| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| CPI - M/M | 0.6% | 0.3% to 0.9% | 1.1% | 0.1% |
| CPI - Y/Y | 2.2% | 1.9% to 2.5% | 2.6% | 1.9% |
| Core CPI - M/M | 0.9% | -0.1% | ||
| Core CPI - Y/Y | 2.9% | 2.2% |
Highlights
Canada's Consumer Price Index was jumped 1.1 percent in February on a monthly basis, after experiencing a 0.1 percent uptick in January, exceeding expectations for a 0.6 percent rise in the Econoday survey of forecasters.
Compared to February 2024, the CPI is up 2.6 percent, speeding up from the 1.9 percent pace set in January, and above expectations for a 2.2 percent rise in the Econoday survey of forecasters.
Excluding food and energy prices, the CPI rose by 0.9 percent on a monthly basis, following a 0.1 percent dip in January. Compared to a year ago, the core CPI is up 2.9 percent in February vs. a 2.2 percent increase in January.
The average of the Bank of Canada's 'Alternative measures' of annual core inflation for January is 2.9 percent, up from 2.7 percent in January.
There is no indication from StatsCan that the trade war with the United States played a role in last month's spike in consumer prices, with the expectation that the impact will be in the coming months.
Instead, StatsCan points to the end of the goods and services tax/harmonized sales tax break, which stopped affecting prices after Feb. 15, that had upward pressure on consumer prices for those items, as taxes paid by consumers are included in the CPI.
Restaurant food prices contributed the most to the February CPI's acceleration.
Shelter price growth continued to slow down but remains elevated rising 4.2 percent year over year, easing off a bit from January's 4.5 percent annual growth rate. The Bank of Canada at its March meeting highlighted the persistence of shelter price inflation as the main factor keeping core inflation above 2 percent.
The inflation data underlines the balance of risks facing the Canadian economy, as inflation should accelerate in coming months as tariffs drive prices higher, even as the trade war dampens economic activity.
Prices for goods are up 1.5 percent from a year ago in February, after a 0.9 percent increase in January. Meanwhile, service price inflation surged by 3.6 percent in February, following a 2.8 percent increase in January.
Compared to February 2024, the CPI is up 2.6 percent, speeding up from the 1.9 percent pace set in January, and above expectations for a 2.2 percent rise in the Econoday survey of forecasters.
Excluding food and energy prices, the CPI rose by 0.9 percent on a monthly basis, following a 0.1 percent dip in January. Compared to a year ago, the core CPI is up 2.9 percent in February vs. a 2.2 percent increase in January.
The average of the Bank of Canada's 'Alternative measures' of annual core inflation for January is 2.9 percent, up from 2.7 percent in January.
There is no indication from StatsCan that the trade war with the United States played a role in last month's spike in consumer prices, with the expectation that the impact will be in the coming months.
Instead, StatsCan points to the end of the goods and services tax/harmonized sales tax break, which stopped affecting prices after Feb. 15, that had upward pressure on consumer prices for those items, as taxes paid by consumers are included in the CPI.
Restaurant food prices contributed the most to the February CPI's acceleration.
Shelter price growth continued to slow down but remains elevated rising 4.2 percent year over year, easing off a bit from January's 4.5 percent annual growth rate. The Bank of Canada at its March meeting highlighted the persistence of shelter price inflation as the main factor keeping core inflation above 2 percent.
The inflation data underlines the balance of risks facing the Canadian economy, as inflation should accelerate in coming months as tariffs drive prices higher, even as the trade war dampens economic activity.
Prices for goods are up 1.5 percent from a year ago in February, after a 0.9 percent increase in January. Meanwhile, service price inflation surged by 3.6 percent in February, following a 2.8 percent increase in January.
Market Consensus Before Announcement
The consensus sees CPI up 0.6 percent on the month and up 2.2 percent on year in February versus gains of 0.1 percent and 1.9 percent in January. The GST sales tax holiday that depressed consumer prices in December and January ended in February.
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.
