RBC Canadian Inflation Watch

• Year-over-year CPI ticked lower on lower food prices and a larger-than-expected cooling in price growth excluding food and energy products.
• The breadth of inflationary pressure continued to narrow, with the share of CPI basket growing at more than 3% edging lower to 47.8%.
• Growth in the BoC’s closely watched core measures slowed sharply and CPIX was unchanged over the last three months in February.
• Most of the price growth was still driven by shelter inflation, but mortgage interest costs have been trending lower.
• Canadian businesses on average continue to plan for smaller price increases in the year ahead.

• Year-over-year CPI growth slowed to 3.2% in January from 3.4% in December.
• Energy and food price growth slowed, but the Bank of Canada’s preferred core measures of broader price pressure also unexpectedly slowed.
• Mortgage interest cost growth is slowing but still driving a disproportionate share of CPI growth. Home rent growth is still accelerating.
• But other components of shelter inflation, such as homeowners’ replacement costs, saw improvements on lower house prices.
• Wage growth still elevated along with a strong start to the year for labour markets.

• Energy component pushed headline inflation reading higher with food price growth holding steady after slowing for 5 straight months.
• The BoC’s preferred core CPI measures bounced higher, although the breadth of inflationary pressures over the last three months continued to narrow.
• Travel tour prices declined sharply in December, reversed the jump the prior month.
• The latest Business Outlook Survey revealed more firms perceived normal/less price increases due to weaker demand
• And on the consumer side, Canadians’ expectations on rent price growth remained elevated

• Headline CPI growth held steady at 3.1% in November (just above the top end of the BoC’s 1% to 3% inflation target range) despite lower energy prices and easing food inflation.
• Mortgage interest costs and rents still driving shelter costs higher. But the prior is peaking at high levels
• Underlying details continue to point to easing inflation pressures – the breadth of price growth also narrowed again in November
• And the Bank of Canada’s favored inflation gauges continue to improve, gradually moving towards the target range

• Lower energy costs and slowing grocery price growth pushed headline CPI growth lower in October
• Stripping out food and energy components, price growth is still ‘sticky’ but edged lower
• Bank of Canada’s core measures are still above the 2% inflation target but continued to look better on a 3-month rolling average basis
• Abnormally high Inflation is impacting a smaller share of products in the consumer basket

• Growth in BoC’s preferred inflation gauges slowed, but still surpassed the 2% target.
• The latest BOS survey revealed that firms anticipated lower inflation than consumers in the near future.
• Businesses’ wage growth expectations trended lower as labour markets cool.
• Gasoline prices dipped down in September but still higher than the levels from a year ago.
• Mortgage interest costs are still disproportionately adding to overall price growth.

• Higher prices at the pump pushed Canadian headline inflation rate up.
• Food costs are still high but growing at a slower pace.
• Mortgage interest costs continue to drive a disproportionate share of headline price growth.
• But the Bank of Canada’s preferred inflation measures also accelerated further above the 2% target.
• The breadth of inflationary pressures remain wide in Canada.

• The uptick in headline CPI was largely due to higher energy prices, but broader price pressures still above the BoC’s target range.
• Recent month-over-month growth in ‘core’ measures showed signs of easing, but still stubbornly high.
• The breadth of inflation is still wider than normal.
• Food price growth still high but edging lower.
• Mortgage interest costs continue to surge.

Canada’s headline inflation back in Bank of Canada’s target range

• Lower gasoline prices continue to slow year-over-year growth in the consumer price index.
• Broader inflation pressures are also weaker than a year ago—but most of the BoC’s key core measures have been ‘sticky’ at about 4%.
• Businesses are planning smaller price increases in the year ahead. But these will still be larger and more frequent than in pre-pandemic times.
• Consumers continue to expect high rental price growth over the next year. But their expectations for higher food, automobile, and gas prices are moderating.

June 27, 2023

• Inflation pressures are increasingly driven by rising rents and mortgage interest costs.
• Global drivers like commodity prices and supply chain disruptions continued to ease—and domestic pressures started to come down.
• Ongoing moderation in supply chain pressures pushed raw material and industrial prices lower.
• The Bank of Canada’s preferred core measures were at rates still well-above the 2% target.
• Firms’ expectations on wage and inflation improved slightly in recent months, but remained at high levels.

May 16, 2023

• Inflation pressures still lower than they were, but did not ease further in April
• Growth in the Bank of Canada’s preferred core measures ticked up slightly on a 3-month rolling average basis
• Grocery price growth slowing in both Canada and the U.S.
• A slowdown in cost growth for rail and truck transportation have signaled further easing in supply chain pressures.
• Travel costs remain high as demand persists.

April 18, 2023

• The breadth of inflation pressures narrowed again in March.
• Prices at the grocery store remained elevated but price growth may be past its peak.
• Businesses expect input price growth will continue to slow.
• Expectations for wage growth are also edging lower, with consumers expecting more modest increases than businesses plan to pay

March 21, 2023

• Headline and core CPI continued to decelerate.
• Moderation in the farm product price index foreshadow easing in food inflation.
• Rent and mortgage interest still surging, offsetting slower inflation for home-buying expenses and travel costs.
• Breadth of inflation pressure has stabilized but remains elevated compared to pre-pandemic period.

February 21, 2023

• The cooldown in Canadian inflation continued in January despite higher mortgage interest costs.
• Growth in travel prices slowed after busy holiday season.
• Domestically-driven inflation pressures remained as foreign-driven price pressures subsided.

