Inflation continues to fall as temperature rise
As we’re moving through summer’s dog days and heat records are being broken around the world, Canadian inflation is moving in the opposite direction. Statistics Canada released that the year-over-year Consumer Price Index (CPI) increase cooled to 2.7% in June. As inflation continues its downward trend, it generally indicates that the Bank of Canada’s monetary policy is working.
Consumer price index June 2024 report highlights
The main takeaways from the monthly CPI report are:
Core CPI (excluding food and energy) stayed stubbornly higher than the headline CPI, coming in at an annualized 2.9%.
Shelter continues to dominate the overall inflation picture, as prices were up 6.2%.
Services, another major inflation concern, were up 4.8%.
Durable good prices have substantially deflated, as they fell at an annualized rate of 1.8%.
Similarly, prices for clothes and shoes were down 3.1%.
Gas prices were down 3.1% from May to June, and have been pretty stable over the last year.
Grocery prices went up at an annualized rate of 2.1%, lower than the overall CPI figure.
The business and individual sentiment surveys point to decreasing inflation expectations going forward, and are significant indicators that the Bank of Canada (BoC) has succeeded in curbing the scariest runaway inflation scenarios. The early 1980s saw the rise of denim and ultra-high interest rates. While ’80s fashion might be back, it’s pretty clear that the era’s monetary policy isn’t.
Decreased inflation is welcomed news by many Canadians, but it’s probably cold comfort to those with mortgages due for renewal this month. The country as a whole might be happier that demand-pull inflation is down, but that just really means: “People have way less money to spend on most things because their mortgage or rent payments just went through the roof.”
The lower inflation rates and decreased inflation sentiments should empower the BoC to continue to slowly but surely cut interest rates in the coming months. It would be shocking if the BoC didn’t lower interest rates by 0.25% when it makes its decision next week.
To check out the effects of inflation rates right now, use this table.
Read more: Canada’s inflation rate falls to 2.7% in June, driving hopes for July rate cut
Netflix subscribers must be nostalgic for TV commercials
Earnings day went largely as predicted for Netflix last Thursday, as earnings and revenues were quite close to the company’s guidance last quarter.
Netflix earnings highlights
Currency figures in this section are reported in USD.
• Netflix (NFLX/NASDAQ): Earnings per share of $4.88 (versus $4.74 predicted). Revenue of $9.56 billion (versus $9.53 billion estimate).
Netflix sold more memberships than was predicted (277.65 million versus 274.40 million). The bulk of that subscriber growth was in its advertising-supported platform. The markets seemed to take the news in stride, as share prices were largely flat in after-market trading.
Netflix co-CEO Ted Sarandos highlighted the company’s focus on ads going forward, saying that the streamer would no longer partner with Microsoft. Instead, it’s investing in its own platform. He also mentioned that Netflix’s push into live sports would attract more ad dollars, specifically mentioning the NFL games on Christmas Day as important opportunities. He summed up the company’s push into live sports saying, “We’re in live [TV] because our members love it, and it drives a ton of engagement and a ton of excitement… and the good thing is advertisers like it for the exact same reason.”
With Netflix up over 43% this year, and at a price to earnings (P/E) ratio of over 44, one could make the argument the stock is priced appropriately, and that it will have to expertly execute future growth plans to have any chance of justifying that high price tag.
