HomeContributorsFundamental AnalysisCanadian Inflation Rebounds in June

Canadian Inflation Rebounds in June

  • Canadian consumer price inflation moved back into positive territory on a year-on-year basis in June, rising to +0.7% year-on-year (from -0.4% in May).
  • The turn positive in the year-on-year metric was due largely to goods categories, which went from -2.3% in May to -0.2% in June. Services prices were unchanged at 1.3% year-on-year – still weak relative to the longer run trend (above 2.0%).
  • Adjusting for seasonality, consumer prices rose a strong 1.0% month-on-month. Clothing and footwear led the major price categories higher in the month, rising 2.3% after three consecutive months of declines. Recreation, reading, and education also rebounded soundly, rising by 1.4% on the month.
  • Two of three of the Bank of Canada’s core inflation measures edged higher in the month. CPI-trim rose to 1.8% (from 1.6%) and CPI-common to 1.5% (from 1.4%). CPI-median was unchanged at 1.9%.

Key Implications

  • The economic disruption caused by COVID-19 dissipated considerably in June. The worst hit categories in terms of price declines – clothing and footwear, transportation, and recreation, saw particularly strong rebounds in the month, consistent with the rebound in spending that took shape as economies around the country continued to re-open.
  • Deflation is not an immediate risk to the Canadian economy, but the road ahead will be long and challenges to maintaining economic momentum will come from a slowing U.S. economy (as cases rise). Risks of health and economic setbacks will continue until a vaccine is widely available.
TD Bank Financial Group
TD Bank Financial Grouphttp://www.td.com/economics/
The information contained in this report has been prepared for the information of our customers by TD Bank Financial Group. The information has been drawn from sources believed to be reliable, but the accuracy or completeness of the information is not guaranteed, nor in providing it does TD Bank Financial Group assume any responsibility or liability.

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