or more than quadruple the actual inflation rate.

    “People who aren’t economists, when they think about inflation, are thinking about the price level,” Yaros said. “‘A gallon of milk is $3, not $2 like it used to be, and I’m upset about it’.”

    Why the “misery index” could portend

    Voters who focus on the recent cooler rate of inflation might be inclined to support Harris, in what Yaros calls his “misery-index model,” based on the misery index, an informal measure that looks at the sum of the nation’s unemployment rate and the annual inflation rate. 

    Currently, the misery index stands at 6.5%, below its 9.1% average since 1947.

    Historically, the misery index has accurately predicted the presidential outcome, with a high index number predicting that the incumbent party was set to lose. For instance, the misery index reached 15% in 2020, indicating that President Trump was vulnerable in that year’s race.


    To be sure, plenty of other factors could sway voters this year, from immigration to abortion, Yaros acknowledged. And despite Americans’ glum outlook about the economy, consumers are still spending.

    “We’ve seen such a disconnect between consumer sentiment measures and actual consumer spending, so people could be saying one thing and acting differently,” he said. “I don’t think anyone can say for sure what way this is going to break.”

    Aimee Picchi

    Aimee Picchi is the associate managing editor for CBS MoneyWatch, where she covers business and personal finance. She previously worked at Bloomberg News and has written for national news outlets including USA Today and Consumer Reports.

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  • Stock market today: Wall Street climbs ahead of a big week for Big Tech as oil drops 5%

    Stock market today: Wall Street climbs ahead of a big week for Big Tech as oil drops 5%

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    NEW YORK — U.S. stocks are approaching records Monday ahead of a big week for profit reports from Big Tech stocks. Oil prices, meanwhile, are tumbling toward their worst loss in more than a year.

    The S&P 500 was 0.4% higher in afternoon trading. The main measure of the U.S. stock market is coming off its first losing week in the last seven, but it’s still near its all-time high set earlier this month.

    The Dow Jones Industrial Average was up 280 points, or 0.7%, as of 1:10 p.m. Eastern time, while the Nasdaq composite was 0.5% higher and flirting with its own record set in July.

    Several Big Tech stocks helped lead the way, and five of the behemoths known as the “Magnificent Seven” are on this week’s schedule to report their latest profits. These high-flying stocks have been at the forefront of Wall Street for years and have grown so big that their movements can singlehandedly shift the S&P 500.

    After suffering a summertime swoon on worries that their stock prices had risen too quickly when compared with their profits, Alphabet, Meta Platforms, Microsoft, Apple and Amazon are under pressure to deliver more big growth.

    Another member of the Magnificent Seven, Tesla, soared to one of the best days in its history last week after reporting a better profit than analysts expected.

    Monday’s gains for Big Tech helped offset drops for stocks in the oil-and-gas industry, which were hurt by the sinking price of oil. Exxon Mobil’s 0.6% drop and ConocoPhillips’ slide of 1.4% were two of the heaviest weights on the S&P 500.

    A barrel of benchmark U.S. crude fell 5.7%, and Brent crude, the international standard, slid 5.7%. It was the first trading for them since Israel attacked Iranian military targets on Saturday, in retaliation for an earlier barrage of ballistic missiles. Israel’s attack was more restrained than some investors had feared it could be, and it raised hopes that a worst-case scenario may be avoided.

    Beyond the violence that is taking a human toll, the worry in financial markets is that an escalating war in the Middle East could cut off the flow of crude from Iran, which is a major oil producer. Such worries had sent the price of Brent crude up to nearly $81 per barrel in early October, despite signals that plenty of oil is available for the global economy. It’s since fallen back below $72.

    Financial markets are also dealing with the volatility that typically surrounds a U.S. presidential election, with Election Day fast approaching in two Tuesdays. Markets have historically been shaky heading into an election, only to calm afterward regardless of which party wins.

    The trend affects both the stock and the bond markets. In the bond market, Treasury yields were ticking higher to tack more gains onto their sharp rise for the month so far.

    The yield on the 10-year Treasury rose to 4.29% from 4.24% late Friday. That’s well above the roughly 3.70% level where it was near the start of October.

