Canada’s annual inflation rate eased more than expected to 5.9 per cent in January, data showed on Tuesday, backing up the Bank of Canada’s declared aim to keep rates on hold at its next meeting to let previous rate hikes sink in.

Analysts had expected inflation to edge down to 6.1 per cent from 6.3 per cent in December. Month over month, the consumer price index rose 0.5 per cent, Statistics Canada said, again lower than analysts’ forecast of a 0.7 per cent gain after a 0.6 per cent decline in December.

Statscan said part of the easing of the annual rate was due to the comparison with last year’s strong inflation numbers, or because of a base effect. In January last year prices gained amid Russia-Ukraine tensions and supply chain disruptions.

“There were some very strong base effects from last January that are starting to roll out of the headline inflation metrics,” said Andrew Kelvin, chief Canada strategist at TD Securities.

The inflation figure “allows (the Bank of Canada) to stay on hold in March, despite the fact that the labour market was extraordinarily hot in the month of January,” he said.

The Bank of Canada in January raised its benchmark interest rate to a 15-year high of 4.5 per cent and became the first major central bank to say it would hold off on further increases as long as prices eased in line with its forecast.

But Canada’s economy then smashed expectations by adding a net 150,000 jobs in January, data showed earlier this month.

Markets toned down their bets on another rate hike after the release of the inflation figures. Money markets now see a roughly 80 per cent chance that the Bank of Canada will raise interest rates again this year after having fully discounted such a move before the data.

The bank forecasts inflation to slow to about 3 per cent by the middle of 2023, and to come down to its 2 per cent target next year.

Excluding food and energy, prices rose 4.9 per cent compared with a rise of 5.3 per cent in December.

The average of two of the central bank’s core measures of underlying inflation, CPI-median and CPI-trim, came in at 5.1 per cent compared with 5.3 per cent in December.

“It gives them (the Bank of Canada) somewhat greater comfort in their decision to go on pause at least temporarily,” said Doug Porter, chief economist at BMO Capital Markets. “A lowside inflation read will definitely prove to be a nice antidote to some of those high-side surprises.”

Adding to the favourable base effect, cellular services fell 7.9 per cent annually in January after increasing 2.5 per cent in December, and consumers paid 6.2 per cent more for passenger vehicles compared with 7.2 per cent in December.

Mortgage interest costs, on the other hand, rose 21.2 per cent annually in January, the largest increase since 1982, while food prices rose 10.4 per cent, slightly faster than the 10.1 per cent in December.

The Canadian dollar was trading 0.4 per cent lower at 1.35 per U.S. dollar, or 74.07 U.S. cents.

Cenovus Energy Inc CVE-T -2.07%decrease posted a net profit for the fourth quarter on Thursday, compared with a loss last year, and said Chief Operating Officer Jon McKenzie would become its president and chief executive officer.

McKenzie, who was the finance chief of Husky Energy from 2015 to 2018, joined Cenovus in 2018 as its chief financial officer.

Outgoing CEO Alex Pourbaix will shift to the role of executive chair after the company’s annual general meeting on April 26, where he will be nominated for election to the board.

Cenovus’s total revenue rose nearly 3 per cent to $14.1-billion in the fourth quarter, helped by an increase in downstream operating margins.

U.S. oil prices pulled back from a multiyear high in the quarter, but were trading 9 per cent higher than the year-ago level as Western sanctions against major energy producer Russia and a decision by OPEC+ to cut output tightened global supply.

The Calgary, Alberta-based company reported a profit of $784-million, or 39 cents, for the fourth quarter ended Dec. 31, compared with a loss of $408-million, or 21 cents per share, a year earlier.

Its total upstream production stood at 806,900 barrels of oil equivalent per day (boepd), down from 825,300 boepd a year earlier. Downstream production rose to 473,500 barrels per day (bpd) from 469,900 bpd last year.

Oil prices edged lower on Thursday after a large build in U.S. crude inventories but continued to trade in a narrow range as hopes for a Chinese demand recovery remained in focus.

Brent crude futures fell 36 cents, or 0.42%, to $85.02 a barrel by 1042 GMT. U.S. West Texas Intermediate (WTI) crude futures were down 29 cents, or 0.37%, at $78.30.

Prices were pressured by last week’s larger than expected build in U.S. crude oil stocks. Stocks rose to the highest level since June 2021, the Energy Information Administration (EIA) said on Wednesday.

The build was largely because of a data adjustment, which analysts said muted the impact on oil prices.

“Brent failed again to move above the 100-day moving average this week. Together with a large crude build in the U.S., prices remain under downward pressure,” said UBS analyst Giovanni Staunovo.

The Brent benchmark has been swinging within an $80-$90 a barrel range for the past six weeks while WTI has ranged between $72 and $83 since December.

“Oil prices are very choppy at the moment, with traders having a lot to take in,” OANDA analyst Craig Erlam said in a note, pointing to Russia’s 500,000 bpd cut to oil production in March, a strong Chinese economic recovery and an uncertain global economic outlook.

China will account for almost half of global oil demand growth this year after relaxing its COVID-19 curbs, the International Energy Agency (IEA) said on Wednesday.

On the supply side, the market is keeping a close eye on Russian oil production.

“It is open for interpretation how the country’s oil production will be affected by international sanctions or to what extent the invader would go to use oil as leverage,” said Tamas Varga of oil broker PVM.

Russian oil exports were down in January by only 160,000 bpd from levels before the war in Ukraine, but about 1 million bpd of production will be shut in by the end of the first quarter, the IEA said.

The market will look for economic clues from a host of Fed and ECB officials due to speak on Thursday.

