MNI 5 THINGS:Gas,Seasonals To Weigh On Cdn CPI;Core Resilient

By Yali N'Diaye        

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

Index Friday morning. Ahead of the release, we highlight five themes for

particular attention:

     - Analysts in a MNI survey expect headline unadjusted inflation to decline

by 0.4% on the month, repeating November's performance. On a 12-month basis,

however, the all-item CPI targeted by the Bank of Canada is expected to

stabilize at 1.7%. Should this forecast materialize, it would bring the fourth

quarter average to 1.9%, given the 1.7% gain in November and the 2.4% increase

in October. 

     - A 1.9% fourth quarter average would slightly undershoot the Bank of

Canada's projection of 2.0% despite its downward revisions published as recently

as January 9. The central bank expects the average to further slip to 1.7% in

the firs quarter of 2019. A reading below analysts' forecasts would question the

BOC's assessment of the impact of the oil price slump, including its expectation

of a modest spillover to non-energy sectors and regions.

     - Gasoline prices are again expected to dampen the monthly inflation

reading. In November, gasoline prices fell 9.4%, the largest monthly drop since

January 2015, explaining 0.3 percentage points of the 0.4% CPI decrease. CPI

excluding gasoline fell by only 0.1% in November.

     - Seasonal patterns are also expected to be a key factor, as they are the

weakest in December. The seasonally adjusted CPI was down 0.2% in November. On

that front, airfares continue to remain a source of uncertainty given that the

methodological introduced in 2018 have not been in effect for a full year yet.

     - Offsetting those two factors, core inflation is expected to continue to

show some resilience in December, after the average of the BOC's three preferred

measures of underlying inflation dipped to 1.9% in November from 2.0% in

October. Despite the expected monthly CPI decline, base effects should help

inflation stabilize on a year-over-year basis. The unadjusted index fell 0.4% in

December 2018. 

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

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