Consumer prices were up 2.2% year-on-year in Canada in April, down from 2.3% in March and below the consensus call for 2.3%. Adjusted for seasonal patterns, prices rose 0.1% month-on-month.
By category, the biggest (seasonally adjusted) month-on-month gainers were clothing & shoes (+1.2%), alcohol and tobacco (+1.0%), and household operations (+0.7%). On the other side of the ledger, recreation and education prices fell 1.5%, health and personal care prices were down 0.5%, and transportation prices edged lower by 0.2%.
Still, most categories were up on a year-on-year basis, led by energy (+6.3%). Only recreation and education prices are lower than year ago levels (down 0.2%)
Two of three of the Bank of Canada’s core price measures edged higher in the month, with CPI-Trim and CPI-Median rising to 2.1% (from 2.0%). CPI-common remained unchanged at 1.9%.
Key Implications
Inflation in Canada continues to run close to the Bank of Canada’s 2% target, but shows little signs of breaking much higher.
Higher energy prices will pull up the headline measure over the next several months, but core inflation should remain relatively well contained. The Canadian economy is operating close to its potential, but unlike last year, is running right around its trend rate rather than well above it.
With a relatively benign inflation outlook, the Bank of Canada will remain focused on the risks to the Canadian economy, namely headwinds to growth from a slowing housing market and uncertainty around NAFTA, which, as of today, looks to remain a thorn in the side of policy makers for some time to come.
