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Stronger Than Expected CPI Inflation But On Its Own Still Not Troubling

CANADA DATA
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  • Headline CPI came in above all analyst estimates in May as it accelerated to 2.9% Y/Y (cons 2.6) after 2.7%.
  • Core (av of median & trim) beat expectations by 0.15pps as it accelerated from a marginally downward revised 2.7% to 2.85% Y/Y.
  • As shown above, the 3-month core rate accelerated to a seasonally adjusted 2.5% annualized rather than the circa 2% figure implied by a few analyst estimates seen beforehand.
  • The 6-month rate also increased a tenth to 2.4% annualized but it’s worth noting that these are still the fourth consecutive month that both metrics have been within the BoC’s 1-3% target band.
  • Recall the difference with the US here, with 6-mth Canadian core inflation still running under the Y/Y rates vs six-month core PCE possibly set for a fourth month in excess of its Y/Y.
  • As noted in our preview, we put more focus on these core measures as they should be less impacted by the new weights with this month’s data, which boosted the weight on shelter in particular.
  • That said, both CPIxFE and CPIX saw sizeable accelerations over three months (to 3.2% and 2.1% respectively) but with much more measured one tenth increases over six months (to 2.4% and 1.2%).
  • Alternatively, giving an equal weight to median, trim, CPIxFE and CPIX, our very crude measure of “underlying” inflation accelerated from 2.4% to 2.6% Y/Y in May vs 2.7% to 2.8% Y/Y for the BoC’s preferred core.
  • The report adds weight to some important releases still to be seen before the Jul 24 decision including the June labour report (Jul 5), Q2 BOS/CSCE surveys (Jul 15) and June CPI (Jul 16).

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  • Headline CPI came in above all analyst estimates in May as it accelerated to 2.9% Y/Y (cons 2.6) after 2.7%.
  • Core (av of median & trim) beat expectations by 0.15pps as it accelerated from a marginally downward revised 2.7% to 2.85% Y/Y.
  • As shown above, the 3-month core rate accelerated to a seasonally adjusted 2.5% annualized rather than the circa 2% figure implied by a few analyst estimates seen beforehand.
  • The 6-month rate also increased a tenth to 2.4% annualized but it’s worth noting that these are still the fourth consecutive month that both metrics have been within the BoC’s 1-3% target band.
  • Recall the difference with the US here, with 6-mth Canadian core inflation still running under the Y/Y rates vs six-month core PCE possibly set for a fourth month in excess of its Y/Y.
  • As noted in our preview, we put more focus on these core measures as they should be less impacted by the new weights with this month’s data, which boosted the weight on shelter in particular.
  • That said, both CPIxFE and CPIX saw sizeable accelerations over three months (to 3.2% and 2.1% respectively) but with much more measured one tenth increases over six months (to 2.4% and 1.2%).
  • Alternatively, giving an equal weight to median, trim, CPIxFE and CPIX, our very crude measure of “underlying” inflation accelerated from 2.4% to 2.6% Y/Y in May vs 2.7% to 2.8% Y/Y for the BoC’s preferred core.
  • The report adds weight to some important releases still to be seen before the Jul 24 decision including the June labour report (Jul 5), Q2 BOS/CSCE surveys (Jul 15) and June CPI (Jul 16).