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August 2021 Inflation
September 15, 2021
1:13 pm
Vatox
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4.1%. Not looking too healthy, with that rate hold!

https://www150.statcan.gc.ca/n1/daily-quotidien/210915/dq210915a-eng.htm

September 15, 2021
1:36 pm
Bill
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I read somewhere it's the highest in 18 years - Canadians will want even more printing now!

September 15, 2021
1:45 pm
Vatox
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Bill said
I read somewhere it's the highest in 18 years - Canadians will want even more printing now!  

January, February, March 2003. It was 4.5%, 4.7% and 4.2%

September 15, 2021
1:58 pm
Alexandre
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Vatox said

January, February, March 2003. It was 4.5%, 4.7% and 4.2%  

CBC News · Posted: Apr 14, 2003 10:00 AM ET | Last Updated: April 14, 2003

The Bank of Canada boosted its key interest rate by a quarter of a percentage point Tuesday, saying growing inflationary pressures outweigh concerns that the economy may be slowing.

The central bank's overnight rate target what banks charge each other for overnight loans rises to 3 per cent.

Chartered banks raised their prime rates by a quarter of a percentage point to 4.75 per cent, effective Wednesday.

The country's annual inflation rate in January jumped to an 11-year high of 4.5 per cent and the Bank of Canada's measure of core inflation which excludes volatile items like fruit, vegetables, gasoline, and tobacco rose to 3.3 per cent. Both measures are well above the 2 per cent target the Bank has set.
The central bank signaled that further rate hikes are coming. "Further reductions in monetary stimulus will be required to return inflation to the target over the medium term," it said.

BMO Nesbitt Burns chief economist Sherry Cooper said the Bank of Canada did the right thing. "If the Bank had ignored the inflation report, which screamed for a rate hike, its commitment to fighting inflation would have been suspect," she said.

September 15, 2021
3:00 pm
Vatox
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Well, the next “scheduled” interest rate policy statement is October 27. And it looks like they aren’t very keen to stamp out inflation, but maybe they are crossing fingers that inflation will dissipate quickly and let them off the hook. At this point, with 3 months over 3% and now over 4%, I’m thinking they should raise rates before someone points the finger, saying they aren’t following the mandate. I suppose we can get away with waiting to see September inflation before deciding.

September 15, 2021
3:26 pm
cgouimet
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If you think back 12 months...

Gasoline prices had dropped significantly cause no one was driving.

Hotel rooms, airline seats were dirt cheap cause there was no travel.

Lots of electronic sales for home learning and entertainment.

Many others...

Now that people have saved lots of $ during the pandemic (note how credit card debt has gone way down too), they're driving so gas prices go back up. They want to travel and stay somewhere so airline tickets and hotel room prices go backup. They want to buy cars but Holly sh__ the darn chips are in those darn laptops and tablets so no cars to buy so that's now a buyers market along with the houses people want to put their savings into ...

And on and on and on ... Give it 6 months and see who comes out trying to take credit for inflation to be turned back to normal levels ...

September 15, 2021
3:51 pm
dougjp
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cgouimet said
If you think back 12 months...

Gasoline prices had dropped significantly cause no one was driving.

Hotel rooms, airline seats were dirt cheap cause there was no travel.

Lots of electronic sales for home learning and entertainment.

Many others...

Now that people have saved lots of $ during the pandemic (note how credit card debt has gone way down too), they're driving so gas prices go back up. They want to travel and stay somewhere so airline tickets and hotel room prices go backup. They want to buy cars but Holly sh__ the darn chips are in those darn laptops and tablets so no cars to buy so that's now a buyers market along with the houses people want to put their savings into ...

And on and on and on ... Give it 6 months and see who comes out trying to take credit for inflation to be turned back to normal levels ...  

No credit in sight to be taken, nor a drop in inflation. Except lumber, where the huge recent drop was mainly because all buyers said forgetabout it after the prices spiked too high. Dumb retailers, now they are stuck with operating losses.

The lack of computer chips problem is only in its early stages, wait to see the real fallout. New cars and trucks on mostly empty lots that can't start due to incomplete production is the current situation in some places, and this will increase rapidly as there is no solution in sight. Bidding wars for cars next?

"Tell a man that there are 400 billion stars and he'll believe you. Tell him a bench has wet paint and he has to touch it." ~ Steven Wright

September 15, 2021
5:14 pm
mordko
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Shut-downs from 12 months ago are not the only factor. Flight tickets are still dirt cheap so they are not causing inflation. Shipping prices are up. A lot. Apparel. Equipment. Bath tubs. In the last 3 days I saw two separate messages from small business apologizing that they are forced to jack up their prices.

