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CANADA: GS See Significant Uncertainty Over Tax Holiday Impact On CPI

CANADA
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  • Goldman Sachs highlight four key elements to watch in the December CPI report:
  • i) “our forecast assumes a 34bp drag on headline inflation from the start of the GST/HST tax holiday in mid-December, but we acknowledge significant uncertainty around how the cumulative 70bp tax holiday drag will be distributed across the December and January inflation releases.”
  • ii) “we expect a spike in energy inflation, but soft food inflation due to the sales tax holiday on several food items such as restaurant meals.”
  • iii) “we forecast an uptick in homeowners’ replacement cost inflation—reflecting higher new house prices—and a slight moderation in rent prices, as asking prices declined for the third consecutive month.”
  • iv) “we expect mortgage interest cost inflation will continue to moderate following rate cuts.”
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  • Goldman Sachs highlight four key elements to watch in the December CPI report:
  • i) “our forecast assumes a 34bp drag on headline inflation from the start of the GST/HST tax holiday in mid-December, but we acknowledge significant uncertainty around how the cumulative 70bp tax holiday drag will be distributed across the December and January inflation releases.”
  • ii) “we expect a spike in energy inflation, but soft food inflation due to the sales tax holiday on several food items such as restaurant meals.”
  • iii) “we forecast an uptick in homeowners’ replacement cost inflation—reflecting higher new house prices—and a slight moderation in rent prices, as asking prices declined for the third consecutive month.”
  • iv) “we expect mortgage interest cost inflation will continue to moderate following rate cuts.”