MNI DATA ANALYSIS: Canadian Core Inflation Picks Up Further>

By Yali N'Diaye

     OTTAWA (MNI) - The pace of inflation slowed in December, as a 0.4% 

decline on the month, the largest since November 2016, translated into a 

1.9% year-over-year gain, down from 2.1% in November, Statistics Canada 

reported Friday. 

     The easing of total inflation matched analysts' expectations in a 

MNI survey and is unlikely to worry the Bank of Canada, which said in 

its January 17 Monetary Policy Report and interest rate announcement 

that it expected inflation to "fluctuate in months ahead." 

     In particular, it anticipated inflation to "ease" in January, 

"reflecting the transitory effects of elevated gasoline prices a year 

earlier." So the central bank is currently looking through such 

fluctuations, with inflation expected to remain close to 2% through the 

end of 2019. 

     In the fourth quarter of 2017, total CPI rose by an average 1.8%, 

as projected by the BOC, following a 1.4% increase in the third quarter, 

according to Statistics Canada data. 

     --CORE FURTHER UP 

     While looking through expected short-term fluctuations of total 

CPI, the BOC, which uses the three core measures of inflation as an 

operational guideline, should find comfort in Friday's data. 

     The range of measures edged up further, to 1.6%-1.9% in December 

from 1.5%-1.9% in November, confirming a recent trend that is consistent 

with slowly rising inflation pressures amid diminishing economic slack. 

     Two of the core measures accelerated: CPI-common, which tracks 

common price changes across categories, rose 1.6% after 1.5% in 

November; CPI-trim, which removes components whose rates of changes are 

in the tails of the distribution, rose 1.9% after 1.8% in November. 

     Meanwhile, CPI-median, which reflects the price change at the 50th 

percentile of the distribution, continued to rise at a steady pace of 

1.9%. 

     --GAS PRICE EFFECT 

     Total CPI readings reflected changes in gas prices to a large 

extent in December. 

     Transportation and shelter were the largest positive contributors 

to the 1.9% 12-month CPI increase, with a 12.2% gain in gasoline prices 

helping push transportation prices up 4.9% year-over-year. 

     Conversely, on a monthly basis, a 3.3% contraction in gasoline 

prices was the main downward contributor along with a 7.6% drop in 

telephone services. 

     Overall, four of eight major components were down on the month, and 

three were up. On a 12-month basis, seven of eight major components were 

up, with household operations, furnishings and equipment down 0.3%. 

     Goods and services prices were both down 0.4% on the month, with 

goods prices up 1.7% from December 2016 and services prices up 2.0%. 

     Total CPI excluding food and energy fell 0.5% on the month, easing 

to 1.7% year-over-year from 1.8% in November. 

     On a seasonally adjusted basis, total CPI rose 0.2% in December 

after a 0.5% gain in November. Excluding food and energy, the monthly 

rate remained steady at 0.2%. 

     --MNI Ottawa Bureau; email: yali.ndiaye@marketnews.com 

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