The experts are saying it will pass all by itself. Maybe they are right but traditionally they are useless at predicting the future. The market is also suggesting inflation will subside, but thats based on government bonds and central banks have been messing with that particular market.

Supply is struggling because trade is suffering and manufacturing still has operational issues related to Covid. Some of it will pass. Some won’t. On the demand side of things Canadians are sitting on a lot of cash, waiting to be permitted to spend it. Meanwhile the next government will throw a lot more cash at us.

Eventually inflation will subside but not by itself. Sooner or later the market will force the bank to act.

September 15, 2021
6:04 pm
Norman1
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High August-to-August CPI inflation. But, not really high from before the pandemic.

Month CPI
Jan 2020 136.8 +4.2%
Aug 2020 137.0 +4.1%
Jan 2021 138.2
Aug 2021 142.6

+4.2% from January 2020 to August 2021 (after 19 months) works out to be +2.6% per annum.

September 15, 2021
7:11 pm
Bill
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You can always play with odd-length periods, the point is the usual period we look at, the last year (12 months) is 4.1%.

I'm guessing a lot has to do with supply constraints, as mordko says, though I don't see that changing in the forseeable future.

September 15, 2021
7:36 pm
Vatox
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Bill said
You can always play with odd-length periods, the point is the usual period we look at, the last year (12 months) is 4.1%.

I'm guessing a lot has to do with supply constraints, as mordko says, though I don't see that changing in the forseeable future.  

I agree, I actually think the supply and manufacturing issues will worsen with this 4th Covid-19 wave.

September 15, 2021
7:56 pm
Norman1
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That depends on which supply chain.

Lumber supply has recovered. Globe & Mail article B.C. Interior sawmills scale back lumber output as consumers delay home renovations yesterday said that wholesale lumber prices are back to pre-pandemic levels. Some sawmills have reduced production because of lower demand.

Unfortunately, computer chip supplies have not yet.

September 15, 2021
8:01 pm
Norman1
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The longer periods are more relevant.

One can do the same 12-month sensationalism with the TSX 300. The August-to-August change in the TSX 300 Total Return Index was +28.2%!

September 15, 2021
8:14 pm
Loonie
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However, you slice it, inflation is now progressing at a rate we haven't seen in quite a while -AND it is increasing every month at present. It's not all due to missing computer chips.
I think that even if the press release said 2.6 over 19 months, we'd think it was high compared to what we've been used to.

September 15, 2021
8:15 pm
Bill
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It's mainly Asian supply chains & shipping that will be impacted in the longer run, and that affects lots of stuff.

September 15, 2021
9:42 pm
Vatox
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Norman1 said
The longer periods are more relevant.

One can do the same 12-month sensationalism with the TSX 300. The August-to-August change in the TSX 300 Total Return Index was +28.2%!  

Tell that to all the Canadians that live paycheque to paycheque. I’m quite sure they don’t care what the cost of living was 2 or 3 years ago, they need affordability today. Wages have not been increasing. Over 50% of Canadians lived with less than $200 remaining each month, that was pre-pandemic, I’m not sure about now, but I’m thinking it’s still high. And that means a lot of people are hurting because of the annual inflation calculation. We, here, are mostly savers and have reserves to draw on for costs, so our perspectives are different. You have to look at the way most people live, and that isn’t us here on this site.

September 16, 2021
4:19 am
mordko
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Some of the supply issues are transient and will pass. Others will persist, like protectionism and trade wars.

But its not just the supply. Its also demand. In the developed world US and Canada provided the most stimulus/money-printing. US had to do that to some extent because protection provided on a routine basis is comparatively low.

Everyone is experiencing supply issues but inflation is running exceptionally hot in the US and Canada. And money printing in Canada will persist thanks to the election so not sure why inflation wouldn’t. Won’t be long before unions start escalating their demands putting more upward pressure on the demand side.

September 16, 2021
5:10 am
mordko
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Something else to be aware of… The way CPI is calculated, a lot of numbers are effectively averaged over preceding months or even years. For example, rental price index reflects monthly changes in the rent actually paid. Well, most of these rents reflect deals negotiated months ago. Moreover, unless the renter changes, annual price increases are constrained and don’t reflect supply-demand. With house prices jumping as they have, rent prices are escalating but CPI has a long lag before it starts reflecting this. The cost of mortgages - ditto. Rates will go up from nothing. House price inflation will eventually show in the CPI but it hasn’t happened yet.

September 16, 2021
5:32 am
Righand
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What I cannot understand is why the bond market hasn't sold off forcing higher interest rates.

The 5 year bond yield is still hovering around 0.85 %

With inflation soaring this doesn't seem to make any sense at all.sf-confused

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