Canada Inflation


Canada: Inflation softens in July

August 22, 2014

In July, consumer prices decreased a seasonally-adjusted 0.1% over the previous month, marking the first drop since October 2013. The result contrasted the 0.3% increase in June and the 0.1% rise the markets had expected. According to Statistics Canada, the overall price decrease was driven mainly by a decline in the price for transportation, as well as a decrease in the price for food and household operations. In contrast, the prices for alcoholic beverages and tobacco products rose.

Annual headline inflation softened from 2.4% in June to 2.1% in July, which was slightly below market expectations of a 2.2% price increase. Inflation is still well anchored within the Central Bank’s tolerance margin of plus/minus 1.0 percentage points around its target of 2.0%. Annual average inflation continued on an upward trend and rose from June’s 1.4% to 1.5% in July. Core annual inflation, which excludes volatile items such as gasoline and fresh food, remained constant at June’s 1.4%.

According to its July Monetary Policy Report, the Bank of Canada expects headline inflation to average 1.6% in 2014 and 1.7% in 2015. FocusEconomics Consensus Forecast panelists expect inflation to average 1.9% in 2014, which is unchanged from the previous month’s forecast. The panel expects inflation to average 2.0% in 2015.

Author: Angela Bouzanis, Senior Economist

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Canada Inflation Chart

Canada Inflation July 2014

Note: Year-on-year and month-on-month variation of seasonally adjusted consumer price index in %.
Source: Statistics Canada (SC).

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