Zellers returns, inflation slows and rents ruin the financial future: The business and investment stories you need to know this week

A customer outside the Zellers store in Mississauga on August 16, 2004.Tibor Kolley/The Globe and Mail

Being overtaken by a week that got away? Here’s your weekly roundup of the Globe’s most essential business and investing stories, with insights and analysis from the pros, stock tips, portfolio strategies and more.

Don’t Call It a Comeback: Zellers Returns

The Hudson’s Bay Company announced this week that it will resurrect discount retailer Zellers with locations in major Bay Area stores beginning early next year. This follows an announcement from HBC earlier this month that the company is teaming up with outdoor chain MEC in building ‘shops-in-shops’ at major Compagnie de la Compagnie stores. Hudson Bay starting this fall. As Susan Krashinsky Robertson reports, Canada’s oldest retailer will also launch an e-commerce store for Zellers selling homewares and furniture, toys, pet accessories and apparel. Canadians reacted to news of the discount retailer’s return with nostalgia for the old-time Zellers, which dominated suburban malls from the 1970s to the early 2000s. There’s no confirmation yet if the Bay will bring back the Zellers Zeddy mascot or the brand’s 1950s-style restaurant, but in these times of inflation, any store where “lowest price is the law” is welcome.

Inflation has slowed but there is still a long way to go

After months of rising inflation and a four-decade high inflation rate reached in June, Canada’s inflation rate slowed in July from 8.1% to 7.7% the previous month. As Matt Lundy reports, gas prices were the main reason, dropping 9.2% in July from June, but other areas – including grocery store prices, rents and natural gas – showed less encouraging signals. The Bank of Canada expects inflation not to return sustainably to its 2% target before the end of 2024, meaning further rate hikes are likely. Financial analysts expect the bank to raise its overnight rate by half or three-quarters of a percentage point in September.

The woes of middle income inflation

Almost all Canadians feel the pain of high inflation, but according to analysis by TD Economics, middle-income households are likely to suffer the most. While Canada’s inflation rate eased slightly to 7.6% in July, for middle-income households it is actually 8.1%, the highest of all income brackets, when adjusted for based on how each income group typically spends money, according to the bank’s economists. Why is this group so hard hit? Jason Kirby examines the impact of inflation by income bracket – and offers some good news – in this week’s Decoder.

Union leaders are angry with Tiff

A growing number of labor leaders are frustrated at the Bank of Canada after Governor Tiff Macklem suggested companies should not adjust wages for inflation despite soaring consumer prices eroding incomes. At a recent event, Mr Macklem said companies shouldn’t expect inflation to stay high. The comment prompted a backlash from union leaders, who have been trying to keep their members’ wages in line with high inflation for four decades. However, the central bank remains cautious in the face of a wage-price spiral: a situation in which companies and workers expect a permanent rise in inflation, and therefore respectively push up prices and demand higher wages. brought up in a self-sustaining cycle. Yet despite Canada’s accelerating pace of wage growth — up 5.2% year-over-year in July — it remains well below the consumer price index, which increased by 7.6% over the same period.

Back to the office here we go!

The chief executive of Canada’s largest bank is urging employees to return to the office more often, asking that they “meet more often in person to work and collaborate.” While Dave McKay, CEO of Royal Bank of Canada, acknowledges that flexible and hybrid work models are here to stay, he suggests that face-to-face interaction is a business necessity. RBC employs more than 89,000 workers and is asking most of them to return to the office two to three times a week by the end of September. Canada’s big five banks imposed a partial return to offices this spring, but many have struggled to convince workers who have made permanent lifestyle changes during the pandemic that the journey was worth it, writes Vanmala Subramaniam .

Renting ruins us financially

According to personal finance rules, monthly rental costs should not be more than 30% of gross salary. But in Vancouver, the average rent-to-income ratio is 53%, while in Toronto it’s 48% and in Halifax, 40%. Rents are a major source of the growing unaffordability of living life in 2022, writes Rob Carrick. Unaffordable rent cripples people financially by limiting their upward mobility and resilience. Between rent and the rising cost of everyday purchases like food and fuel, there isn’t much left to save. So what is the solution to high rents? To get a roommate, move to the boonies or live with your parents – but these aren’t great options for most young adults.

Now that you’re all caught up, get ready for the week ahead with The Globe’s investment calendar.

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