Canadian headline inflation edged higher but underlying details are soft

  • March’s headline inflation print inched up on higher energy costs.
  • The breadth of inflation pressures narrowed again with the share of the CPI basket growing above 5% going down to 22.3% in March, from 26.0% in the prior month.
  • The Bank of Canada’s favored inflation measures, CPI-median, trim, CPIX, and ‘supercore’ all edged lower with annualized 3-month growth in the ‘trim,’ ‘median’, and CPIX measures all below the BoC’s 2% inflation target in March.
  • Latest Business Outlook Survey showed firms’ expected wage growth was unchanged (4.1%) from the last quarter, but it’s still much lower than the peak level (5.84%) in Q1/22.
  • Businesses’ expected input and output price increases are back to pre-pandemic average levels.

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  • 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

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