What Stocks Will Benefit from Canada’s Inflation Rate Falling to 1.9 Percent?

CPI Data Release

Canada’s inflation rate decline to 1.9% in November from 2% in October suggests slowing price pressures, which can positively influence certain sectors and stocks.

Key Stocks Likely to Benefit:

1. Consumer Discretionary

Lower inflation often improves consumer purchasing power, potentially boosting demand for non-essential goods and services. Companies in this sector may see increased revenue and profit margins.

• Canadian Tire Corporation (CTC-A:CA): Retailer benefiting from improved consumer spending.
• Restaurant Brands International (QSR:CA): Parent of Tim Hortons and Burger King, supported by higher dining-out activity.

2. Financials

A drop in inflation reduces uncertainty around interest rates, supporting financial services, particularly banks and insurers.

• Royal Bank of Canada (RY:CA): Broad-based lender poised to benefit from a stable economic outlook.
• Manulife Financial (MFC:CA): Life insurance provider with exposure to Canadian and global markets.

3. Real Estate Investment Trusts (REITs)

Lower inflation may stabilize or lower borrowing costs, making REITs attractive as fixed-income alternatives.

• Canadian Apartment Properties REIT (CAR-UN:CA): Focused on residential rental properties.
• RioCan REIT (REI-UN:CA): Exposure to retail and mixed-use properties.

4. Utilities

Utilities tend to perform well in lower inflation environments due to their predictable cash flows and appeal as dividend-yielding investments.

• Fortis Inc (FTS:CA): Known for stable, regulated earnings and high dividend yield.
• Emera Inc (EMA:CA): Electricity and natural gas provider with a strong focus on sustainability.

5. Industrials and Exporters

With inflation under control, export-oriented companies may benefit from improved competitiveness globally if the Bank of Canada maintains a stable interest rate environment.

• Canadian National Railway (CNR:CA): Transporting goods across North America, benefiting from economic stability.
• Bombardier Inc. (BBD-B:CA): Exposed to global demand for business jets.

6. Growth Stocks and Technology

Lower inflation could signal a less aggressive monetary policy, supporting growth-oriented and tech companies reliant on favorable borrowing conditions.

• Shopify Inc. (SHOP:CA): E-commerce giant benefiting from stable consumer demand and favorable credit conditions.
• OpenText Corporation (OTEX:CA): Software company with recurring revenue streams and potential for growth.

These stocks align with sectors likely to gain from improved consumer sentiment, stable borrowing costs, and favorable economic conditions tied to declining inflation.