Time to say goodbye to the resilient consumer as supply issues subside: Rosenberg
Tuesday's Consumer Price Index (CPI) data shows encouraging signs that inflation is starting to ease, according to David Rosenberg.
Canada’s inflation rate slowed in December, as the CPI came in 6.3 per cent higher when compared to the previous year, according to Statistics Canada. The CPI fell 0.6 per cent from the previous month, marking the largest drop since April 2020.
“I think that we're starting to see signs that this uptrend inflation line in Canada, I would actually argue is starting to finally break,” Rosenberg, the founder and president of Rosenberg Research, said in an interview with BNN Bloomberg Tuesday.
“I realized that the narrative was that it was all just gasoline prices but actually when you go through the components of today's number, it softened across the board, [including] recreation, household furnishings, transportation, shelter, all softened considerably.”
The majority of the inflationary pressures experienced over the past 18 months were partly a reflection of supply chain problems that have begun to subside, according to Rosenberg.
The full effects of the Bank of Canada's interest rate hikes from last year are yet to be felt, according to Rosenberg.
The central bank hiked interest rates seven consecutive times in 2022, bringing its policy rate to 4.25 per cent, in an effort to bring inflation back to its two per cent target.
“Look inflation is a process. Look how long it took before the inflation genie was out of the bottle. It may take quite a bit of time before inflation comes back down to target, whether it's 12 months or 18 months, who knows,” he said.
Rosenberg said disinflationary momentum is already in process and he thinks it will “gather steam.”
Amid disinflationary concerns, Rosenberg said he thinks a recession is looming and that the debate is now over its severity, not the likely hood of its occurrence.
INTEREST RATE EXPECTATIONS
The next interest rate decision from the Bank of Canada will take place on Jan. 25. Rosenberg said that the market has priced in a 25-basis-point hike from the central bank.
“I think that this is the last one [interest rate hike] for the cycle. They're [the Bank of Canada] going to go on hold. And they're going to wait and see, they're going to talk a lot more about the policy lags,” he said.