Preview: Due September 14 - Canada August CPI - Slightly firmer but with BoC core rates steady
We expect August Canadian CPI to edge higher to 3.1% yr/yr from 3.0%, extending the gain from June’s 2.8% but remaining below May’s 3.2%. We also expect a firmer ex food and energy pace at 2.1% from 1.9%, but we expect the Bank of Canada’s three core rates to remain at July’s pace.
On the month we expect CPI to rise by 0.3% seasonally adjusted with a 0.2% increase ex food and energy. Before seasonal adjustment however we expect both overall and ex food and energy CPI to be unchanged from July. Gasoline prices changed little in August after picking up in July but are likely to see a small rise after seasonal adjustment.
As the Canadian economy has regained momentum, the seasonally adjusted ex food and energy rate has seen three straight 0.3% gains after four straight months no higher than 0.1%. We do not think the economy is strong enough to sustain a 0.3% monthly trend in ex food and energy CPI and some slowing is likely in August, particularly in travel tours after a strong July. However, air fares, which were also firm in August, may remain so on energy pass-through. We do not expect a correction below trend in August ex food and energy data. We expect traveller accommodation to stabilize after strength in June and slippage in July.
We expect CPI ex food and energy to rise to 2.1% yr/yr from 1.9%. This would be the highest since January and a fourth straight acceleration from a recent low of 1.5% in April. However, this in not one of the Bank of Canada’s three core rates which we expect to remain stable, CPI-Common at 2.7%, CPI-Median at 2.0% and CPI-Trim at 1.9%. Before rounding we expect CPI-Median to fall to 1.95% but CPI common to be stable close to 1.90%. We expect the rise in overall CPI to be modest before rounding, to 3.09% from 3.03%.
