• Consumer price inflation slowed to 2.0% year-on-year in June (from 2.4% in May). Month-on-month, seasonally adjusted prices edged down 0.1%.
  • Falling energy prices were the main factor pulling the headline number lower. Energy prices were down 4.1% from a year-ago (down from -0.1% in May), with gasoline prices down 9.2%. Excluding energy, inflation was up 2.6% (edging down slightly from 2.7% in May).
  • Food price inflation was unchanged in June at a still-strong 3.5%.
  • Core inflation edged lower in the month. CPI-median was unchanged at 2.2% (upwardly revised from 2.1%), CPI-trim slowed to 2.1% (from 2.3%). The CPI-common measure was unchanged for the fifth straight month at 1.8%. On average, the three core measures are at 2.0% (down from 2.1% in May).

Key Implications

  • That was a short stint above 2.0%. With energy prices pulling back, inflation is right back on the 2.0% target.
  • Inflation for the quarter as a whole averaged 2.1%, consistent with the Bank of Canada’s updated projection. Base effects suggest that headline inflation will cool further in the months ahead, but core measures should remain relatively close to the 2.0% mark.
  • Data continue to point to a healthy rebound in Canadian economic activity in Q2 of this year. Alongside encouraging data on wage growth and rebounding housing activity, there is little obvious to point to in terms of domestic concerns. Still, risk management remains the name of the game. With trade tensions elevated and global central banks easing policy in response, the Bank of Canada is likely to remain on the sidelines and especially attentive to signs that global weakness is seeping into Canada.

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