Zellers returns, inflation slows and rent is ruining financial futures: The business and investing stories you need to know about this week

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

Getting caught up on a week that got away? Here’s your weekly digest 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

Hudson’s Bay Co. announced this week it’s resurrecting discount retailer Zellers with locations in Bay department stores starting early next year. This follows an HBC announcement earlier this month that the company is partnering with outdoor store chain MEC by building “shop-in-shops” in Hudson’s Bay Co. department stores starting this fall. As Susan Krashinsky Robertson reports, Canada’s oldest retailer will also launch an e-commerce store for Zellers selling housewares and furniture, toys, pet accessories and clothing. Canadians have reacted to news of the discount retailer’s comeback with nostalgia for the Zellers of yore, which dominated suburban malls from the 1970s into the early 2000s. There’s no confirmation yet if the Bay will bring back Zellers mascot Zeddy or the brand’s 1950s-style restaurant, but in these inflationary times, any store where “the lowest price is the law” is welcome.

Inflation has slowed but there’s 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, decreasing to 7.7 percent from 8.1 percent the month before. As Matt Lundy reports, gasoline prices were the main reason, falling 9.2 percent in July from June, but other areas – including grocery prices, rent and natural gas – showed less encouraging signals. The Bank of Canada predicts inflation won’t return sustainably to its 2-per-cent target until late 2024, meaning more rate hikes are likely coming. Financial analysts expect the bank to raise its benchmark overnight rate by half or three-quarters of a percentage point in September.

Middle-income inflation woes

Almost every Canadian is feeling the pain of high inflation, but according to an analysis by TD Economics, it’s middle-income households that are likely getting the worst of it. While Canada’s inflation rate eased slightly to 7.6 per cent in July, for middle-income households it’s actually 8.1 per cent, the highest for any income bracket, after adjusting for how each income group typically spends money, according to the bank’s economists. Why is this group being hit so hard? Jason Kirby looks at inflation impact by income bracket – and offers some good news – in this week’s Decoder.

Union leaders are miffed at Tiff

A growing number of labor leaders are frustrated at the Bank of Canada after Governor Tiff Macklem suggested that businesses should not adjust wages to inflation despite soaring consumer prices eroding earnings. At a recent event, Mr. Macklem said that companies should not expect inflation to remain high. The comment has sparked pushback from union leaders, who are trying to ensure the wages of their members keep up with four-decade-high inflation. However, the central bank remains wary of a wage-price spiral: a situation where both businesses and workers expect permanently higher inflation, and so respectively push up prices and demand higher wages in a self-reinforcing cycle. Still, despite the pace of wage growth picking up in Canada – growing 5.2 per cent year-over-year in July – it remains well below the Consumer Price Index, which increased 7.6 per cent during that same time.

Back to the office we go!

The chief executive of Canada’s largest bank is urging employees to return to the office more frequently, asking that they “come together 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 mandated a partial return to offices this spring, but many have struggled to convince workers who made permanent lifestyle changes during the pandemic that the commute is worth it, writes Vanmala Subramaniam.

Renting is ruining us financially

According to personal finance rules, monthly rental costs should account for no more than 30 percent of gross pay. But in Vancouver, the average rent-to-income ratio is 53 percent, while in Toronto, it’s 48 percent and in Halifax, 40 percent. Rents are one of the big sources of the increasing unaffordability of living your life in 2022, writes Rob Carrick. Unaffordable rent financially paralyzes people by limiting their upward mobility and resilience. Between rent and the rising cost of everyday purchases like food and fuel, there’s not much left to save. So what’s the solution to high rents? To get a roommate, move to the boonies or live with your parents – but those aren’t great options for most young adults.

Now that you’re all caught up, prepare for the week ahead with the Globe’s investing calendar.

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