The Latest on Inflation

Statistics Canada has released the latest inflation numbers for June. Consumer prices fell by 0.3% on an annualized basis. Reviewing the actual components reveals some interesting things. You can view the chart here: http://www.statcan.gc.ca/daily-quotidien/090717/t090717a1-eng.htm .

The transportation component which includes automobile and gasoline prices fell by 7.7% and the total energy component fell by 19.0%. This should come as no surprise to anyone, since we were clearly paying upwards of $1.20/litre of gasoline at this time last year, and car prices has certainly fallen. Declines in prices were also experienced in the shelter component (-0.8%), and clothing (-1.3%)

Since the transportation component accounts for almost 30% of the entire CPI calculation, these declines were more than enough to offset increases in prices to all of the other categories including food which increased by 5.5%.

Core Inflation which the Bank of Canada uses to measure the inflationary trend in order to set interest rates rose by 1.9% which is well within the Bank of Canada’s acceptable range. Core inflation strips out some of the more volatile components such as energy prices and food. It is unlikely we will see a change in the Bank of Canada’s interest rate in the near future.
CBC News has an excellent FAQ on inflation if you would like more information: http://www.cbc.ca/news/background/economy/inflation.html .

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