    Yields have climbed as report after report has shown the U.S. economy remains stronger than expected. That’s good news for Wall Street, because it bolsters hopes the economy can escape from the worst inflation in generations without the painful recession that many had worried was inevitable.

    But it’s also forcing traders to ratchet back forecasts for how deeply the Federal Reserve will cut interest rates, now that it’s just as focused on keeping the economy humming as getting inflation lower. With bets diminishing on how much the Fed will ultimately cut rates, Treasury yields have also been given back some of their earlier declines.

    That means the U.S. jobs report on the schedule for Friday could end up being the market’s main event, even bigger than the Big Tech profit reports. Investors want to see more evidence of solid hiring to keep alive the perfect-landing hopes for the economy.

    Such data has supplanted inflation reports, which used to be the most important for Wall Street every month but have waned as inflation seems to be heading toward the Fed’s target of 2%.

    Yields have also climbed as investors have seen former President Donald Trump’s chances of re-election improving. Economists say a Trump win could help push inflation higher in the long term, and worsening inflation could push the Fed to hike interest rates.

    Trump Media & Technology Group, the company that tends to move more with Trump’s re-election odds than on its own profit prospects, jumped 20.3% Monday to $46.87. The parent company of Trump’s Truth Social platform has been rallying since hitting a bottom of roughly $12 in late September, though it’s still well below its perch above $60 reached in March.

    Robinhood Markets rose 3.7% after it said it would begin allowing some of its customers to trade contracts based on whether they think either Trump or Vice President Kamala Harris will win the 2024 election.

    Delta Air Lines was another winner and rose 3.8% after suing CrowdStrike, claiming the cybersecurity company had cut corners and caused a worldwide technology outage that led to thousands of canceled flight in July.

    In stock markets abroad, Japan’s Nikkei 225 rose 1.8% as the value of the Japanese yen sank after Japanese Prime Minister Shigeru Ishiba’ s ruling coalition lost a majority in the 465-seat lower house in a key parliamentary election Sunday.

    Stock indexes were mostly higher across much of the rest of Asia and in Europe.

    ___

    AP Business Writers Yuri Kageyama and Matt Ott contributed.

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  • For 20% of California, half the paycheck or more goes to housing

    For 20% of California, half the paycheck or more goes to housing

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    “How expensive?” tracks measurements of California’s totally unaffordable housing market.

    The pain: Housing eats up at least half of paychecks in one-fifth of California households.

    The source: My trusty spreadsheet looked at the latest Census Bureau stats tracking household expenses in 2023, focusing on what government experts call “extreme burdens” – folks paying 50% or more of their income for housing.

    The pinch

    California is by far the nation’s largest housing market, so it’s not terribly surprising that it’s also home to the most households spending half of their income on shelter – 2.7 million, or 14% of the nation’s 19.3 million. Next is Texas at 1.7 million, Florida at 1.6 million, New York at 1.5 million and Pennsylvania at 687,900.

    What’s distressing is the size of the 20% slice of the Golden State’s population that it represents. That’s the largest slice among the states, and well above the 15% slice nationwide.

    New York and Hawaii are next in shares of households spending half-plus on housing at 19%. Then comes Florida and Nevada at 18%. Texas was No. 14 at 15%.

    And where is it the hardest to find deeply housing-pinched households? North Dakota and West Virginia were at 9%, South Dakota at 10%, and Iowa and Missouri at 11%.

    Pressure points

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    Jonathan Lansner

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  • Making sense of the markets this week: October 27, 2024 – MoneySense

    Making sense of the markets this week: October 27, 2024 – MoneySense

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    Despite these setbacks, CPKC posted an income gain of 7% year over year. The four categories that made the most impact were grain, energy, plastics and chemicals, and they grew revenues by 11%. CPKC says the shipment of wheat to Mexico from the Canadian and American Prairies over the past 12 months was exactly the type of “synergy win” that it was hoping for when the former Canadian Pacific acquired Kansas City Southern back in 2021. This railway remains the only one to span Canada, the United States and Mexico.

