By MICHAEL BABAD
Monday, February 19, 2018
We may get a sense this week of whether restaurant and certain other businesses have been swallowing their higher labour costs or passing them on to their customers.
That's one of the things economists will be looking for when Statistics Canada releases its monthly inflation report Friday.
The numbers will be scoured "for evidence that the large minimum wage hike in Ontario in January is pushing consumer prices higher," Royal Bank of Canada economists said in projecting the report will show a hotter 0.5-per-cent to 0.6-percent increase from December.
"Prices for accommodation and restaurant food, in particular, are probably among the most susceptible to minimum-wage driven price increases."
Those aren't the only things you may be paying more for. A big part of that monthly jump will have been because of a spike in the cost of filling up your car, as well as your stomach.
Analysts believe the annual rate of inflation will come in at about 1.5 per cent or 1.6 per cent, down from December's 1.9 per cent, but that's because of sharply higher costs in the consumer price index a year earlier.
January is traditionally a "seasonally strong" month for inflation readings, said Benjamin Reitzes, Canadian rates and macro strategist at BMO Nesbitt Burns.
"Indeed, seasonality suggests that we'll see some chunky increases in the CPI over the next five months," Mr. Reitzes said.
"And, there's some upside risk from the 20.7-per-cent increase in Ontario's minimum wage.
There's anecdotal evidence of price increases at restaurants, and broader cost pressures are possible."
This week also brings the stragglers of the quarterly earnings season, with some big players still to come.
"Still-solid earnings results have also proved supportive [of markets], with nearly 80 per cent of S&P 500 companies topping expectations about four-fifths of the way through the reporting period," BMO senior economist Robert Kavcic said.
Canada's major banks also kick off their quarterly reporting.
Here's the rest of the calendar.
Markets are closed in Canada, the United States and China. In Europe, though, finance ministers will be discussing - guess what? - the Greek bailout.
TUESDAY: WALMART VS. AMAZON
It's a light day on the economics front, but Walmart Inc. is one of the companies releasing results as the quarterly earnings season winds down.
Walmart "has been one of the few U.S. retailers that has been able to take the fight to Amazon in terms of the online shopping experience," CMC Markets chief analyst Michael Hewson said.
"Big box retailers have come under increasing pressure from the low overheads model that Amazon is able to bring to the table, however Walmart's stronger grocery offering is helping it ride out the storm," he added.
"At its last trading update at the end of last year, it showed that revenues in its U.S. stores were holding up well, however, the recent increases in wages and bonuses announced recently by its management could cause the company to revise down its outlook for 2018."
Others reporting results include Duke Energy Corp. and Keg Royalties Income Fund.
WEDNESDAY: FED IN FOCUS
Investors will be perusing the minutes from the late January meeting of the Federal Open Market Committee, the Federal Reserve's policy-setting group.
"The FOMC teed up the prospect of another rate rise next month at its most recent meeting at the end of January, by upgrading its outlook for inflation on a 12-month basis while staying optimistic about the health of the U.S. economy," Mr. Hewson said. "Given recent volatility, these minutes may not be too instructive, but as long as U.S. data continue to show increasing price pressure, then a March rate hike could be the first of many this year."
Amid the tumult in South African politics, John Ashbourne of Capital Economics expects to see that inflation eased to an annual pace of 4.6 per cent in January.
"Meanwhile, the country's Finance Minister will present the 2018 budget, providing an opportunity for President Cyril Ramaphosa to lay out his new fiscal plans," Mr. Ashbourne said.
"Investors will be keen to see whether the new President replaces the current minister, Malusi Gigaba, with someone from the more fiscally conservative wing of the party."
There's also a reading on U.S. home sales, expected to show a jump in January of about 0.7 per cent, manufacturing purchasing managers index readings from around the world, and quarterly results from HudBay Minerals Inc., Iamgold Corp., Maple Leaf Foods Inc. and Trican Well Service Ltd.
THURSDAY: MOVIES, GIFT CARDS, T-SHIRTS AND BANK ACCOUNTS
An interesting day, this, with a lot of scope.
First up is the second estimate of fourth-quarter economic growth in Britain, and economists expect no revisions from the first reading of 0.5 per cent.
Then we get Statscan's monthly report on retail sales for the key month of December.
Observers generally expect to see a drop of 0.5 per cent, although it could be bigger than that, with auto sales dragging down our shopping.
"Adding to the softness is an anticipated decline in underlying sales," BMO's Mr. Reitzes said.
"Increased activity on Black Friday has pulled sales into November in recent years, and 2017 was likely no different. The ubiquity of gift cards also serves to push sales into January, acting as another headwind on December."
Among the companies reporting results, it's always interesting to see Cineplex Inc.'s earnings because they tell you how the blockbusters fared and how you're helping the company's bottom line by buying popcorn.
Canadian Imperial Bank of Commerce, meanwhile, starts the ball rolling in its sector, and we'll also hear from Canfor Corp., Gildan Activewear Inc., Loblaw Cos. Ltd., Magna International Inc. and SNC-Lavalin Group Inc.
FRIDAY: THE COST OF LIVING
Alongside the Statscan report come inflation readings from Japan and the euro zone.
Royal Bank of Canada reports quarterly results, as does Berkshire Hathaway Inc.
RBC economists will be looking for signs of Ontario's minimum-wage hike 'pushing consumer prices higher' in Statscan's monthly inflation report, set for release on Friday.
JENNIFER ROBERTS/THE GLOBE AND MAIL