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Scotia: Watching Whether CPI Breadth Improvement Is Retained

CANADA
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  • Scotia see headline CPI inflation ebbing from 2.7% Y/Y to about 2.5% Y/Y in May.
  • It comes from a seasonally adjusted 0.2% M/M, with traditional core at a similar pace.
  • Rather than focusing on Y/Y rates (with CPI set to see a “particular powerful drag” from gasoline prices in next month’s data for June) the “Key will be whether breadth retains improvement to date, or whether the forces that guided inflation lower over the first four months of this year have further legs.”
  • “Those forces included political pressure on quasi-regulated prices for categories like telecommunications and groceries, and a warmer and drier than usual winter that depressed demand for categories like clothing and footwear and travel.”
  • “One upside risk is starting to look like house prices in addition to the pressures on shelter CPI that are coming from soaring rent”
  • On weight changes to be reflected this month: Headline CPI would have been 2.8% Y/Y instead of 2.7% Y/Y back in April and traditional core (ex-food and energy) 2.8% instead of 2.6%. “We estimate that headline and core would have been unaffected in m/m terms. It’s unclear how trimmed mean and weighted median may have been affected.”
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  • Scotia see headline CPI inflation ebbing from 2.7% Y/Y to about 2.5% Y/Y in May.
  • It comes from a seasonally adjusted 0.2% M/M, with traditional core at a similar pace.
  • Rather than focusing on Y/Y rates (with CPI set to see a “particular powerful drag” from gasoline prices in next month’s data for June) the “Key will be whether breadth retains improvement to date, or whether the forces that guided inflation lower over the first four months of this year have further legs.”
  • “Those forces included political pressure on quasi-regulated prices for categories like telecommunications and groceries, and a warmer and drier than usual winter that depressed demand for categories like clothing and footwear and travel.”
  • “One upside risk is starting to look like house prices in addition to the pressures on shelter CPI that are coming from soaring rent”
  • On weight changes to be reflected this month: Headline CPI would have been 2.8% Y/Y instead of 2.7% Y/Y back in April and traditional core (ex-food and energy) 2.8% instead of 2.6%. “We estimate that headline and core would have been unaffected in m/m terms. It’s unclear how trimmed mean and weighted median may have been affected.”