The latest inflation numbers from Canada dropped this morning. There's a lot to unpack in this report. The annual inflation rate, it dropped to 1.6% in September. That's down from 2% in August.
The lowest now we've seen since February 2021. It's even below the market forecast of 1.9%. But what's driving this cooling of inflation here? Most importantly, what could it mean for our economy here in Canada as we move forward?
I want to look at some details. First off, the headline inflation rate of 1.6%. That's notable, especially because it's now the second straight month that inflation has stayed under the Bank of Canada's target of 2%.
Not all prices are dropping across the board. Some sectors are still feeling some heat. Let's look at some details here.
Gasoline prices, they led the decline with a 10.7% drop compared to 5.1% in August. This is largely tied to falling crude prices that we've seen lately. It also dragged down the broader transportation sector by 1.5%. Shelter costs, they cooled a bit too. Rent prices slowed to 8.2% from 8.9%.
That helped ease inflation for the overall shelter category, which dropped from 5.3% to 5%. That said, not everything is getting cheaper. We saw food prices actually tick up slightly, rising 2.8% compared to 2.7% in August. Restaurant prices saw a 3.5% increase and grocery store prices held steady at 2.4%.
Meanwhile, the trimmed core inflation, that's the key measure that strips out the most volatile items, it held steady at 2.4%. Month over month, overall consumer prices fell by 0.4%. So what is behind this drop?
Well, the main driver, as I mentioned here, is cheaper energy, especially gasoline and transportation. We've seen the oil prices falling lately. We've also seen that ripple effect that's cooling inflation in these sectors.
The story with shelter costs, that's also worth noting. While rent prices, they are still high. They're not rising as fast as they were before.
That's providing some relief. The food sector, that remains a little bit of a puzzle right now. Even though we've seen inflation down overall, Canadians are still paying more at restaurants and grocery stores.
This could be a reflection of the lingering supply chain issues, if there's still a few of those out there, or more probably. the higher labour costs that are keeping prices elevated in certain areas. This is now though where things really get interesting. We've seen now inflation below that 2% target for two straight months.
So there's a growing consensus that the Bank of Canada is going to be extending its rate cutting cycle. We had months and months and months, of course, of aggressive rate hikes to combat inflation. Now we're seeing a drop and this might give the bank the green light to loosen monetary policy even a little bit more than it has lately. If they do go ahead with another cut, of course, that's going to make borrowing cheaper.
That would potentially boost the housing market. But there's also that trade-off like there always is. Too many rate cuts. That could just reignite inflation if the economy picks up too fast. It'll be interesting to see how cautious the Bank of Canada decides to be in the coming months.
So what's the main takeaway here? Well, on the surface, of course, falling inflation, that sounds like good news. It means that rising cost of living is at least slowing down. Not everyone is going to feel that relief right away.
As I mentioned, gas transportation costs, they're down. That's great for drivers. But rent, shelter prices, they're still high.
Good news, I guess, they're rising at a slower pace than they were before. But food prices, they're like stubbornly high, especially if, you know, your lifestyle includes dining out. So this mixed bag here shows that while headline inflation is improving, Canadians may not feel those gains evenly across all of their budgets. The big question now, will inflation stay under control? Well, if...
oil prices stay low if rent costs continue to stabilize we could see inflation hover around or maybe even a little bit below that target rate of two percent but if we see those food prices you know continue to creep up or if we see global energy markets get more volatile that could change pretty quickly and of course the events over in the middle east that may play a big role there so we have some interest rate decisions coming up next few months this is going to be crucial i'm going to keep an eye on how the bank of canada responds any moves that they make will have a ripple effect across the economy from mortgages to business loans. What do you think? Do you think inflation is going to stay low? Are we in for another round of surprises?
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BMOGAM today that's B-M-O-G-A-M dot com today and see how BMO can help you meet your financial goals. TD Bank's troubles certainly aren't going away anytime soon even though last week it did plead guilty to felony charges that are tied to anti-money laundering failures. The fallout of this a 3.09 billion dollar fine and an indefinite cap on the bank's U.S. retail assets and that has dealt a major blow up to its growth prospects.
What does it mean for the bank's future? I'm going to break it down right here. Here's what happened. TD's US retail assets they are now locked in at $434 billion as of September 30th and that means that the bank can't grow by adding new products or branches in the US to stay under that cap. TD has said they're going to cut 10% of its US retail assets and will be holding more cash in reserve.
Now on top of that fine the bank's stock target has been slashed from $88 to $82 by RBC Dominion Securities. On that news TD Bank shares fell four percent on Friday and they dropped on six percent on Thursday. So you know with this growth stalled now TD is shifting its plans to focus on Canada's markets which are already of course somewhat saturated.
They're looking to work look more towards corporate banking through TD securities. The timing could not be worse. We've got CEO Bharat Mastrani.
He will be retiring in April 2025. He'll be passing the reins over to Raymond Shun. Now he's obviously going to be facing the tough task of rebuilding trust and stabilizing the profits with the banks. Internally, the bank struggles.
They're not really helping either. Apparently, morale has taken a hit. That might be sort of expected. There appears to be frustration over leadership's focus on compliance, despite all these failures that they have in their U.S. unit. So right now, executives, they're going to be scrambling to retain the talent with all these ongoing concerns here that key leaders could have.
they could be leaving during the restructuring. So 2025 it really will be a transition year for the bank with these anti-money laundering compliance costs expected to rise from 350 million to 500 million dollars. Now analysts they believe that TD's asset cap could last as long as five years or more and that would be similar to the restrictions that were put on Wells Fargo back in 2018. So yeah TD Bank it does face no doubt a long road to recovery here it's got a balance the market challenges, it's got to retain the talent that will help it get through these difficult times and also they have to importantly restore client trust, investor trust and we'll just have to see if the new leadership can turn things around. Let me know what your thoughts are in the comments.
The Canadian Real Estate Association, CREA, they just revised its housing forecast and it's not the rebound that many of us were hoping for. Even though we have seen these multiple rate cuts from the Bank of Canada, the housing market is remaining quite sluggish. So why is the recovery stalling?
When might things turn around? Let's dig into that. First of all, here are Korea's latest numbers. 468,900 properties are expected to sell in 2024. That's a 5.2% increase from 2023, but it's still down from Korea's earlier forecast of 6.1% growth. The average home price in September was $669,630, a 2.1% increase year over year.
Now for 2024, CREA is expecting prices to rise by only 0.9%. That is far less than the 2.5% growth that was originally predicted. Sales in September, they're up 6.9% from a year ago. But monthly growth from August was a sluggish 1.9%, even after the three straight rate cuts that we saw from the Bank of Canada.
So what's the holdup, you might ask? CREA says that buyers may be waiting for more rate cuts before they jump back into the market. Some could also be hoping... for a little bit more price stability before they take the plunge. Meanwhile you've got more homes hitting the market.
There's 185,427 listings in September. That's up 16.8% from last year. So not immaterial there but inventory overall it's still below the historical average.
of $200,000 which is keeping the market tighter than usual. Now Korea they say that they don't expect the market to actually pick up until spring of 2025. If rate cuts come faster buyers might just continue waiting to see if they can get a better mortgage deal. The tight supply it might also prop up prices limiting to how far they can fall.
So will this housing market finally turn around next year or are we in for an even longer slowdown? Drop your thoughts in the comments. If you found this video helpful hit the like button, subscribe for more updates Thank you as always for watching.
We'll see you in the next video.