Canada: Core inflation still trending close to target – NFB

Data released on Wednesday in Canada, showed headline inflation numbers for June above expectations. According to National Bank of Canada’s analysts, Matthieu Arseneau and Kyle Dahms, point out that despite the significant economic shock from the coronavirus, underlying inflation been resilient, trending close to the mid-point target of the central bank.

Key Quotes:

“Canada’s consumer price index jumped 0.8% in June (not seasonally adjusted), following a decent increase last month (+0.3%). Moreover, the 12-month headline rate surged from a decade low of -0.4% in May to a consensus-beating +0.7% in June.” 

“Despite the significant economic shock, underlying inflation in Canada has been resilient with both measures trending close to the mid-point target of the central bank (1.8% for CPI-Trim and 1.9% for CPI-Median, see chart on the right). The struggling economy in the coming months will put some downward pressure on prices.”

“This recession is atypical in a sense that the shuttering of certain supply chains and rising operational costs due to social distancing could have the opposite effect going forward. The prolonged period for CERB (Canada Emergency Response Benefit) could also put some upside pressures on wages in some sectors.”