    CNR CEO Tracy Robinson commented on the railway’s operational challenges. “Our scheduled operating plan demonstrated its resilience in the third quarter, allowing us to adapt our operations to challenges posed by wildfires and prolonged labor issues,” she said. “Our operations recovered quickly and the railroad is running well. As we close 2024, we will continue to focus on recovering volumes, growth, and ensuring our resources are aligned to demand.”

    CNR’s revenues were up 3% year over year; however, increased expenses meant the company’s operating ratio rose 1.1% to 63.1% (indicating that expenses are growing as a share of revenue). The railway announced it was  raising its quarterly dividend from $0.79 to $0.845. This raise of nearly 7% is right in line with CNR’s mission to conservatively raise its dividend payouts each year.

    For more information on these railroads, check out my article on Canadian railway stocks at MillionDollarJourney.ca.

    Canada’s best dividend stocks

    Rough day for Rogers 

    Thursday’s revenue miss left some Rogers shareholders shaking their heads. 

    Rogers earnings highlights

    Here’s what the large mobile company reported this week:

    • Rogers Communications (RCI/TSX): Earnings per share of $1.42 (versus $1.34 predicted) and revenues of $5.13 billion (versus $5.17 predicted).

    While solid earnings numbers did take away some of the sting, Rogers’ share price was down 3% on Thursday. Lower-than-expected numbers for new wireless customers were at the root of low revenue growth. The oligopolistic Canadian wireless market remains uncharacteristically competitive as Rogers, Telus and Bell all continue to fight for market share. That competition is hurting profit margins for all three telecommunications giants at the moment. (Unlike in past years, when the three telcos all enjoyed charging some of the highest wireless plan fees in the world.)

    One highlight for Rogers was its sports revenue vertical, which was up 11% from last quarter. Rogers has really doubled down on its sports media strategy over the last few years and now owns a controlling share of the: 

    • Toronto Blue Jays in the Major League Baseball league (MLB)
    • Toronto Maple Leafs in the National Hockey League (NHL)
    • Toronto Raptors in the National Basketball Association (NBA)
    • Toronto FC in Major League Soccer (MLS)
    • Toronto Argonauts in the Canadian Football League (CFL)
    • SportsNet, a major Canadian sports network
    • Toronto’s Rogers Centre and Scotiabank Arena venues
    • Naming rights of sports venues in Edmonton, Toronto and Vancouver
    • National NHL media rights in Canada
    • Local media rights to the NHL’s Vancouver Canucks, Calgary Flames and Edmonton Oilers
    • Partial local media rights to the Maple Leafs and Raptors
    • Several minor-league franchises and esports (gaming) teams

    Despite owning all those household-name sports assets, it’s worth noting that Rogers’ wireless and cable divisions were responsible for close to 90% of revenues, with sports and media making up the rest.

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    Kyle Prevost

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  • Russia’s central bank raises interest rate to 21% to fight inflation boosted by military spending

    Russia’s central bank raises interest rate to 21% to fight inflation boosted by military spending

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    MOSCOW — Russia’s central bank on Friday raised its key interest rate by two percentage points to a record-high 21% in an effort to combat growing inflation as government spending on the military strains the economy’s capacity to produce goods and services and drives up workers’ wages.

    The central bank said in a statement that “growth in domestic demand is still significantly outstripping the capabilities to expand the supply of goods and services.” Inflation, the statement said, “is running considerably above the Bank of Russia’s July forecast,” and “inflation expectations continue to increase.” It held out the prospect of more rate increases in December.

    Russia’s economy continues to show growth as a result of continuing oil export revenues and government spending on goods, including for the military. One result is inflation, which the central bank has tried to combat with higher rates that make it more expensive to borrow and spend on goods, in theory relieving pressure on prices.

    This is the highest key interest rate in Russia since it was introduced in 2013 and effectively replaced the refinancing rate, a similar instrument. The previous high was in February 2022, when the central bank raised the rates to a then-unprecedented 20% in a desperate bid to shore up the ruble in response to crippling sanctions that came after the Kremlin sent troops into Ukraine.

    Russia’s economy grew 4.4% in the second quarter of 2024, with unemployment low at 2.4%. Factories are largely running at full speed, in many cases to produce items that the military can use, such as vehicles and clothing. In other cases, domestic producers are filling gaps left by imports from abroad that have been interrupted by sanctions or by foreign companies’ decisions to stop doing business in Russia.

