| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| CPI - M/M | -0.1% | -0.2% to 0.1% | 0.1% | -0.1% |
| CPI - Y/Y | 2.2% | 2.1% to 2.4% | 2.4% | 1.9% |
| Core CPI - M/M | 0.1% | 0.0% to 0.1% | -0.1% | -0.2% |
| Core CPI - Y/Y | 2.7% | 2.6% to 2.7% | 2.4% | 2.4% |
Highlights
Headline inflation picked up more than expected in September, edging up 0.1 percent on the month and 2.4 percent year-over-year from 1.9 percent in August. Forecasters in an Econoday survey had expected prices to edge down 0.1 percent on the month and rise 2.2 percent from a year earlier.
Overall inflation averaged 2.0 percent in the third quarter, up from 1.8 percent in the second quarter but right on the Bank of Canada's target.
The headline numbers are unlikely to alter the Bank of Canada's focus on the softening job market and growth trend recently highlighted by Governor Tiff Macklem.
Excluding food and energy, the CPI index was down 0.1 percent from August, while expectations had focused on an increase of 0.1 percent. That being said, the 12-month increase of 2.4 percent was the same as the previous month. The Bank of Canada's own measures of core inflation also ticked up to an average of 3.0 percent in September from 2.9 percent in August.
But the central bank is also focused on expectations, and on that front, its quarterly Business Outlook Survey published Monday points to softer expectations.
Even as businesses continue to expect upward pressure from tariffs, inflation expectations for one year ahead are easing, with weak demand limiting firms' ability to pass costs through to customers, the Business Outlook Survey showed.
The percentage of firms expecting inflation to top 3 percent has declined to 18 percent from 23 percent, while the proportion expecting inflation between 1 and 2 percent has almost doubled to 21 percent from 12 percent.
Recently, Governor Tiff Macklem downplayed the 60,400 gain in September employment, pointing out the slow growth and overall soft job market conditions. In fact, firms told the central bank they found it easier to find labor and expect slower wage growth. The sister consumer survey described perceptions of negative labor market conditions.
In September, goods prices increased 0.3 percent on the month and 1.6 percent year-over-year, and services edged down 0.1 percent from August while still rising 3.0 percent from a year earlier.
Transportation and clothing and footwear were the only two categories recording lower prices, with declines of 0.5 percent and 0.1 percent, respectively. All other six categories were up, including a 0.4 percent gain for food. Gasoline was up 1.9 percent, and energy overall up 0.3 percent. On a 12-month basis, food was up 3.8 percent and energy was down 2.6 percent, with gasoline down 4.1 percent.
A 4.8 percent gain in rent and a 3.6 percent increase in mortgage interest cost were the top upward contributors to the 12-month CPI increase, while gasoline and homeowners' replacement cost were the main downward contributors.
On a seasonally-adjusted basis, both headline and core consumer prices increased 0.4 percent on the month, up from 0.2 percent in August.
Overall inflation averaged 2.0 percent in the third quarter, up from 1.8 percent in the second quarter but right on the Bank of Canada's target.
The headline numbers are unlikely to alter the Bank of Canada's focus on the softening job market and growth trend recently highlighted by Governor Tiff Macklem.
Excluding food and energy, the CPI index was down 0.1 percent from August, while expectations had focused on an increase of 0.1 percent. That being said, the 12-month increase of 2.4 percent was the same as the previous month. The Bank of Canada's own measures of core inflation also ticked up to an average of 3.0 percent in September from 2.9 percent in August.
But the central bank is also focused on expectations, and on that front, its quarterly Business Outlook Survey published Monday points to softer expectations.
Even as businesses continue to expect upward pressure from tariffs, inflation expectations for one year ahead are easing, with weak demand limiting firms' ability to pass costs through to customers, the Business Outlook Survey showed.
The percentage of firms expecting inflation to top 3 percent has declined to 18 percent from 23 percent, while the proportion expecting inflation between 1 and 2 percent has almost doubled to 21 percent from 12 percent.
Recently, Governor Tiff Macklem downplayed the 60,400 gain in September employment, pointing out the slow growth and overall soft job market conditions. In fact, firms told the central bank they found it easier to find labor and expect slower wage growth. The sister consumer survey described perceptions of negative labor market conditions.
In September, goods prices increased 0.3 percent on the month and 1.6 percent year-over-year, and services edged down 0.1 percent from August while still rising 3.0 percent from a year earlier.
Transportation and clothing and footwear were the only two categories recording lower prices, with declines of 0.5 percent and 0.1 percent, respectively. All other six categories were up, including a 0.4 percent gain for food. Gasoline was up 1.9 percent, and energy overall up 0.3 percent. On a 12-month basis, food was up 3.8 percent and energy was down 2.6 percent, with gasoline down 4.1 percent.
A 4.8 percent gain in rent and a 3.6 percent increase in mortgage interest cost were the top upward contributors to the 12-month CPI increase, while gasoline and homeowners' replacement cost were the main downward contributors.
On a seasonally-adjusted basis, both headline and core consumer prices increased 0.4 percent on the month, up from 0.2 percent in August.
Market Consensus Before Announcement
Forecasters see CPI down 0.1 percent on the month and up 2.2 percent on year in September versus a decrease of 0.1 percent on the month and an increase of 1.9 percent in August.
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.
