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Canada’s Inflation Rate Slumps to Lowest in Two Years; Retail Sales Slip



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Canada’s inflation rate slumped to its lowest in more than two years in August, as tepid consumer prices added to the chorus of disappointing economic signs that have dogged the country for months.

Statistics Canada reported that the country’s consumer price index rose 0.1 per cent in August from July, but the year-over-year inflation rate slipped to 1.1 per cent, up from 1.3 per cent the previous month. The closely watched core inflation measure, which excludes the eight most volatile components of CPI (including many food and energy goods), was 1.8 per cent, its lowest reading since July 2014.

Economists had expected overall CPI inflation of 1.4 per cent, and a core reading of 2.0 per cent.

The Canadian dollar fell half a cent against its U.S. counterpart on the news, to about 76.2 cents (U.S.), as the inflation slowdown substantially reduces pressure on the Bank of Canada to consider raising interest rates any time soon.

“It is safe to say there was a complete absence of pricing pressures to worry about in the August inflation numbers. That lines up with the Bank of Canada’s recent shift to sounding a bit more worried about Canada’s economy, and hence the outlook for inflation,” said Toronto-Dominion Bank senior economist Leslie Preston in a research note.

The central bank uses a 2 per cent inflation target as the basis for setting its rate policy, relying particularly on the less volatile core measure to guide its assessment of underlying inflation pressures. Despite an uneven and often disappointing pace in the economy – punctuated by the second quarter’s decline in real gross domestic product of 1.6 per cent annualized – core inflation had been running above the 2 per cent target for the past five months. August’s downturn finally bore the scars of those economic stumbles.

In its most recent interest-rate decision, in early September, the Bank of Canada said inflation risks had “tilted tilted somewhat to the downside since July,” citing the sluggish Canadian and global economies and disappointing Canadian exports.

Much of the weakness in the August inflation numbers came from food, down 0.6 per cent from July, and gasoline, down 0.9 per cent.

The travel component fell 0.8 per cent month over month, as weak domestic economic conditions and the upswing in the Canadian dollar earlier in the year weighed on the tourism business.

The Bank of Canada has long expected Canada’s inflation pace to cool, as the effects of last year’s slump in the Canadian dollar fades from the CPI numbers. Nevertheless, economists noted that inflation in the services sector – which is largely domestically based and therefore little affected by currency movements – cooled to 1.8 per cent in August from 2.1 per cent in July, suggesting the sluggish domestic economy is also weighing on pricing.

Statscan reported Friday that Canada’s retail sales in July were down 0.1 per cent from June, well short of economists’ expectations of a gain of 0.1 per cent in the month. It was the third straight month without a gain, as May and June sales were flat. The decline was mainly due to lower gasoline prices, but the weakness was nevertheless fairly broad-based, with declines in five of 11 sectors.

On a volume basis, excluding the effects of price changes, retail sales rose 0.3 per cent in the month – an encouraging sign of firm demand. Nevertheless, the tepid retail numbers are another indication of an economy that isn’t firing on all cylinders.

“The overall message is one of a slow-motion machine for both Canadian growth and inflation,” said Bank of Montreal chief economist Douglas Porter.

He said the inflation downturn “is far from enough” to prompt the Bank of Canada to consider an interest-rate cut, but suggested that the pull-back in the core rate to below the central bank’s 2-per-cent target gives it a little bit of breathing room.

“The sag in core inflation does remove one potential obstacle if another nasty shock erupts and the BoC needs to respond.”

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade experience in the global financial markets.

Crude Oil

Crude Oil Pulled Back Despite Joe Biden Stimulus



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Crude Oil Pulled Back Despite Joe Biden Stimulus

Crude oil pulled back on Friday despite the $1.9 trillion stimulus package announced by U.S President-elect, Joe Biden.

Brent crude oil, against which Nigeria’s oil is priced, pulled back from $57.38 per barrel on Wednesday to $55.52 per barrel on Friday in spite of the huge stimulus package announced on Thursday.

On Thursday, OPEC, in its latest outlook for the year, said uncertainties remain high in 2021 with the number of COVID-19 new cases on the rise.

OPEC said, “Uncertainties remain high going forward with the main downside risks being issues related to COVID-19 containment measures and the impact of the pandemic on consumer behavior.”

“These will also include how many countries are adapting lockdown measures, and for how long. At the same time, quicker vaccination plans and a recovery in consumer confidence provide some upside optimism.”

Governments across Europe have announced tighter and longer coronavirus lockdowns, with vaccinations not expected to have a significant impact for the next few months.

The complex remains in pause mode, a development that should not be surprising given the magnitude of the oil price gains that have been developing for some 2-1/2 months,” Jim Ritterbusch, president of Ritterbusch and Associates, said.

Still, OPEC left its crude oil projections unchanged for the year. The oil cartel expected global oil demand to increase by 5.9 million barrels per day year on year to an average of 95.9 million per day in 2020.

But also OPEC expects a recent rally and stimulus to boost U.S. Shale crude oil production in the year, a projection Investors King experts expect to hurt OPEC strategy in 2021.

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Crude Oil

OPEC Says Uncertainties Remain High in 2021



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OPEC Says Uncertainties Remain High in 2021

The Organization of the Petroleum Exporting Countries (OPEC) on Thursday said global uncertainties remained high going forward in 2021 but kept its oil demand forecast unchanged.

In the cartel’s latest oil outlook for 2021, oil demand is expected to increase by 5.9 million barrels per day year on year to 95.9 million barrels per day. The prediction was unchanged from December’s assessment.

However, OPEC and allies, said: “Uncertainties remain high going forward with the main downside risks being issues related to COVID-19 containment measures and the impact of the pandemic on consumer behavior.”

“These will also include how many countries are adapting lockdown measures, and for how long. At the same time, quicker vaccination plans and a recovery in consumer confidence provide some upside optimism.

Crude oil rose to $57 per barrel this week after incoming US President Joe Biden announced it would inject $1.9 trillion stimulus into the world’s largest economy.

But the recent rally in the commodity and stimulus announcement is expected to boost US crude oil output and disrupt OPEC+ production cuts strategy for the year.

The 2021 supply outlook is now slightly more optimistic for U.S. shale with oil prices increasing, and output is expected to recover more in the second half of 2021,” OPEC said.

Still, OPEC, in its forecast “assumes a healthy recovery in economic activities including industrial production, an improving labour market and higher vehicle sales than in 2020.”

“Accordingly, oil demand is anticipated to rise steadily this year supported primarily by transportation and industrial fuels,” the group said.

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Crude Oil

Brent Crude Oil Rose to $56.25 Per Barrel




Brent Crude Oil Rose to $56.25 Per Barrel

Oil price surged following the declaration of Joe Biden as the President-elect of the United States of America last week after Trump’s mob invaded Capitol to disrupt a joint Senate session.

Also, the large drop in US crude inventories helped support crude oil price to over 11 months despite the second wave of COVID-19 crushing the world from Asia to Europe to America.

Brent crude oil, against which Nigerian Crude oil is priced, rose to $56.25 per barrel on Friday before pulling back to $55.422 per barrel on Monday during the London trading session.

Experts attributed the pullback to the rising number of COVID-19 cases in Asia with about 11 million people already locked down in Hebei province in China.

Covid hot spots flaring again in Asia, with 11 million people (in) lockdowns in China Hebei province… along with a touch of FED policy uncertainty has triggered some profit taking out of the gates this morning,” Stephen Innes, chief global market strategist at Axi, said in a note on Monday.

China, the world’s largest importer of crude oil, has joined the United Kingdom and others declaring full or partial lockdown to curb the second wave of COVID-19.

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