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Economic growth

Economic Headwinds Ahead: Key Takeaways from the Bank of Canada and Retailers

Strategic Insights

— 1 min read

Inflation and interest rates will be the focal points this week as the Bank of Canada releases its second-last inflation data before the September interest-rate decision. The central bank is expected to hold interest rates unchanged, but investors will be keenly watching core inflation, which has been above 3 per cent for three months. Meanwhile, big-box retailers Walmart and Target will report earnings, with Walmart trading around record highs and Target languishing around a five-year low. The earnings reports will provide insight into the consumer spending outlook and the impact of inflation on retail sales.

Key Takeaways:

  • The Bank of Canada will release its second-last inflation data on Tuesday, with core inflation expected to remain sticky at 3 per cent.
  • Investors will be watching for a deceleration in inflation before further rate cuts are considered.
  • Walmart is trading around record highs, while Target is languishing around a five-year low, with Walmart's profit expected to increase by 11 per cent compared to a 23-per-cent drop for Target.
  • The earnings reports will provide insight into the consumer spending outlook and the impact of inflation on retail sales.
  • Home Depot and Lowe's Companies will report earnings, with Royal Bank of Canada warning that comparable sales growth estimates may be too lofty.
  • Palo Alto Networks will report earnings, with investors nervous about volatile tech spending and its potential impact on the company's forecast.
  • Cybersecurity stocks have been under pressure, with investors looking for a rebound in the sector.

Statistics:

  • Core inflation is expected to remain above 3 per cent for three months.
  • Walmart's profit is expected to increase by 11 per cent.
  • Target's profit is expected to drop by 23 per cent.
  • Comparable sales growth estimates for Home Depot and Lowe's Companies are sitting at a three-year high.
  • Palo Alto Networks' expected earnings per share is expected to be $1.39.

Sources:

  • Bank of America
  • Bank of Montreal Capital Markets
  • Stifel
  • RBC Capital Markets
  • Bloomberg (referenced in the original text, but no specific quote or statistic was used)

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