TORONTO — The dip in the headline Canadian Consumer Price Index year-over-year rate of growth to 1.6 percent from 2.0 percent in February provides little evidence that stronger recent economic growth is generating greater underlying inflation pressures, RBC Economics reported.
The latest monthly dip in part reflected a moderation in energy price growth, which moderated to 8.5 percent on a year-over-year basis from 12.3 percent in February. However, the larger factor was a moderation in the pace of growth excluding the energy and food components to a 1.7 percent year-over-year pace from 2.0 percent in February and 2.2 percent in January.
Of the Bank of Canada’s three preferred “core” measures, the “trim,” which was 1.4 percent in March and “median” (1.7 percent) both edged lower from modestly downwardly revised levels in earlier months while CPI Common held at 1.3 percent, matching its lowest level since the mid-1990s.
“The monthly price data can be volatile and we continue to expect the underlying trend rate of price growth is just under a 2 percent rate,” said Nathan Janzen, senior economist. “However, alongside continued modest wage growth to-date in 2017, today’s report will provide further ammunition to the Bank of Canada’s argument that the economy continues to run materially below its long-run production capacity.”
Highlights of the report include:
- The year-over-year rate of headline CPI inflation edged down to 1.6 percent (below expectations for a 1.8 percent reading) from 2.0 percent in February 2.1 percent in January.
- The rate of energy price inflation eased to 8.5 percent (on a year-over-year basis) from 12.3 percent in February but food price weakness eased to –1.9 percent from the 46-year low –2.3 percent in the earlier month.
- Excluding food and energy, price growth dropped to 1.7 percent from 2.0 percent in February and 2.2 percent in January.
- Of the Bank of Canada’s three preferred ‘core’ measures, the ‘CPI-Median’ and ‘CPI-Trim’ measures both moderated, to 1.7 percent from 1.8 percent and 1.4 percent to 1.5 percent, respectively, while the ‘CPI-Common’ held at historically low levels of 1.3 percent.
SOURCE: RBC Economics press release