January 17, 2023

• Headline CPI continued to retreat and pressures narrowed across goods and services
• Shelter inflation still robust, as higher rent and mortgage costs more than offset falling home prices
• More easing to come – businesses expected slower growth in input and output prices in year ahead
• Inflation expectations stayed above 2% for most businesses for the next 2 years, but improved in the near term

December 21, 2022

• Inflation still running hot, but price pressures have narrowed
• Travel inflation stalled before holidays after summer surge
• Lower commodity prices will put a cap on goods inflation in 2023
• Higher interest rates will cut into household purchasing power in 2023 and further ease inflation pressures

November 16, 2022

• Headline CPI ticked higher as food and gas inflation accelerates
• But broader measures of inflation pressures showing further evidence of easing
• Gasoline prices still down from earlier this year but elevated diesel prices expected to add to production costs down the road
• Costs for mortgage interest payments and motor vehicles will see more acceleration as home-buying related inflation slows
• Price pressures still running above Bank of Canada target, but further signs of easing mean end of interest rate hiking cycle could be close

October 18, 2022

• Headline CPI growth eased again in September on lower gasoline prices
• Core inflation still running hot despite early tentative signs of easing in breadth of near-term price momentum
• Lower price expectations from businesses not enough to prevent further aggressive BoC interest rate hikes

September 20, 2022

• Headline CPI continued to slow in August with falling home and industrial prices flagging more declines to come
• ‘Core’ measures also ticked lower, but are still exceptionally high
• Services prices still surging on strong demand for travel and hospitality services
• Inflation pressures still too broad to prevent further central bank rate hikes

August 16, 2022

• Slowdown was led by a drop in gasoline prices, to still elevated levels above last year
• Industrial prices cooled further, as supply chain challenges keep moderating
• With more pullback in consumer spending expected ahead, inflation likely has peaked
• Pressures still too broad to derail central bank from aggressive hiking path

July 20, 2022

• Canadian inflation pressures continued to surge in June
• Home prices have shifted from big tailwind to headwind for price growth
• Industrial price growth edging lower as global supply chain disruptions show signs of easing
• Markets are betting that aggressive central bank rate hikes will cool inflation pressures

June 22, 2022

• Surging inflation is cutting into year-ahead GDP growth expectations.
• Close to half of Canadian CPI growth fueled by global price pressures, with home buying costs adding to domestic growth.
• Cooling housing market could bring some relief; although price pressure has also continued to broaden.
• Wage growth should continue to accelerate, as labour shortage issues grow more acute.

May 18, 2022

• Industrial input and output prices are still surging, keeping pressures broadly based
• Grocery prices rising at fastest pace since the early 1980s
• But central banks rate hikes are expected to slow demand
• Home buying costs (accounting for ~20% of year-over-year CPI growth) will start to slow on lower housing demand

April 20, 2022

• Higher headline inflation partly a result of rising gas prices after Russia invaded Ukraine
• But price pressures continued to broaden
• Geopolitical headwinds also adding pressure to business input costs
• Inflation expectations remain elevated for the near-term, although anchored around 2% in longer-run

March 16, 2022

• More goods and services seeing faster price growth.
• Invasion driving commodity price volatility.
• Market expects inflation to stay above 3% over 5 years.

February 16, 2022

• Prices for commodities and industrial inputs continued to edge higher.
• To-date, home and auto remain the biggest driver for price growth but pressure’s also broadening.
• Strong household purchasing power will put a floor under consumer demand and inflation trends in the near-term.

January 19, 2022

• Surging house prices underpinning higher shelter costs.
• Share of goods/services seeing higher price growth continuing to broaden.
• Wage growth to pick-up; recent gains more present for highly-skilled jobs.

December 15, 2021

• Inflation pressure in Canada has been broadening, with more goods and services seeing above-target levels of price growth.
• Energy commodity prices jolted on Omicron related concerns.
• Wage pressures are building, although unevenly across industries.

November 17, 2021

• Even excluding higher shelter costs, prices in Canada have bounced back above pre-pandemic trends.
• Inflation pressure is broadening with more of the consumer basket seeing above-target rate of growth.
• Inflation expectations, from market, businesses and consumers are still edging up.

October 20, 2021

• Share of CPI basket seeing above-trend price increases from pre-pandemic levels still rising
• Energy prices have increased; industrial input prices remain elevated
• More businesses reported capacity issues related to shortages of inputs and supply chain disruptions in Q3

September 15, 2021

• Shelter prices have surged but the pace of growth is now slowing
• Motor vehicle production disruptions expected to keep vehicle prices high
• Supply chain disruptions and increased services demand taking over as driver of price growth

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August 18, 2021

• Headline CPI growth still impacted by ‘transitory’ factors but growth in industrial prices beginning to slow
• Slower demand for homes will limit further gains in accommodation related expenses
• Rising agriculture commodity prices and firming consumer demand to keep floor under price growth

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July 28, 2021

• Cars and homes accounted for much of price growth in June
• Investors are still betting that the inflation spike will prove temporary
• Cooling commodity prices to temper soaring input costs

June 16, 2021

• Consumer price increases were more broadly-based in May
• Market inflation expectations plateau albeit at elevated levels
• Rising input costs pose a key hurdle for businesses though some offset from stronger loonie

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May 20, 2021

• Inflation pressure still manageable but broadening
• Market expectations have dialed higher
• Rising Input costs and firming demand to act as tailwinds for price growth

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