Canada Inflation
Inflation overshoots market expectations in July
Inflation rose to 3.3% in July, above June’s 2.8%. The reading was primarily due to a less favorable base effect for energy prices. Moreover, housing and clothing inflation accelerated. July’s reading was notably above market expectations of 3.0%.
The trend pointed down, with annual average inflation coming in at 5.2% in July (June: 5.6%). Meanwhile, core inflation was steady, coming in at June’s 3.2% in July.
Finally, consumer prices rose 0.57% in July over the previous month, accelerating from June’s 0.13% rise.
July’s data raises the risk of a rate hike at the Central Bank’s 6 September meeting, though for now most of our analysts still see the Bank on hold for the remainder of the year.
On the outlook, Desjardins’ Randall Bartlett said:
“July’s headline inflation print stands in contrast to the relatively weak macroeconomic data over the past few weeks. Indeed, real GDP, employment and international trade all suggested the long-anticipated cooling of the Canadian economy may have finally arrived. […] When combined with the deceleration in the 3-month annualized core inflation numbers, this reinforces our call that the Bank of Canada is likely to remain on hold at its September meeting.”
Goldman Sachs’ analysts are more hawkish:
“ The BoC will have to hike again by the end of the year. While we maintain our forecast for a more cautious approach that leads to pause in September and a final 25bp hike in October, we think a hike in September is possible given the lack of progress on a range of underlying inflation indicators, the resilient activity picture, and the still-elevated wage growth.”
Canada Inflation Chart
This chart displays Inflation Rate (CPI, annual variation in %) for Canada from 2013 to 2022.
Canada Inflation Data
2018 | 2019 | 2020 | 2021 | 2022 | |
---|---|---|---|---|---|
Inflation (CPI, ann. var. %, aop) | 2.3 | 1.9 | 0.7 | 3.4 | 6.8 |
Inflation (CPI, ann. var. %, eop) | 2.0 | 2.2 | 0.7 | 4.8 | 6.3 |
Inflation (Core, ann. var. %, aop) | 1.5 | 1.8 | 1.2 | 2.8 | 5.6 |
Inflation (PPI, ann. var. %, aop) | 3.9 | -0.1 | -0.4 | 13.9 | 12.8 |