    Government revenues are supported by economic growth and by continuing exports of oil and gas with less-than-airtight sanctions and a $60 price cap imposed by Western governments on Russia oil. The cap is enforced by barring Western insurers and shippers from handling oil priced over the cap. But Russia has been able to evade the price cap by lining up its own fleet of tankers without Western insurance, and it earned some $17 billion in oil revenues in July.

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  • Russia’s central bank raises interest rate to 21% to fight inflation boosted by military spending

    Russia’s central bank raises interest rate to 21% to fight inflation boosted by military spending

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    MOSCOW (AP) — Russia’s central bank on Friday raised its key interest rate by two percentage points to a record-high 21% in an effort to stem growing inflation as massive government spending on the military amid the fighting in Ukraine strains the economy’s capacity to produce goods and services and drives up workers’ wages.

    The central bank said in a statement that “growth in domestic demand is still significantly outstripping the capabilities to expand the supply of goods and services.” Inflation, the statement said, “is running considerably above the Bank of Russia’s July forecast,” and “inflation expectations continue to increase.” It held out the prospect of more rate increases in December.

    Russia’s economy continues to show growth as a result of booming oil export revenues and a hike in government spending, the bulk of which goes to the military as the conflict in Ukraine has dragged into a third year. That has fueled inflation, which the central bank has tried to combat with higher rates that make it more expensive to borrow and spend on goods, in theory relieving pressure on prices.

    Central bank governor Elvira Nabiullina said that inflation is expected to double the bank’s target of an annual 4% and emphasized that the bank remains committed to bringing it down to the targeted level.

    Nabiullina noted that inflation has overshot the goals because of increased government spending and lenient banking regulations that encouraged commercial banks to offer more loans. Years of price growth that exceeded the targets have fueled high inflationary expectations among consumers, she added.

    “There is a high inertia of inflationary expectations as the inflation has exceeded the target level for four years,” Nabiullina said. “The more inflation exceeds the targets, the less people and companies believe that it could fall back to low levels.”

    This is the highest key interest rate in Russia since it was introduced in 2013 and effectively replaced the refinancing rate, a similar instrument. The previous high was in February 2022, when the central bank raised the rates to a then-unprecedented 20% in a desperate bid to shore up the ruble in response to crippling Western sanctions that came after the Kremlin sent troops into Ukraine.

    Russia’s economy grew 4.4% in the second quarter of 2024, with unemployment low at 2.4%. Factories are largely running at full speed, and an increasing number of them are focusing on weapons and other military gear. Domestic producers are also stepping in to fill the gaps left by a drop in imports that have been affected by Western sanctions and foreign companies’ decisions to stop doing business in Russia.

    Government revenues are supported by economic growth and by continuing exports of oil and gas with less-than-airtight sanctions and a $60 price cap imposed by Western governments on Russian oil. The cap is enforced by barring Western insurers and shippers from handling oil priced over the cap. But Russia has been able to evade the price cap by lining up its own fleet of tankers without Western insurance, and it earned some $17 billion in oil revenues in July.

    Chris Weafer, CEO at Macro-Advisory Ltd. consultancy, noted that with the rate hike the central bank wants to raise its “concern about the imbalances that emerged in the economy” that could lead to “serious problems down the road that could even trigger maybe a crisis or a recession.”

    He noted that the booming defense spending, with over a third of next year’s budget allocated to the military-industrial complex, has driven economic growth along with soaring consumer spending but also deepened imbalances in the economy.

    Labor shortages resulting from a decrease in population and exacerbated by workers leaving factory jobs to join the military have driven a massive increase in wages and fueled a consumer boom. “The central bank is trying to keep the interest rates as high as possible to try and cool that because they warn of the overheating in the consumer economy, which of course can destabilize the economy before too long,” Weafer said.

    He described the rate hike as “not so much a cry for help, but a scream of pain from the central bank,” sending a signal to the government that the current high level of spending on military issues can’t continue indefinitely.

