Canada – The consumer price index fell 0.7% in December, allowing the year-on-year inflation rate to sink to 1.5% (from 2.0%), the lowest since February 2014. In seasonally adjusted terms, CPI fell 0.1%, as four of the eight broad categories saw price declines, namely transportation (- 1.2%), clothing (-0.3%), health/personal care (-0.2%), and alcohol/tobacco (-0.2%) which more than offset increases for recreation/education (+0.1%), shelter (+0.2%), food (+0.5%), and household ops (+0.1%). The core CPI, which excludes eight of the most volatile items, fell 0.3%, but that was not enough in preventing the year-on-year core inflation rate from rising one tick to 2.2%. In seasonally-adjusted terms, core CPI was up 0.2%. In the final quarter of 2014, year-on-year inflation was 1.9% for the headline and 2.2% for the core, almost matching the Bank of Canada’s estimates from the latest Monetary Policy Report which estimated Q4 year-on-year inflation at 2.0% for the headline and 2.2% for the core. The transportation category continues to weigh on the CPI due to slumping gasoline prices. While imported prices will increase a bit in light of the much weaker Canadian dollar (that may partly explain the uptick in food prices in December), price pressures should generally be down thanks to further declines in fuel prices.
Manufacturing shipments fell 1.4% in November, worse than the 0.7% decline expected by consensus. The sales drop was broad based as 16 of the 21 industries saw declines, including a 6% slump for transportation equipment as lower auto sales more than offset better sales of aerospace. In real terms, factory sales fell 1.4%, the second straight decline. Real inventories rose 0.2%. With weak sales and higher stocks, the inventory to sales ratio rose to 1.38 in November, the highest since April.
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