• Consumer price inflation slowed to 1.9% year-on-year (y/y) in August (from 2.0% in July), in line with the median analyst projection. Month-on-month, seasonally adjusted prices were flat, following a robust 0.4% climb in July.
  • Slower price growth was largely a function of lower gasoline prices, which were down 10.2% year-on-year (from -6.9% in July), offset in part by higher natural gas prices (up 5.8% y/y, from 3.2% in July). Food price growth also edged lower, to 3.6% in August (from 3.8% in July).
  • Surprising on the upside, air transportation prices were up 10.3% year-on-year, accelerating from 4.6% in July. Statistics Canada attributed the increase in part to the grounding of the Boeing 737 MAX aircraft.
  • As for core measures, CPI-median and CPI-trim were both unchanged at 2.1%, but the CPI-common measure reversed its July gain, edging lower to 1.8% (from 1.9%) in July. The measures averaged exactly 2.0% in the month.

Key Implications

  • Some volatility in the usual suspects aside, inflation is downright boring in Canada. This will leave the Bank of Canada looking to signs in other economic data, namely the balancing act between a resilient domestic economy and elevated external risks.
  • After a strong second quarter, the Canadian economy looks to slow to somewhere between 1% and 1.5% (annualized) in Q3. In and of itself, this may not be too concerning, but alongside still simmering trade disputes and signs that global growth continues to struggle, we would not be surprised to see the Bank take out some insurance in the form of a rate cut later this year, moving it closer to the majority of its advanced economy peers.


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