| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| CPI - M/M | 0.1% | -0.3% to 0.2% | 0.1% | 0.6% |
| CPI - Y/Y | 1.9% | 1.5% to 2.0% | 1.9% | 1.7% |
| Core CPI - M/M | 0.1% | 0.6% | ||
| Core CPI - Y/Y | 2.6% | 2.6% |
Highlights
Canada's Consumer Price Index was up 0.1 percent in June for a 1.9 percent year-over-year advance, accelerating from 1.7 percent in May as expected by forecasters in an Econoday survey.
Excluding food and energy, June CPI edged up 0.1 percent on the month and increased 2.6 percent from a year earlier. Food prices rose 0.1 percent on the month and 2.9 percent year-over-year. Energy was down 0.4 percent and 9.5 percent, respectively.
Both goods and services prices were up 0.1 percent on the month, with goods 0.5 percent year-over-year and services up 3.0 percent.
The year-over-year headline CPI reading will remain distorted for months to come due to the removal of the carbon tax in April, making the Bank of Canada's own measures of core inflation particularly relevant as both CPI-common and CPI-median are adjusted to remove the effect of changes in indirect taxes.
CPI-common was steady at 2.6 percent while CPI-median increased to 3.1 percent. The average of the BoC's core measures remained unchanged at 2.9 percent, above the BoC's target, which might lead the central bank to hold on to its ammunitions.
The impact of tariffs on inflation is indeed still unclear. In a June 18 speech, BoC Governor Tiff Macklem said It's too early to observe the direct effects of Canadian counter-tariffs in inflation data. Since then, there have been two inflation reports and the impact isn't much clearer.
Prices increased for seven of the eight main categories year-over-year in June. Transportation was down 0.6 percent, as gasoline prices fell 13.4 percent.
Shelter, up 0.2 percent on the month and 2.9 percent from a year earlier, remained a key contributor to the 12-month CPI increase. Rents, the largest upward contributor, were up 4.7 percent, and mortgage interest costs, up 5.6 percent, were the second largest.
Gasoline was the largest downward contributor to the 12-month inflation, followed by air transportation. However, the latter was the largest upward contributor to the monthly CPI, followed by traveller accommodation, which is to be expected during the vacation season.
The adjusted CPI increased at a steady rate of 0.2 percent in June from May. The core index was up 0.3 percent, the same as the previous month.
It remains to be seen to which extent businesses will pass through more price increases to consumers down the road, making next week's Business Outlook Survey even more important.
Excluding food and energy, June CPI edged up 0.1 percent on the month and increased 2.6 percent from a year earlier. Food prices rose 0.1 percent on the month and 2.9 percent year-over-year. Energy was down 0.4 percent and 9.5 percent, respectively.
Both goods and services prices were up 0.1 percent on the month, with goods 0.5 percent year-over-year and services up 3.0 percent.
The year-over-year headline CPI reading will remain distorted for months to come due to the removal of the carbon tax in April, making the Bank of Canada's own measures of core inflation particularly relevant as both CPI-common and CPI-median are adjusted to remove the effect of changes in indirect taxes.
CPI-common was steady at 2.6 percent while CPI-median increased to 3.1 percent. The average of the BoC's core measures remained unchanged at 2.9 percent, above the BoC's target, which might lead the central bank to hold on to its ammunitions.
The impact of tariffs on inflation is indeed still unclear. In a June 18 speech, BoC Governor Tiff Macklem said It's too early to observe the direct effects of Canadian counter-tariffs in inflation data. Since then, there have been two inflation reports and the impact isn't much clearer.
Prices increased for seven of the eight main categories year-over-year in June. Transportation was down 0.6 percent, as gasoline prices fell 13.4 percent.
Shelter, up 0.2 percent on the month and 2.9 percent from a year earlier, remained a key contributor to the 12-month CPI increase. Rents, the largest upward contributor, were up 4.7 percent, and mortgage interest costs, up 5.6 percent, were the second largest.
Gasoline was the largest downward contributor to the 12-month inflation, followed by air transportation. However, the latter was the largest upward contributor to the monthly CPI, followed by traveller accommodation, which is to be expected during the vacation season.
The adjusted CPI increased at a steady rate of 0.2 percent in June from May. The core index was up 0.3 percent, the same as the previous month.
It remains to be seen to which extent businesses will pass through more price increases to consumers down the road, making next week's Business Outlook Survey even more important.
Market Consensus Before Announcement
Forecasters see Canada CPI up 0.1 percent on the month and up 1.9 percent on year in June versus increases of 0.6 percent and 1.7 percent in May.
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.
