| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| CPI - M/M | 0.1% | -0.1% to 0.2% | 0.1% | -0.4% |
| CPI - Y/Y | 1.8% | 1.7% to 1.9% | 1.9% | 1.8% |
| Core CPI - M/M | -0.1% | -0.1% | ||
| Core CPI - Y/Y | 2.2% | 2.1% |
Highlights
Canada's Consumer Price Index was up 0.1 percent in January on a monthly basis, after contracting by 0.4 percent in December, matching expectations in the Econoday survey of forecasters.
Compared to January 2024, the CPI is up 1.9 percent, speeding up slightly from the 1.8 percent pace set in December, and just above expectations for a 1.8 percent rise in the Econoday survey of forecasters.
Excluding food and energy prices, the CPI fell 0.1 percent on a monthly basis, following a similar rate of decline in December. Compared to a year ago, the core CPI is up 2.2 percent in January vs. a 2.1 percent increase in December.
The average of the Bank of Canada's 'Alternative measures' of annual core inflation for January is 2.7 percent, up from 2.5 percent in December.
The inflation data remains in line with the Bank of Canada's outlook for consumer prices, but lurking in the background is the specter of a potential trade war with the United States. The Bank of Canada included a scenario in its latest monetary policy report predicting higher inflation, as well as a a contraction in economic activity, should the U.S. government impose punitive tariffs on Canadian exports.
As for January's CPI increase, StatsCan said higher energy prices, particularly for gasoline and natural gas, contributed the most to the acceleration. Partially offsetting these increases was the continued downward pressure on the cost of products affected by the goods and services tax/harmonized sales tax break introduced in December.
The major components impacted by the tax break are food; alcoholic beverages, tobacco products, and recreational cannabis; recreation, education, and reading; and clothing and footwear.
Food prices fell 0.6 percent on an annual basis in January, the first yearly decrease since May 2017, driven by a record decline in prices for food purchased from restaurants (-5.1 percent). The CPI excluding food rose 0.2 percent on a monthly basis, and +2.4 percent on an annual basis in January.
Compared to a year ago, gasoline prices jumped 8.6 percent in January, building on a 3.5 percent increase in December. On a monthly basis, gasoline prices surged 4 percent in January following a 0.6 percent contraction in December. Consumer prices excluding gasoline rose 1.7 percent year over year last month, after rising by 1.8 percent in December and 2 percent in November.
Shelter price growth continued to slow down but remains elevated rising 4.5 percent year over year, the same rate as in December.
Prices for goods are up 0.9 percent from a year ago in January, after a 0.1 percent drop in December. Meanwhile, service price inflation slowed down to a 2.8 percent rise in January, following a 3.5 percent jump in December.
Compared to January 2024, the CPI is up 1.9 percent, speeding up slightly from the 1.8 percent pace set in December, and just above expectations for a 1.8 percent rise in the Econoday survey of forecasters.
Excluding food and energy prices, the CPI fell 0.1 percent on a monthly basis, following a similar rate of decline in December. Compared to a year ago, the core CPI is up 2.2 percent in January vs. a 2.1 percent increase in December.
The average of the Bank of Canada's 'Alternative measures' of annual core inflation for January is 2.7 percent, up from 2.5 percent in December.
The inflation data remains in line with the Bank of Canada's outlook for consumer prices, but lurking in the background is the specter of a potential trade war with the United States. The Bank of Canada included a scenario in its latest monetary policy report predicting higher inflation, as well as a a contraction in economic activity, should the U.S. government impose punitive tariffs on Canadian exports.
As for January's CPI increase, StatsCan said higher energy prices, particularly for gasoline and natural gas, contributed the most to the acceleration. Partially offsetting these increases was the continued downward pressure on the cost of products affected by the goods and services tax/harmonized sales tax break introduced in December.
The major components impacted by the tax break are food; alcoholic beverages, tobacco products, and recreational cannabis; recreation, education, and reading; and clothing and footwear.
Food prices fell 0.6 percent on an annual basis in January, the first yearly decrease since May 2017, driven by a record decline in prices for food purchased from restaurants (-5.1 percent). The CPI excluding food rose 0.2 percent on a monthly basis, and +2.4 percent on an annual basis in January.
Compared to a year ago, gasoline prices jumped 8.6 percent in January, building on a 3.5 percent increase in December. On a monthly basis, gasoline prices surged 4 percent in January following a 0.6 percent contraction in December. Consumer prices excluding gasoline rose 1.7 percent year over year last month, after rising by 1.8 percent in December and 2 percent in November.
Shelter price growth continued to slow down but remains elevated rising 4.5 percent year over year, the same rate as in December.
Prices for goods are up 0.9 percent from a year ago in January, after a 0.1 percent drop in December. Meanwhile, service price inflation slowed down to a 2.8 percent rise in January, following a 3.5 percent jump in December.
Market Consensus Before Announcement
Canada's inflation continues to hold below the BOC's 2 percent midrange target. CPI is expected up 0.1 percent on the month and up 1.8 percent from a year ago versus minus 0.4 percent on the month and 1.8 percent on the year last month.
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.
