Rising prices are starting to push inflation to the boundary of the central bank’s comfort zone. Statistics Canada’s (StatCan) Consumer Price Index (CPI) shows growth accelerated in July. The upward pressure is primarily attributed to gas prices, but most components accelerated. The only thing keeping inflation in check is housing, apparently.
Canadian Inflation Accelerates To 3%, The BoC’s Upper Bound
The annual growth of the Canadian consumer price index (CPI).
Source: StatCan.
CPI’s annual growth accelerated to 3% in July, following a 2.8% increase reported in June. Gasoline was the primary driver of growth, with the rate accelerating from 20.5% in June to 25.7% last month. Excluding gasoline, CPI advanced 2.2% y/y for a third straight month.
Energy isn’t the only story here. Headline inflation is sitting at the Bank of Canada’s 3.0% upper bound, making it more difficult for the central bank to ease policy. At the same time, CPI is starting to accelerate more broadly.
Not Just Gas: Canadian Inflation Accelerated In Most Components
The annual growth of the 8 major Canadian consumer price index (CPI) components.
Source: StatCan.
The agency notes that 5 of the 8 major CPI components saw acceleration in July. Annual growth in transportation (+7.8%) was the big one, followed by recreation/education/reading (+4.4%). Food (+3.0%) was among the three that decelerated, though it still managed to come in fairly lofty.
Canadian Inflation Apparently Tempered By Housing
Out of the five biggest drags on inflation, almost all were housing-related. The biggest downward pressure came from homeowner replacement costs (-2.1%). It was followed by owned accommodation expenses (-1.8%), natural gas (-7.5%), household appliances (-3.9%), and furniture (-1.5%).
Housing led the way up and now it’s leading the way down—sort of. It’s worth emphasizing that 5 of the 8 major components accelerated. Any downward pressure ex-gasoline is largely due to the modelling skews, especially the recently introduced annual re-weighing slanted toward minimizing CPI growth.
