Inflation Is Up (Again): What Investors Need to Know

Inflation ticked higher in Canada this month, but core inflation was lower. Here’s how investors can take advantage during this volatile time.

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Canadians likely weren’t all that pleased to wake up and see that national inflation had risen in March. The annual inflation rate ticked higher to 2.9%, which was expected. However, core inflation eased for yet another month, the third in a row!

So let’s look at what influenced this rise in inflation, fall in core inflation, and how investors can take advantage.

What happened

Analysts believed inflation would rise to 2.9% from 2.8% in February, so the results were certainly expected. However, the consumer price index (CPI) rose 0.6%, which marked the largest increase since July 2023. Although it was lower than the 0.7% expected by analysts.

The higher inflation came mainly from one source, and that’s oil and gas. The higher costs at the pump with supply concerns and production cuts have pushed global crude oil prices even higher. Yet if you take out the cost at the pump, inflation actually slowed from 2.9% in February, to 2.8% in March.

The news actually led many to increase their bets for a June rate cut to 50%, up from 44% before the data hit. This comes as headline inflation has stayed under 3% since January, in line with Bank of Canada (BoC) forecasts. Yet it will need to slow to 2% if we’re hoping for anymore rate cuts.

What’s up, what’s down

Last week we saw the BoC hold the key interest rate at 5%, and that will likely remain the same for the first half of 2024. However, with core inflation coming down, and oil and gas a volatile sector, it could be that we’re in for more good news in the coming months.

Besides oil and gas, the biggest influences continued to be more pressure on shelter prices. Mortgage interest costs and rent indexes contributed the most to the gains in all items of the CPI, according to Statistics Canada.

Services inflation rose as well to 4.5% from 4.2%, with goods inflation coming down to 1.1% from 1.2%. Overall, if we excluded the volatile areas of food and energy, prices were up to 2.9% compared to 2.8% in February.

How to take advantage

Inflation certainly does not feel good when you’re going to the gas pump or buying groceries. But if you’re investing, there are certainly ways to take advantage. In fact, you can even make up for the losses!

One way is to invest in dividend stocks that do well in a higher inflationary environment. One I would consider in this case as it rises higher is NorthWest Healthcare Properties REIT (TSX:NWH.UN). The company saw shares shrink down to practically nothing, but they have been climbing back on strong momentum.

NorthWest REIT invests in healthcare properties, but expanded too much, too soon. Yet after renegotiating rates for its debts and selling non-core assets, the company is doing quite well. Shares are now up 8% in the last month alone! With a dividend yield at 7.21%.

Investing in NWH.UN could certainly help with higher inflation, and the REIT will likely remain stable as healthcare is an essential part of our economy. And now that the company has its bottom line under control, we should see more growth in shares in the near future. All considered, Northwest is a strong way to take advantage of rising inflation, even if interest rates remain high.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has positions in NorthWest Healthcare Properties Real Estate Investment Trust. The Motley Fool recommends NorthWest Healthcare Properties Real Estate Investment Trust. The Motley Fool has a disclosure policy.

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