Fundamental Analysis

Canadian CPI Growth Moderated Further in March



  • The year-over-year rate of headline CPI inflation edged down to 1.6% (below expectations for a 1.8% reading) from 2.0% in February 2.1% in January.
  • The rate of energy price inflation eased to 8.5% (on a year-over-year basis) from 12.3% in February but food price weakness eased to –1.9% from the 46-year low –2.3% in the earlier month.
  • Excluding food and energy, price growth dropped to 1.7% from 2.0% in February and 2.2% in January.
  • Of the Bank of Canada's three preferred 'core' measures, the 'CPI-Median' and 'CPI-Trim' measures both moderated, to 1.7% from 1.8% and 1.4% to 1.5%, respectively, while the 'CPI-Common' held at historically low levels (1.3%).

Our Take:

The dip in the headline CPI year-over-year rate of growth to 1.6% from 2.0% in February provides little evidence that stronger recent economic growth is generating greater underlying inflation pressures. The latest monthly dip in part reflected a moderation in energy price growth (which moderated to 8.5% on a year-over-year basis from 12.3% in February); however, the larger factor was a moderation in the pace of growth excluding the energy and food components to a 1.7% year-over-year pace from 2.0% in February and 2.2% in January. Of the Bank of Canada's three preferred 'core' measures, the 'trim' (1.4% in March) and 'median' (1.7%) both edged lower from modestly downwardly revised levels in earlier months while 'CPI-Common' held at 1.3%, 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% rate; 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.

Author: RBC Financial GroupWebsite:
RBC Financial Group
The statements and statistics contained herein have been prepared by the Economics Department of RBC Financial Group based on information from sources considered to be reliable. We make no representation or warranty, express or implied, as to its accuracy or completeness. This report is for the information of investors and business persons and does not constitute an offer to sell or a solicitation to buy securities.
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