Statistics Canada's monthly pricing report, released today, doesn't say anything about the new BMW 3 series or the summer sales at Holt's, but reading between the numbers, it's clear that now's the time to go shopping.
Annual inflation dropped to 1.2 per cent in May, according to StatsCan, the lowest consumer price reading in nearly two years and well below the Bank of Canada's 2 per cent target. Consumer prices, particularly for cars, shoes and clothing, all dropped last month, after slight gains in April.
The decline is attributed to an odd trifecta of slumping oil and a decline in women's clothing and auto prices. The latter is particularly evident in luxury car sales, where BMWs, Mercedes' and Audis are now going for similar prices as Toyotas and Hondas.
That's a function of the competition heating up in the high-end segment of the market. According to the Globe and Mail's Greg Kennan, BMW dealers spent $60-million in Canada last year beefing up customer service and opening new stores. In turn, Mercedes is now expanding its reach, from 52 outlets currently to 60 by the end of next year.
But while retailers are duking it out over who has the best deals now, there's no certainty the lower prices are here to say. Indeed, a number of top investors see the picture changing in the next three year.
Mihar Worah, a portfolio head with Pacific Investment Management Co. (Pimco), recently predicted inflation rates will soon begin pushing upwards, and with it, consumer costs. Like many others, Worah believes that the rapidly expanding middle class in emerging markets such as China, India and Indonesia will push wages higher, accelerating manufacturing costs, as well as driving up commodity prices.
A sign of how fast these markets are accelerating, global consulting firm McKinsey & Co estimated this week that China would become the world's largest luxury-market within the next three years. The country already accounts for one-third of all of Prada and Gucci sales and is hot on the heels of the U.S. for the country with the highest number of millionaires.
Inflationary pressures in these markets threaten to have an immediate and sustained impact on global commodity prices.
All of which means that the flash car on the lot may well be cheaper today than six months from now, to say nothing of the gas to drive it.