- Canadian consumer price inflation moved back into positive territory on a year-on-year basis in June, rising to +0.7% year-on-year (from -0.4% in May).
- The turn positive in the year-on-year metric was due largely to goods categories, which went from -2.3% in May to -0.2% in June. Services prices were unchanged at 1.3% year-on-year – still weak relative to the longer run trend (above 2.0%).
- Adjusting for seasonality, consumer prices rose a strong 1.0% month-on-month. Clothing and footwear led the major price categories higher in the month, rising 2.3% after three consecutive months of declines. Recreation, reading, and education also rebounded soundly, rising by 1.4% on the month.
- Two of three of the Bank of Canada’s core inflation measures edged higher in the month. CPI-trim rose to 1.8% (from 1.6%) and CPI-common to 1.5% (from 1.4%). CPI-median was unchanged at 1.9%.
Key Implications
- The economic disruption caused by COVID-19 dissipated considerably in June. The worst hit categories in terms of price declines – clothing and footwear, transportation, and recreation, saw particularly strong rebounds in the month, consistent with the rebound in spending that took shape as economies around the country continued to re-open.
- Deflation is not an immediate risk to the Canadian economy, but the road ahead will be long and challenges to maintaining economic momentum will come from a slowing U.S. economy (as cases rise). Risks of health and economic setbacks will continue until a vaccine is widely available.
