In this issue:

• CPI Posts Largest Drop Since Early Pandemic

• U.S. Earnings Season

• The FHSA is Officially Open

• Chart Corner

Volatility remains relatively subdued as the concerns about the banking sector that arose in early March have subsided, for now. With that in mind, some of the fundamental issues that had been front and centre over the past year have understandably come back into focus. Chief among those is inflation. Below, we take a closer look at where inflation stands as well as earnings season in the United States.

CPI Posts Largest Drop Since Early Pandemic

The Canadian Consumer Price Index (CPI) fell to 4.3% y/y in March from 5.2% y/y in February. The sizable decline in consumer price inflation was widely expected, according to RBC Economics. Lower energy prices were the primary driver of the significant drop in headline CPI inflation as gasoline prices fell nearly 14% y/y, although they were still up 1.2% from February. Mortgage costs were the largest upward contributor, rising 26.4% y/y, up from February’s gain of 24%. Growth in food prices was still high in March but continued to slow after peaking in January 2023; grocery prices rose 9.7% y/y, down from increases of more than 11% in recent months.

U.S. Earnings Season

As U.S. earnings season is in motion, overall, companies are surpassing estimates by a strong margin. S&P 500 earnings per share (EPS) is on pace to decline 4.2 percent year over year, better than the consensus forecast of a 6.7 percent decline at the end of the quarter, according to FactSet. Companies are beating the earnings forecast by 6.9 percent, the highest rate since Q3 2021. Even if the earnings beat rate holds up at a high level, we anticipate Q1 will mark the third consecutive quarterly decline in earnings and the second consecutive year-over-year decline. The latter would qualify as an earnings recession. For more information on earnings season, read our latest article: So far, so good—sort of—for U.S. earnings season .

The new First Home Savings Account (FHSA) has officially launched.The new First Home Savings Account (FHSA) can help you save for a first home, while enjoying important tax advantages. Even if you, personally, already have a home, the FHSA may still benefit your younger family members. 

Why should you open a FHSA?

• Receive tax deductions for your contributions.
• Room accumulates at $8,000 per year once the account is opened.
• Lifetime maximum contribution of $40,000 is possible.
• Carry forward up to $8,000 unused contribution room to future years.
• Earn tax-free investment income on your contributions.
• Make tax-free withdrawals to purchase a first home in Canada.
• Alternatively, transfer FHSA funds tax free to your RRSP (or RRIF) without reducing your available RRSP contribution room (effectively gaining more RRSP contribution room). 

Quick tip: Carry forward contribution room only starts accumulating after you open a FHSA – so considering opening one this year, even if you don’t make a contribution right away.

Who can open a FHSA?

• First-time home buyers (defined as not owning a home lived in as a principal residence at any time during the part of the calendar year before opening the account or the preceding four calendar years)
• Current spouse (including common-law partner) must also be a first-time home buyer
• Canadian residents over the age of majority, who will not be older than age 71 on December 31 of the year the account is opened. 

Quick tip: Have family members who don’t have a first home yet? You can give funds to your family members, like your children and grandchildren, to open their own FHSAs.

Please contact our team for more information on opening a First Home Savings Account.

~Shawn Milligan | Senior Wealth Advisor | The Milligan Private Wealth Management Team | RBCDS     

               

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