| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| CPI - M/M | 0.7% | 0.5% to 0.8% | 0.3% | 1.1% |
| CPI - Y/Y | 2.7% | 2.5% to 2.8% | 2.3% | 2.6% |
| Core CPI - M/M | 0.2% | 0.9% | ||
| Core CPI - Y/Y | 2.4% | 2.9% |
Highlights
Canada's Consumer Price Index slowed down significantly in March rising just 0.3 percent on a monthly basis, after experiencing a 1.1 percent jump in February. This is nowhere near expectations for a 0.7 percent rise in the Econoday survey of forecasters.
Compared to March 2024, the CPI is up 2.3 percent, easing off from the 2.6 percent pace set in February, and above expectations for a 2.7 percent rise in the Econoday survey of forecasters.
Excluding food and energy prices, the CPI rose 0.2 percent on a monthly basis, following a 0.9 percent spike in February. Compared to a year ago, the core CPI is up 2.4 percent in March vs. a 2.9 percent surge in February.
The average of the Bank of Canada's 'Alternative measures' of annual core inflation for March is 2.9 percent, the same rate as in February.
Seasonal factors aside, the underlying inflation data should give the Bank of Canada room to implement another rate cut at its meeting this week to insulate the economy against the worst effects of the trade war.
One impact of the trade war with the United States that is apparent in this report is the drop in airline fares. Air transportation prices are up by just 1.2 percent last month compared to a 10 percent jump in March 2024. On an annual basis, prices fell 12 percent following a 4.4 percent drop in February.
Travel tour prices are down 8 percent in March, declining following a holiday-related 23.2 percent surge in February. Promotions for cellphone plans resulted in a 6.8 percent plunge in prices for cellular services, meaning an 8.8 percent drop on a year-over-year basis in March, following a 3.7 percent decline in February.
March was also the first full month following the end of the federal tax break, which slowed down the pace of the overall decline in consumer prices. Restaurants prices rose by 3.2 percent year-over-year in March after a 1.4 percent drop in February.
Shelter price growth continued to slow down but remains elevated rising 3.9 percent year over year, easing off a bit from February's 4.2 percent annual growth rate. The Bank of Canada has consistently highlighted the persistence of shelter price inflation as the main factor keeping core inflation above 2 percent.
Prices for goods are up 1.3 percent from a year ago in March, after a 1.5 percent increase in February. Meanwhile, service price inflation increased by 3.1 percent in February, following a 3.6 percent jump in February.
Compared to March 2024, the CPI is up 2.3 percent, easing off from the 2.6 percent pace set in February, and above expectations for a 2.7 percent rise in the Econoday survey of forecasters.
Excluding food and energy prices, the CPI rose 0.2 percent on a monthly basis, following a 0.9 percent spike in February. Compared to a year ago, the core CPI is up 2.4 percent in March vs. a 2.9 percent surge in February.
The average of the Bank of Canada's 'Alternative measures' of annual core inflation for March is 2.9 percent, the same rate as in February.
Seasonal factors aside, the underlying inflation data should give the Bank of Canada room to implement another rate cut at its meeting this week to insulate the economy against the worst effects of the trade war.
One impact of the trade war with the United States that is apparent in this report is the drop in airline fares. Air transportation prices are up by just 1.2 percent last month compared to a 10 percent jump in March 2024. On an annual basis, prices fell 12 percent following a 4.4 percent drop in February.
Travel tour prices are down 8 percent in March, declining following a holiday-related 23.2 percent surge in February. Promotions for cellphone plans resulted in a 6.8 percent plunge in prices for cellular services, meaning an 8.8 percent drop on a year-over-year basis in March, following a 3.7 percent decline in February.
March was also the first full month following the end of the federal tax break, which slowed down the pace of the overall decline in consumer prices. Restaurants prices rose by 3.2 percent year-over-year in March after a 1.4 percent drop in February.
Shelter price growth continued to slow down but remains elevated rising 3.9 percent year over year, easing off a bit from February's 4.2 percent annual growth rate. The Bank of Canada has consistently highlighted the persistence of shelter price inflation as the main factor keeping core inflation above 2 percent.
Prices for goods are up 1.3 percent from a year ago in March, after a 1.5 percent increase in February. Meanwhile, service price inflation increased by 3.1 percent in February, following a 3.6 percent jump in February.
Market Consensus Before Announcement
The call for March looks for increases of 0.7 percent on month and 2.7 percent on year. That compares with a monthly rise of 1.1 percent and 2.6 percent on year 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.
