Price Deflation at Canadian Grocery Giant Loblaw; Anecdotes from the Illinois Home-Front

In response to Deflationary Wage Pressures Hit Canada; Attitudes and Wal-Mart, the 800-Pound Gorillas several Canadian readers sent me an update on the situation at Canadian grocery giant Loblaw.

CBC News reports Loblaw seeing price deflation

Brampton Ont.-based grocery giant Loblaw Companies said Thursday it's feeling the pinch from price deflation and doesn't see any signs that will ease anytime soon.

Loblaw president Allan Leighton told investors on an earnings conference call that deflation has deepened at a quickened pace in recent months, which has challenged the company's overall growth.

"In the second quarter for Loblaw Companies we deflated at a faster rate versus the first quarter, and we were deflating at a deeper rate as we exited the quarter than as we entered it," he said.

"The markets are pretty aggressive," Leighton said of the competition between supermarkets like Sobeys Inc., owned by Empire Company Ltd., and Metro Inc.

"Most of the customer base in Canada is much more value conscious than they were … two years ago."

Pressures on sales have only increased since Walmart Stores unveiled its supercentre

Anecdotes from the Illinois Home-Front

I am always inquisitive about how local businesses are doing, especially under-the-radar businesses.

For example, the architect who drew up the plans for my house is my next door neighbor. He has long ago laid off several employees and does not have enough work to keep himself busy. Those were the conditions a year ago. Those are the same conditions as of yesterday.

Bear in mind, my architect neighbor is on the upscale end, the last to do down, and probably the first to recover.

Wednesday evening I also spoke with a Hispanic man who cuts many lawns in the neighborhood. He is a US citizen who speaks perfect English and his son is graduating from college in August.

He has been losing job after job as upscale clients have decided to mow their own lawns. Those were the conditions a year ago and those conditions are recently deteriorating.

His son has no leads and expects no job offers for his degree in horticulture.

I highly doubt my local experiences are unique. Moreover, the area in which I live had nowhere near the bubble of Florida, Nevada, or California.

The few jobs there are, my landscaper friend is losing to other bidders, at higher prices. I asked if those were government contracts.

You know the answer.

At a time everyone else is cutting back, Illinois, like most states, is governed by prevailing wage laws that favor unions and absurdly priced labor. Not only are we doing unnecessary work, we are paying outrageous wages for it.

Meanwhile, deflation prevails whether most see it or not.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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