| Consensus | Actual | Previous | |
|---|---|---|---|
| CPI - M/M | 0.3% | 0.4% | -0.1% |
| CPI - Y/Y | 2.5% | 2.5% | 2.7% |
| Core CPI - M/M | 0.4% | 0.0% | |
| Core CPI - Y/Y | 2.7% | 2.9% |
Highlights
Consumer prices in Canada rose 0.4 percent in July from June, not seasonally adjusted, marking for a 12-month increase of 2.5 percent versus 2.7 percent in June. Forecasters in an Econoday survey looked for increases of 0.3 percent on the month and 2.5 percent from a year ago.
Excluding food and energy, the consumer price index was also up 0.4 percent on the month and rose 2.7 percent year-over-year. Seasonally adjusted, the CPI rose 0.3 percent in July from June.
The slowing in consumer prices reduced the annual headline increase to its lowest since March 2021, and is likely to prove pleasing to the Bank of Canada as policy-makers consider another rate cut at their September 4 meeting. The decline in price inflation was broad-based and particularly reflected lower price increases in electricity, travel tours, and automobiles, Statistics Canada said.
Travel tour prices fell 2.8 percent on year in July after rising 7.4 percent in June, mostly due to a base-year effect as prices jumped in July 2023 from June 2023 when pandemic restrictions on travel were lifted.
Passenger car prices were another big moderating factor with a decline of 1.4 percent on the year in July, largely due to a lower price increase for new cars, up 1.0 percent on the year.
On the upside for prices, gasoline prices rose more rapidly in July from a year ago, 1.9 percent versus 0.4 percent in June. This was mostly due to reduced fuel supply from a refinery closing in the Midwestern U.S.
The Bank of Canada's own core measures of inflation came down to 2.4 percent year-over-year on average in July from 2.6 percent in June and 2.6 percent in May. All three measures have been below 3.0 percent, the top of the Bank of Canada's inflation target range, since April.
Excluding food and energy, the consumer price index was also up 0.4 percent on the month and rose 2.7 percent year-over-year. Seasonally adjusted, the CPI rose 0.3 percent in July from June.
The slowing in consumer prices reduced the annual headline increase to its lowest since March 2021, and is likely to prove pleasing to the Bank of Canada as policy-makers consider another rate cut at their September 4 meeting. The decline in price inflation was broad-based and particularly reflected lower price increases in electricity, travel tours, and automobiles, Statistics Canada said.
Travel tour prices fell 2.8 percent on year in July after rising 7.4 percent in June, mostly due to a base-year effect as prices jumped in July 2023 from June 2023 when pandemic restrictions on travel were lifted.
Passenger car prices were another big moderating factor with a decline of 1.4 percent on the year in July, largely due to a lower price increase for new cars, up 1.0 percent on the year.
On the upside for prices, gasoline prices rose more rapidly in July from a year ago, 1.9 percent versus 0.4 percent in June. This was mostly due to reduced fuel supply from a refinery closing in the Midwestern U.S.
The Bank of Canada's own core measures of inflation came down to 2.4 percent year-over-year on average in July from 2.6 percent in June and 2.6 percent in May. All three measures have been below 3.0 percent, the top of the Bank of Canada's inflation target range, since April.
Market Consensus Before Announcement
After June's lower-than-expected 2.7 percent rate that was down from May's 2.9 percent, consumer prices in July are expected to decrease to 2.5 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.
