LOOK AHEAD: CPI, IPPI and Housing Starts

Canada sees an unusually heavy docket today. It begins with housing starts at 0815ET with consensus for a relatively modest bounce in June after some wild swings. CPI and IPPI/raw materials then unusually land on the same day. We re-up our preview for CPI below, and whilst it should dominate the day’s data, the additional input price data could help guide the market reaction at least at the margin in the event of any surprises compared to consensus for further, smaller declines on the month.

CPI Preview

• Headline CPI is seen slowing four tenths to 3.0% Y/Y June in the last month of large favourable oil-related base effects. Analysts are tightly packed between 2.9-3.1%.
• The average of the BoC’s preferred median and trim measures are seen slowing two tenths to 3.65% Y/Y for the softest since Dec’21 but remember that it’s the monthly data and the three-month run rate that the BoC has been putting most weight on with decision statements regularly noting stickiness in the 3.5-4% range.
• May saw decent downward progress for these components, printing an average 0.22% M/M, although the three-month was still 3.7% annualized. The separate core of ex food and energy backed this trend up, with 0.20% M/M after three months at 0.34% M/M but still see 3.6% annualized.
• Analyst Y/Y estimates roughly imply a M/M in a similar region (depending in part on revisions), which would push the three-month to 3.3-3.4% annualized for the first time since Oct’22 and before that Nov’21.
• Note that the ex food & energy measure could however see some renewed upward momentum on the month. CIBC, at the middle of headline consensus, look for 0.3% M/M SA, whilst Scotia, at the top end, look for 0.4% M/M SA.
• This increase in the more traditional core will include higher mortgage costs but if repeated in the median/trim measures it would likely see a push higher in the circa two-thirds of a hike priced to year-end, albeit with still almost two months until the next BoC decision.