Call it the Walmart effect. A new report from the Bank of Canada says Canadians have benefited from escalating competition among retailers in recent years, a “good” development that’s helped keep a lid on consumer prices.
The country’s central bank credits one retailer in particular as the driving force: Walmart.
As the world’s largest retailer has expanded most of its 395 Canadian department stores (and counting) into larger Supercentres that carry food aisles, the battle over consumer shopping dollars has “intensified”, the bank report said. The recent moves mean the U.S. discount mammoth is now in direct competition with a wide array of Canada’s big national retailers.
“This new retailing strategy, as well as Walmart’s pricing, increased the competitive pressures on traditional retailers,” the Bank of Canada said in the latest installment of a twice-a-year review of policy matters published Thursday.
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Walmart is the only company mentioned by name in the central bank’s report, which talks about why consumer prices have experienced sluggish growth in recent years.
The report also noted though the entrance of “a number of other U.S. retailers,” a nod to Target’s arrival (and subsequent retreat). “Increased cross-border and online shopping were possibly reinforcing factors” for why inflation has been sluggish, as well.
Through monetary policies and the setting of its trend-setting interest rate, the Bank of Canada attempts to keep consumer price inflation at about 2.0 per cent, believing that rate reflects a healthy pace of economic expansion.
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The consumer price index, which captures price changes across a broad basket of goods, rose 1.2 per cent in March. The index rose 1.0 per cent in February.
Still, a slowing of inflation – sometimes referred to as disinflation – has been a positive for shoppers, with the retail market place forcing more retailers to cut better deals while improving their own businesses, the bank paper said.
“More intense retail competition creates ‘good’ disinflation. …Consumers benefit from lower prices, and increased competition is likely to mean higher productivity in the sector – both of which are good things.”
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