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Canada: Inflation Increase In April

ByThe National Bank of Canada
Published 05/20/2012, 05:09 AM
Updated 05/14/2017, 06:45 AM
Facts:

Headline CPI inflation increased to 2.0% in April from 1.9% in March. Core CPI inflation was also up to 2.1% from 1.9% a month before. On a monthly basis, headline CPI was up 0.4% for a fourth month in a row. Core prices also rose 0.4% after rising 0.3% the month before. On a seasonally adjusted basis, headline CPI was up 0.2% and core prices jumped 0.4%. In April, 5 out of 8 major components were up on the month (s.a.). Clothing & footwear (+1.1%) and transportation (+0.4%) registered the strongest increase. On a regional basis, 6 provinces experienced inflation increase (y/y), the sharpest rise being observed in Newfoundland & Labrador (from 2.5% to 3.0%) and Manitoba (from 1.4% to 1.8%).
Slight inflation increase in April
Opinion: April’s inflation report was hotter than consensus expectations with core CPI posting its largest gains in 13 months (middle chart). As a result, the last 3-month annualized increase reached 2.7%, a sharp acceleration from the 1.0% observed during the 3 previous months. This rebound is mostly due to a sharp increase observed in clothing & footwear (+4.9%) and recreation, education & reading (+3.1%). Even if core CPI could be a little bit above the Bank of Canada’s estimate of 2% in Q2, headline CPI is now likely to undershoot its expectations. Indeed, based on the latest weekly data, gasoline prices are already down 3.3% on average in May compared to April. This drop would shave 0.2% on headline CPI in May. Moreover, further price decreases in June should not be discarded given the downtrend in crude in the last few days. Consequently, tame inflation should prevail in the coming months.
Largest increase in 13 months
Decrease in headline CPI ahead

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