Canada: Inflation should accelerate as soon as next month – NFB
|February’s inflation numbers came in below expectations. The CPI rose 0.5% (consensus: 0.7%) monthly and the annual rate reached 1.1%, the highest in a year. According to National Bank of Canada’s analyst Kyle Dahms inflation should accelerate due to a positive base effect.
Key Quotes:
“February’s CPI report came in weaker than expected. While tepid, annual headline inflation is running at its fastest clip in the last year thanks to the strong rebound in gasoline prices over the past few months.”
“Core inflation measures (which you may recall were reverted last month after an adjustment caused a sizeable downward revision of 5 ticks) stayed the course during the month. The average of the three core measures preferred by the Bank of Canada remained at 1.7%.”
“In our view, inflation should accelerate as soon as next month due to a positive base effect (recall how gasoline prices had declined substantially in March of last year). That’s not all, generous government aid programs which should stay in place until vaccination can usher in a return to normal will continue to create artificial labour shortages. Commodity prices, including food (a heavyweight in the basket), have also risen strongly which could also affect the purchasing power of Canadian consumers in the months ahead.”
“Supply chain disruptions which currently are pushing inflation upwards could last for some time, offsetting other downward pressures. In that context we see headline inflation running around 2.6% in Q4 2021.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.