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  • Metro Denver in the middle of its biggest apartment boom since the 1970s — but rent prices aren’t budging

    Metro Denver in the middle of its biggest apartment boom since the 1970s — but rent prices aren’t budging

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    Metro Denver developers pushed out more than 5,000 new apartments in the third quarter, and rents barely moved despite that high volume, according to a quarterly update from the Apartment Association of Metro Denver.

    For the past several quarters, developers have added as many apartments in three months as they would average across an entire year before 2011.

    “I have been concerned about this for some time that we would flood the market with lots of apartments and vacancies would shoot up,” said Cary Bruteig, author of the quarterly report during a press call Wednesday.

    Rising vacancies would in turn force landlords to slash rents. So far, that hasn’t happened.

    Average rents in the region rose $8 last quarter to $1,911 and are up 1.2% over the past year, below the 1.4% rate of inflation measured in September.

    The overall vacancy rate fell 0.3% to 5.3% and moved lower in 18 out of 33 submarkets. Denver, which has seen a high concentration of new multifamily projects, had the highest county vacancy rate at 5.8%. The Central Business District had the highest submarket rate at 6.6%.

    Fueled by strong migration to the state, the 1970s was a boom era for apartment construction. But after an oil bust and then a real estate bust, things calmed down in the following decades. The region averaged about 5,000 new apartments a year until 2011, when the average kicked up to around 10,000 a year, Bruteig said.

    Over the past 12 months, developers have added 21,158 new apartments. That is double the pace seen last decade and equivalent to about 5% of all the existing apartments built in the past 100 years, Bruteig said.

    Even though fewer people are moving to metro Denver from other states this decade compared to last, Bruteig said, “We see no softening in terms of people moving into new apartments in the metro area.”

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    Aldo Svaldi

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  • Despite signals the U.S. economy is strong, voters are wary

    Despite signals the U.S. economy is strong, voters are wary

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    Despite signals the U.S. economy is strong, voters are wary – CBS News


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    Wall Street has seen six straight weeks of gains and with unemployment near a 50-year low, there are signs the economy is strong. However, the cost of everyday essentials is still a top-of-mind issue for voters, and although the rate of inflation is at a three-year low, consumers are still complaining food prices remain high. Michael George reports.

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  • What is the price of gold in Canada? And more about gold investing – MoneySense

    What is the price of gold in Canada? And more about gold investing – MoneySense

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    That, together with the fear of a stock-market correction, has prompted a lot of Canadians who never considered owning the precious metal before to wonder whether this age-old asset should be part of their portfolios. After all, Canada’s largest robo-advisor, Wealthsimple, allocates 2.5% of its clients’ accounts to gold—and 10% in its halal portfolios.

    Should it be part of yours? Or would you just be buying in at the peak? There’s no way to know, except in hindsight. There will always be “gold bugs” out there urging you to sell everything and buy gold before the world goes to pot. Their advice is best avoided.

    Here instead are some important facts around investing in gold that will help you make a better-informed decision.

    Why is gold so valued?

    Gold is used for a wide range of products—such as jewellery, dental fillings and electronics—but most of it is simply stored in vaults, in the form of gold bars. Like money itself or cryptocurrency, gold is valuable because people have decided it is. But unlike the other two, it’s immune to manipulation.

    As of mid-October, all the refined gold in the world, an estimated 212,582 tonnes, was worth a staggering USD$18.3 trillion. Mines around the world poured another 1,788 tonnes in the first half of 2024. So, the supply of gold is increasing, but slowly. And there’s little anyone can do to change that.

    Why do investors buy gold in Canada?

    As an investment, gold is classified as a commodity. That is, it’s a standardized and graded substance that trades globally. But unlike, say, soybeans or Brent crude oil, you can store a meaningful amount of gold in your jewellery drawer or safe deposit box. It’s also uniquely non-perishable; part of its appeal in ancient times was the fact it didn’t corrode like other metals. So, you can hold it indefinitely.

    If you own gold as an investment, it won’t generate any income; it’ll just go up and down in value according to supply and demand. Over the very long term, its price tends to track the rate of inflation.

    Most importantly, gold has a history as a store of value and unit of exchange. Many central banks still hold it to help stabilize their currencies. In developing countries like India and China, many people consider it more trustworthy than paper or electronic money. This is why it continues to hold a privileged place in investment portfolios.

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    Michael McCullough

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