Canadian Personal Finance Blog

No LCBO Strike

The LCBO and their union decided not to turn off the liquor spigot, and thus the mad rush on Tuesday simply meant that the shelves on Wednesday needed a lot of restocking (and lots of profits for the LCBO as well). For those who rushed out, guess you can have a BIG party for Canada Day, or you can keep your stockpile, for another holiday? There is a tentative deal in place and now we can all look forward to a boozy summer (whoo hoo!).

Unfortunately for Toronto their strike continues on and their garbage continues to stack up. With the heat this week, might make for some very aromatic issues in Toronto.

U.S. Interest Rates Stay the Same

Interest rates in the U.S. will stay the same for now, said the Federal Reserve on Wednesday.

The prices of energy and other commodities have risen of late. However, substantial resource slack is likely to dampen cost pressures, and the Committee expects that inflation will remain subdued for some time.

Good to hear, but energy prices going back up is going to whiplash on food prices as well, so inflation being low may be wishful thinking on their part.

Stats Canada published their May 2009 numbers today and it is up but only 0.1% over the previous twelve months, which is good to see (for those of us who worry about inflation).  This means that prices are supposedly only up 1/10 of 1% over the previous twelve months (as close as you can get to ZERO (without being zero)).

The number is a little deceiving since the report does say:

The slowdown in the 12-month Consumer Price Index (CPI) was primarily the result of an 18.3% year-over-year price drop for energy products. Excluding energy, the CPI rose 2.3%.

Thus without the drop in gas and energy prices CPI is actually around 2.3% which sounds more realistic. With the spiking of gas and oil prices for the summer this could make for more interesting numbers in the coming months, unfortunately.

1/10 of 1% Inflation? Wow!

Gas Prices Down (for Now)

The following graph is even more interesting and shows just how volatile gas prices have been for the past little while:

Volatile to say the least!

The Big Price Picture

So how did all of this break down? Energy prices down a great deal, however, food prices are UP a large amount as well, so we have two volatile components in the index, whereas most other components are quite calm.

This does not bode well for those on fixed incomes having to deal with higher food prices (as well as those that are living near the poverty line).

As usual I am including the “big table” to show you the components of the CPI and where the biggest jumps are:

In the summertime when all the leaves and trees are green, and the gas prices double, I’ll be blue… OK, that is not how that song goes, but it looks like we are in for another summer of spiking gas prices again. Certainly can’t be blamed on demand this time, since the number of unemployed folk and folks not driving their gas inhaling SUV’s is up and down respectively, wonder what might be causing this? Maybe a secret Canadian Conspiracy to force the U.S. to rely heavily on the Tar Sands in Alberta? Not a bad concept, except this is driving the Canadian Dollar back up to equal value with the U.S. dollar, which will spike the Canadian Economic recovery if we are not careful.

Financial Blog Highlights

This week’s treasure trove of nuggets of wisdom are a wide spectrum of financial discussions:

• One Million and Beyond tackles the argument for the ages about money, Quality of Life and Frugality, can you live without your $5 latte? Yes, I can, but I can’t live without my digital cable, so I am just as guilty, really.
• Million Dollar Journey does a comprehensive comparison in High End Chequing Comparison, a good read for those who might be shopping around for a new bank.
• Michael James’ cynicism shows through in his post A Phone Call From Bell, but he isn’t wrong either. I’m sure if he asked the young lady to repeat “Peter Piper Picked a Peck of Pickled Peppers” five times fast, and he’d agree to the deal, she might do it.
• The Canadian Capitalist tackles a topic near and dear to my heart in Tips on Safety Deposit Boxes. One thing he missed that you shouldn’t put in your safety deposit box, your spare dentures or eye glasses.
• Preet’s attempt at Television fame at Where Does All My Money Go continues on with Watch Me Compete on the W Network, he is entertaining to drink with, let’s hope it translates well to TV.
• Larry MacDonald discusses the Deflation Threat and is skeptical about hyper-inflation and deflation as well. I like reading cynics, makes me feel safer.
• The Canadian Tax Resource writes about Job Loss and Your Retirement Pension Options, interesting ideas, if you have the money or pension.

Don’t miss my weekend post on the one sure fire way to make some coin!

Now that the largest bankruptcy in history has occurred, it begs the question, is there a bottom here somewhere? I think there is for now, but it does point out that “sure things” should sometimes be questioned. If someone had told a trader or investor that GM and Nortel would be in bankruptcy protection, 10 years ago, that person would have been laughed off as a “nut” or “crack pot” or worse, and now we have seen this happen.

Thanks to all of this the Canadian Government is pouring money into GM, with little hope of recuperating this money or of it making a huge difference. We are in uncharted waters that is for sure, I have little understanding of where this all might lead, and I am pretty sure that I am not the only one with these thoughts.

Stay tuned this could be some very interesting times ahead.

GDP Down, down, down…

Canada’s GDP is down 1.4% in the first quarter of 2009 which is the worst drop since 1991, another bad omen for the economy. 

Lower spending in Canada and the United States, particularly business investment in plant and equipment, led to a sharp decline in Canada’s exports and imports. Business investment in Canada fell at the fastest rate since 1982. Final domestic demand was down 1.5% as personal spending, particularly on durable goods, continued to decline. Corporate and personal income also fell in the quarter.

It is not a surprise that GDP is down, but the size of the drop is concerning, but if Canadians are dropping their spending that might be a good thing in some ways.

GDP Looks Not So Good

Companies and individuals in Canada also had the problem of their purchasing power dropping off steeply as well:

Real gross domestic income (GDI), a measure of Canada’s purchasing power, fell 3.0% in the first quarter (-6.2% year over year). Canada’s terms of trade, a measure of export prices relative to import prices, deteriorated for the third consecutive quarter as commodity prices fell and the Canadian dollar depreciated relative to its US counterpart. As a result, the decline in real GDI was much sharper than real GDP; the third consecutive quarter this has occurred.

Less money to spend, less money being spend, and less purchasing power, not a recipe for a way to spend our way out of this economic downturn (read apocalypse).