MNI 5 THINGS: Canada Jan CPI Seen Below Target; Core Resilient

--12-Mo Inflation Expected to Slow to 1.4%

By Yali N'Diaye        

     OTTAWA (MNI) - Statistics Canada will release the January Consumer Price

Index report Wednesday. Ahead of the release, we highlight five themes for

particular attention:       

     - Analysts in a MNI survey expect headline CPI to be flat on the month,

with forecasts ranging from -0.1% to +0.2%. Headline CPI edged down 0.1% in

December after falling 0.4% in October.

     - Airfare, for which Statistics Canada changed the methodology in March

2018, is expected to remain a source of volatility. After a 28.1% jump in

December, analysts expect a pullback in January. The statistical agency is also

expected to change its methodology for the rent component of the index, which is

part of the shelter category. The rent index represents 6.2% of the 2015 CPI

basket.

     - Another decline in gasoline prices is also expected to weigh on the

headline reading. Gasoline prices fell 6.5% in December from the previous month.

     - On the upside, mortgage interest costs are likely to remain a positive

contributor, although long-term interest rates have been declining since early

October. Mortgage interest costs increased 0.7% in December after rising 0.6%

for five consecutive months. They were the fifth largest upward contributor to

monthly CPI in December, and the second largest on a 12-month basis. 

     - On a 12-month basis, the pace of price gains is expected to slow to 1.4%

in January, below the Bank of Canada's 2.0% target that the CPI measure reached

in December. Forecasts ranged from +1.3% to +1.5%. Weighing on the headline

figure would be gasoline prices, as well as a negative base effect. In

particular, gasoline prices were up more than 3% in January 2018, when the

overall CPI rose 0.7%. Underlying inflation, however, is expected to remain

close to 2%.

--MNI Ottawa Bureau; +1 613 869-0916; email: yali.ndiaye@marketnews.com

[TOPICS: MACDS$,M$C$$$]