| Consensus | Actual | Previous | |
|---|---|---|---|
| CPI - M/M | 0.1% | -0.1% | 0.6% |
| CPI - Y/Y | 2.8% | 2.7% | 2.9% |
| Core CPI - M/M | 0.0% | 0.6% | |
| Core CPI - Y/Y | 2.9% | 2.9% |
Highlights
Consumer prices in Canada fell 0.1 percent in June from May, not seasonally adjusted, for a 12-month increase of 2.7 percent from 2.9 percent in May. Forecasters in an Econoday survey looked for increases of 0.1 percent on the month and 2.8 percent from a year ago.
Excluding food and energy, the consumer price index was flat on the month and up 2.9 percent year-over-year. Seasonally adjusted, CPI rose a modest 0.1 percent in June from May.
Statistics Canada attributed the slower year-over-year rise to gasoline prices, which rose 0.5 percent in June from a year ago. That compares with a jump of 5.6 percent in May. Excluding gasoline, consumer prices in June rose 2.8 percent on the year.
On the other hand, prices were lifted by a 2.1 percent rise for food purchased in stores from a year ago, and a slower decline in cellular services, minus 12.8 percent in June versus minus 19.4 percent in May.
On the month, the decline in CPI reflected lower prices for travel tours, down 11.1 percent, and a decline of 3.1 percent in gasoline prices.
The Bank of Canada's own core measures of inflation came in at 2.6 percent year-over-year on average in June versus 2.7 percent in May, with all three measures still below 3.0 percent.
Today's report puts inflation on track to land well within the Bank of Canada's 1 percent to 3 percent target range. Prior to the latest CPI report expectations for the Bank of Canada's July 24 meeting were split between calls for no action and a 25 basis point cut; today's soft showing bolsters the case for an early move.
Also pointing to a possible cut is Econoday's Relative Performance Index which is at minus 23 to indicate that recent Canadian data are missing forecasts.
Excluding food and energy, the consumer price index was flat on the month and up 2.9 percent year-over-year. Seasonally adjusted, CPI rose a modest 0.1 percent in June from May.
Statistics Canada attributed the slower year-over-year rise to gasoline prices, which rose 0.5 percent in June from a year ago. That compares with a jump of 5.6 percent in May. Excluding gasoline, consumer prices in June rose 2.8 percent on the year.
On the other hand, prices were lifted by a 2.1 percent rise for food purchased in stores from a year ago, and a slower decline in cellular services, minus 12.8 percent in June versus minus 19.4 percent in May.
On the month, the decline in CPI reflected lower prices for travel tours, down 11.1 percent, and a decline of 3.1 percent in gasoline prices.
The Bank of Canada's own core measures of inflation came in at 2.6 percent year-over-year on average in June versus 2.7 percent in May, with all three measures still below 3.0 percent.
Today's report puts inflation on track to land well within the Bank of Canada's 1 percent to 3 percent target range. Prior to the latest CPI report expectations for the Bank of Canada's July 24 meeting were split between calls for no action and a 25 basis point cut; today's soft showing bolsters the case for an early move.
Also pointing to a possible cut is Econoday's Relative Performance Index which is at minus 23 to indicate that recent Canadian data are missing forecasts.
Market Consensus Before Announcement
After May's more heated-than-expected 2.9 percent rate that was up from April's 2.7 percent, consumer prices in June are expected to split the difference at 2.8 percent.
Definition
The Consumer Price Index (CPI) is a measure of the average price level of a fixed basket of goods and services purchased by consumers. Monthly and annual changes in the CPI provide widely used measures of inflation. The policy target measure for the Bank of Canada (BoC), the annual CPI rate can be distorted by swings in the more volatile subsectors so the central bank also monitors an adjusted measure of the CPI that excludes a range of volatile categories in order to get a better handle on underlying trends.
Description
The consumer price index is the most widely followed indicator of inflation. An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact. In countries such as Canada, where monetary policy decisions rest on the central bank's inflation target, the rate of inflation directly affects all interest rates charged to business and the consumer.
Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets - and your investments.
Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.
By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.
As the most important indicator of inflation the CPI is closely followed by the Bank of Canada. The Bank of Canada has an inflation target range of 1 percent to 3 percent but focuses on the 2 percent midpoint. It uses the CPI and three measures of the underlying rate as the prime inflation indicators. Markets also look at core rate which excludes food and energy.
Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets - and your investments.
Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.
By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.
As the most important indicator of inflation the CPI is closely followed by the Bank of Canada. The Bank of Canada has an inflation target range of 1 percent to 3 percent but focuses on the 2 percent midpoint. It uses the CPI and three measures of the underlying rate as the prime inflation indicators. Markets also look at core rate which excludes food and energy.