• The European Union’s embargo on Russian oil products came into effect on Feb. 5, building on the $60 oil price cap implemented by the G-7 (Group of Seven) major economies on Dec. 5.
• China, India and Turkey in particular have ramped up purchases to partially offset a fall in Russian crude exports to Europe of 400,000 barrels a day in January.
• Russian net oil output was down by only 160,000 barrels a day from pre-war levels in January, with 8.2 million barrels of oil shipped to markets worldwide, according to the IEA’s oil market report.

https://www.cnbc.com/2023/02/16/sanctions-on-russian-oil-are-having-the-intended-effect-iea-says.html

• The market probability of a further 25 basis point increase at the Monetary Policy Committee’s next meeting nudged up past 73% on Wednesday, according to Refinitiv data.
• The U.K. annual inflation rate dipped for a third straight month to 10.1% in January, landing below consensus forecasts, even as high food and energy prices continue to squeeze British households.
• Tuesday’s employment figures for December offered little indication that the labor market is beginning to ease.

https://www.cnbc.com/2023/02/16/a-cocktail-of-sticky-inflation-and-a-tight-labor-market-boosts-bank-of-england-rate-hike-bets.html

Retail sales were flat in the fourth quarter for Canadian Tire Corp. Ltd., as the company’s automotive business continued to offset declines in demand for products such as home improvement and entertainment products.

On Thursday, the Toronto-based retailer reported that comparable sales were up 0.3 per cent across its store banners in the fourth quarter, and down 0.1 per cent at the flagship chain, citing declines in categories it refers to as “playing” and “fixing.”

The results for the 13 weeks ended Dec. 31 – including the all-important holiday period – showed that sales held steady at Canadian Tire CTC-A-T +0.48%increase compared to a strong period the prior year when comparable sales grew by nearly 10 per cent. But the purchasing trends still pointed to an ongoing shift in consumer behaviour across the country, as inflation-weary shoppers continue to spend on essential products such as tires and pet supplies, while cutting back on non-essential expenses.

Comparable sales at Sport Chek were down by 1.6 per cent, as demand waned across categories and especially in outerwear. At Mark’s, sales grew 4.4 per cent as customers continued to stock up on casual clothing and footwear, and industrial items.

Revenue at the company’s financial services segment grew by 14.3 per cent in the quarter on higher interest income and fees related to growth in credit card sales.

Overall, Canadian Tire’s profits were up as revenues increased and gross margins improved in its retail segment. The company reported net income of $562.6-million, or $9.13 per share in the quarter, compared to $535.7-million or $8.40 per share in the same period the prior year.

Total revenue in the 13 weeks ended Dec. 31 grew by 3.9 per cent to $5.3-billion.

At an investor presentation last March, Canadian Tire announced a four-year growth strategy with the goal of growing its comparable sales by 4 per cent on average annually – not including fuel sales at its gas stations – and to improve its e-commerce operations and supply-chain efficiency. For the full year 2022, comparable sales grew by 2.7 per cent. The fourth-quarter report to shareholders acknowledged that the company “is now operating in a more challenging environment in 2023″ than expected at the time the growth strategy was announced, and that some of the assumptions behind those goals “could be challenged” if consumer spending patterns continue to be affected by inflation. “While the company remains committed to achieving its financial aspirations outlined at investor day, by continuing to invest in its building blocks for the longer term, the pacing will be different than originally planned,” the report stated.

The Canadian Press – Canadian Press – Wed Feb 8, 10:24AM CST

TORONTO — Automotive industry leaders say the need for Canada to take action on the electric vehicle transition has taken on significantly greater urgency as money starts to flow in the U.S. from massive government incentives.

Speaking at an electric vehicle conference in Toronto Wednesday, GM Canada president Marissa West says that sense of urgency can’t be understated as the company looks to secure its mineral and manufacturing capabilities for the years ahead.

West says Canada has a significant advantage thanks to renewable energy supplies, but that the speed of project approvals and inconsistent policies between provincial and federal governments are barriers.

Both West and Linamar Corp. chief executive Linda Hasenfratz emphasized the need for government support to balance the funding being provided by the Inflation Reduction Act in the U.S.

The Canadian industry is set to benefit from many aspects of the U.S. act, but West says that areas like manufacturing capacity will especially require the Canadian government to step in.

Unifor President Lana Payne says the urgency comes as manufacturers look to restructure whole supply chains to be closer to home, which along with the shift to electric vehicles creates risks and opportunities for Canadian workers.

This report by The Canadian Press was first published Feb. 8, 2023.

Companies in this story: (TSX:LNR)

Magna International (TSE:MG) fell on Wednesday after CIBC downgraded North America’s largest auto-parts supplier in the wake of the Volkswagen emissions scandal. 

Shares were trading at $61.06, down 2.1%, at 1:07 p.m. in Toronto.

CIBC lowered the stock to “sector perform” from “sector outperform” and cut its target price to $52 from $62.50.

Analyst Todd Coupland noted that Magna doesn’t make diesel engines, but it does make many parts that end up in VW vehicles.

Magna’s VW sales were $4.26bn in 2014, $3.6bn of which were in Europe.

VW’s emissions rigging scandal continues to broaden. Chief executive officer Martin Winterkorn resigned on Wednesday as the automaker admitted that as many as 11 million cars could be affected. 

Since 48% of VW’s European vehicle sales are diesel, Coupland assumes the same ratio applies to Magna. That works out to an estimated $1.75bn of sales in 2014.

European markets higher as investors weigh up economic outlook

European markets were higher Thursday as investors weighed up the economic outlook and interest rate trajectory.

https://www.cnbc.com/2023/02/09/european-markets-live-updates-stocks-data-earnings-and-news.html