• Consumer price inflation edged up to 2.0% year-on-year (from 1.9% in March), meeting the consensus forecast. Month-on-month, seasonally adjusted prices were up 0.3% in April. Gains were broad-based with all sub-categories either rising or flat on the month.
  • Strong month-on-month gains in gasoline prices contributed to the higher headline print, in part due to the introduction of carbon levies in several provinces. Energy prices were up 0.7% year-on-year (up from -1.2% in March).
  • Food price inflation slowed in April to 2.9% (from 3.6% in March). Declining beef prices were the main contributor according to Statistics Canada. Fresh vegetable price inflation also slowed, but still stood at 14.5% (from 15.7% in March).
  • Two of three core inflation measures edged lower in the month. CPI-median moved to 1.9% (from 2.1%) and CPI-trim to 2.0% (from 2.1%). The CPI-common measure was unchanged at 1.8%. On average, the three core measures are at 1.9% (down from 2.0% in March).

Key Implications

  • Higher energy prices, but slowing food price inflation left overall prices up 2.0% in April. Overall, as evidenced the relative stability of core measures, inflation remains well contained and is likely to remain there over the foreseeable future.
  • The strange combination of weak economic growth and a strong labour market will keep policy makers on their toes. At best it suggests that firms are still looking to expand, but are maintaining flexibility by adding employees rather than increasing investment. At worst it suggests a burgeoning productivity problem that means lower potential growth and less running room for policy. Ultimately policy makers will have to watch how this plays out. In the meantime, with global economic uncertainty increasing, monetary policy is likely to remain on standby.

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