These are stories Report on Business is following Friday, Nov. 22, 2013.
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Loonie sinks
Just in time for that annual rush to the border, Canadians are about a nickel under par.
Not that that's going to make a difference on Black Friday in the United States.
The loonie slipped well below 95 cents, though recovered some ground to close just above that mark.
There was no specific catalyst, said chief currency strategist Camilla Sutton of Bank of Nova Scotia, noting that that the loonie, as the dollar coin is known has "slowly grinded lower" over time.
The U.S. dollar is stronger and, importantly, Statistics Canada released a report today showing annual inflation declined last month to just 0.7 per cent, opening the door for a more "dovish" Bank of Canada.
The central bank targets an inflation rate of 2 per cent. The band is 1 per cent to 3 per cent, meaning that this morning's October measure is likely to be below the bottom, bringing into question the central bank's commitment to its goal.
The Bank of Canada's benchmark interest rate has remained at 1 per cent, though, at its last meeting, it dropped its signal that the next move in rates would be up.
Some observers wonder if the central bank may actually cut the key rate going forward. At the very least, it's not moving up any time soon.
Ms. Sutton believes the current value of the loonie won't change the mind of shoppers heading to areas like Buffalo, N.Y., and Bellingham, Wash., where one usually sees many Canadian licence plates in mall parking lots on Black Friday, the day after U.S. Thanksgiving when sales abound. Or those, still in their pyjamas, heading for their computers.
Indeed, a new forecast released today by Bank of Montreal suggests Canadians are "increasingly circling Black Friday on their holiday calendars."
According to the survey, conducted for the bank by Pollara, 47 per cent of Canadians plan to shop next Friday in one form or another. That's up 15 per cent from last year.
Canadians are expected to spend an average of $292.
Shopping in the United States is a favourite pastime for Canadians. Note that in September, according to the latest reading from Statistics Canada, same-day car trips to the U.S., a proxy for cross-border shopping, increased by 1.2 per cent.
There's a huge issue here, too, for Canadian retailers who try to get in on the action with their own sales. Of course, a couple of those in the heavyweight category are U.S.-based, and the pressure of their presence, notably the entry of Target Corp., is helping to keep Canadian prices down.
There's still a gap, though.
"Canadian retailers are rising to the challenge of the lure of cross-border shopping, as they look to deal with the Canadian dollar still not far from parity, a significant – although narrowing – gap between Canadian and U.S. retail prices and the more generous duty-free limits," said BMO's chief economist, Douglas Porter.
"Canadian holiday retail sales receipts, excluding auto and gasoline sales, should increase by roughly 2 per cent, year over year, in the November-to-December period."
- Marina Strauss: Target's woes in Canada deepen as consumers give retailer cold shoulder
- The only day Wal-Mart fires up every register
- Bertrand Marotte: Canadians plan to spend an average $1,810 this holiday season
Inflation rate dips
Canada's annual inflation rate now stands at just 0.7 per cent, driven down by lower prices at the gas pump.
The pace of consumer price increases fell in October from 1.1 per cent a month earlier, Statistics Canada said today, citing a drop of 4.3 per cent in gasoline prices from a year earlier.
Gas prices fell 5.1 per cent in October alone, but that don't be fooled by that.
"Since the beginning of 2013, there have been an equal number of monthly increases and decreases in the gasoline price index, resulting in an average year-over-year growth rate of 0.3 per cent over these 10 months," the federal statistics agency said.
On an annual basis, price growth also eased in the areas of food and shelter, while the cost of clothes, transportation, and health and personal care products fell.
The so-called core inflation rate, which strips out volatile items like energy and helps guide the Bank of Canada, also dipped, to 1.2 per cent in October from 1.3 per cent a month earlier.
On a month-over-month basis, and seasonally adjusted, consumer prices dipped 0.1 per cent in October, while core prices were flat.
"The recent sub-par Canadian economic performance, the amount of slack still present in the economy, and intense retail competition are providing little upward pressure to prices," said senior economist Sonya Gulati of Toronto-Dominion Bank.
"These forces are expected to have some staying power," she said in a research note.
"That said, inflation in Canada should begin to re-accelerate heading into 2014, but the speed that is clocked in will be nothing to write home about. In turn, the Bank of Canada has some time to wait until it once again tightens monetary policy. We believe that the next rate hike will not occur until the second half of next year."
- Gas price plunge drops annual inflation to 0.7% in October
- Barrie McKenna: Poloz rejects OECD report urging rate hikes for Canada
Retail sales rise
Amid all this, Canadian shoppers are heading into the holiday season seemingly ready to spend. At least a little.
Retail sales in Canada climbed 1 per cent in September, a better showing than expected, according to today's report from Statistics Canada.
Having said that, the gain was boosted by sales of vehicles and car parts, and I'm not sure how many of us are expecting a new SUV or a transmission for Christmas.
September's gains marked the third in a row. Six of the 11 sectors measured by Statistics Canada posted increases, representing 55 per cent of overall sales.
When you strip out cars and parts, sales were flat.
An interest tidbit here: After two months in a row of declines, new car sales rose 5 per cent, marking the best monthly increase since January 2009.
And we all remember January 2009.
"With the rise in volumes driven by autos (which have a low markup), the impact on value-added GDP could be less pronounced than the report suggests at first blush," said economist Emanuella Enenajor of CIBC World Markets.
"That could leave [overall economic] growth in September headed for an increase of 0.2 per cent."
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