Canadian CPI Preview: Forecasts from five major banks, inflation likely to ease again

Statistics Canada will release April Consumer Price Index (CPI) data on Tuesday, May 16 at 12:30 and as we get closer to the release time, here are the forecasts by the economists and researchers of five major banks regarding the upcoming Canadian inflation data.

Headline CPI is seen declining to 4.1% year-on-year vs. the prior release of 4.3%, while core CPI is seen softening to 3.9%.

TDS

“We look for CPI to dip 0.1pp to 4.2% in April as prices rise by 0.5% MoM. Gasoline will provide a key driver for the latter, alongside a broad increase for core goods and steady pressure from services. Core inflation measures should also move 0.2pp lower to 4.3% on average, masking a modest pickup on a MoM (or 3m SAAR) basis which could raise some alarms at the BoC.”

RBC Economics

“Canada’s April inflation reading likely ticked lower again. We expect to a 4.1% YoY rate from 4.3% in March. A 6% increase in gasoline prices from March suggests energy prices fell slightly. But grocery price growth has been slowing and we expect broader gradual softening in underlying inflation pressures to have continued. The BoC is presently expected to sit on the sidelines for the remainder of 2023. Additional evidence of weaker price growth coupled with softening demand will affirm their present policy stance.”

NBF

“A rebound in gasoline prices could have been only partially offset by further moderation in the food segment and resulted in a 0.4% increase of the consumer price index in April (before seasonal adjustment). If we’re right, the 12-month rate of inflation should come down from 4.3% to a two-and-a-half-year low of 4.1%. The core measures preferred by the BoC should decrease as well; we see both the CPI-Trim (4.0% vs. 4.4%) and the CPI-Median (4.2% vs. 4.6%) declining four ticks on an annual basis.”

CIBC

“Core inflation (excluding food and energy) is expected to have advanced at a 0.2% seasonally adjusted pace, as some of the large increases in travel seen during the prior month reverse. While house prices have started to creep up again, the mortgage interest component of CPI is starting to show smaller monthly increases, meaning that the overall pace of shelter inflation is not expected to re-accelerate.”

Citi

“We expect a solid 0.5% MoM increase in headline CPI in April, with the YoY reading moderating to 4.1% from 4.3% in March. Headline CPI should fall further in the near term, likely close to 3% in the next couple of months, due largely to substantial base effects from now-lower energy prices. Details of CPI reports will be most important, particularly the monthly path of core CPI measures and strength of services prices. Core measures remain stable at around 3.5%, a slowing that has occurred alongside easing in shelter prices. However, continued strength in services prices and core inflation still around 3.5% in April may be enough cumulative evidence that underlying inflation is still too strong since the BoC signaled a pause in January. The BoC has consistently communicated that stably above-target inflation would require more hikes. Only a backdrop of much softer services prices and core inflation moderating faster than it has in recent months would suggest that the BoC is less likely to continue to raise rates further.”