Canadian April Consumer Prices Rise 0.4%, Annual Rate Unchanged At 1.6%

Canadian consumer prices rose 0.4% in April compared with consensus expectations of a 0.5% gain for the month. The year-on-year rate was unchanged at 1.6% compared with an expected figure of 1.7%.

The core year-on-year rate declined to 1.1% from 1.3% and compared with an expected increase to 1.4% as prices were unchanged on the month.

Prices rose in six of the eight major categories on the month.

Food prices rose 0.3% on the month, although there was still a 1.1% decline in prices for the seventh successive month.

Transport costs rose 1.6% to give a 4.2% year-on-year increase as gasoline prices rose by close to 10.0% on the month.

Recreation costs rose 3.3% over the year with a sharp increase in travel tour costs.

Goods prices rose 0.6% on the month to give a 0.8% year-on-year increase while there was a 0.2% monthly rise in services-sector prices to give a 2.5% annual increase.

As far as other core measures are concerned, the CPI-common inflation rate was unchanged at 1.3% while the CPI-Median and COI-trim readings declined 0.1% to 1.6% and 1.3% respectively.

On inflation grounds alone, the Bank of Canada will not be looking to tighten monetary policy and any further dip inflation would renew pressure for a further easing. Higher services-sector inflation would, however, not suggest any loosening is justified.

The central bank will face further policy conflicts surrounding the housing sector. There will be pressure for the central bank to tighten policy in order to curb excessive prices increases and speculation within the sector.

The bank will, however, prefer to look for direct controls and macro-prudential measures to curb excessive lending and control risks in the housing sector. These dilemmas will be seen in next week’s policy statement.

The Canadian dollar lost ground following the data with USD/CAD rallying to the 1.3585 area from 1.3560 ahead of the release with a mixed retail sales report.

Tim is a contributing author to EconomicCalendar.com. He is an economist and has been involved in financial markets for over 20 years as an analyst. He specialises in global economic trends, macro policy and central banks. Extensive knowledge, experience and data mining is used to anticipate trends in equities, bonds and forex with a contrarian slant. He is a graduate of the University of York with a degree in Economics/Econometrics.