Highlights:
- The year-over-year rate of headline CPI inflation edged down to 1.6% (below expectations for a 1.8% reading) from 2.0% in February 2.1% in January.
- The rate of energy price inflation eased to 8.5% (on a year-over-year basis) from 12.3% in February but food price weakness eased to –1.9% from the 46-year low –2.3% in the earlier month.
- Excluding food and energy, price growth dropped to 1.7% from 2.0% in February and 2.2% in January.
- Of the Bank of Canada’s three preferred ‘core’ measures, the ‘CPI-Median’ and ‘CPI-Trim’ measures both moderated, to 1.7% from 1.8% and 1.4% to 1.5%, respectively, while the ‘CPI-Common’ held at historically low levels (1.3%).
Our Take:
The dip in the headline CPI year-over-year rate of growth to 1.6% from 2.0% in February provides little evidence that stronger recent economic growth is generating greater underlying inflation pressures. The latest monthly dip in part reflected a moderation in energy price growth (which moderated to 8.5% on a year-over-year basis from 12.3% in February); however, the larger factor was a moderation in the pace of growth excluding the energy and food components to a 1.7% year-over-year pace from 2.0% in February and 2.2% in January. Of the Bank of Canada’s three preferred ‘core’ measures, the ‘trim’ (1.4% in March) and ‘median’ (1.7%) both edged lower from modestly downwardly revised levels in earlier months while ‘CPI-Common’ held at 1.3%, matching its lowest level since the mid-1990s. The monthly price data can be volatile and we continue to expect the underlying trend rate of price growth is just under a 2% rate; however, alongside continued modest wage growth to-date in 2017, today’s report will provide further ammunition to the Bank of Canada’s argument that the economy continues to run materially below its long-run production capacity.
