Canada April CPI - Excluding energy inflation is falling
May Canadian CPI is clearly softer than expected, with the acceleration to 2.8% yr/yr from 2.5% due to a drop in the year ago base due to the abolition of the carbon tax. Current energy strength is being offset by weakness elsewhere. The Bank of Canada’s three core rates are all softer, with CPI-Trim actually reaching the 2.0% target.
CPI dipped in April 2025 to 1.7% from 2.2% as the carbon tax was abolished thus lowering the year ago base this month. This month did see gains in gasoline, with overall CPI up 0.4% on the month and 0.3% seasonally adjusted. However ex food and energy the data is very soft indeed, with the monthly gain only 0.1% and unchanged seasonally adjusted, the latter following a 0.1% decline in March and gains of only 0.1% in January and February. The weakness of the Canadian economy is increasingly putting downward pressure on inflation ex food and energy.
The seasonally adjusted breakdown shows strength in transport with a 1.8% rise on the month, led by gasoline. Autos also increased but travel tours and surprisingly air travel fell on the month. Clothing was also firm at 1.0% after a 0.4% March decline. The main negative was recreation, education and reading at -0.7%. Most other components were near flat seasonally adjusted. The yr/yr ex food and energy pace fell to 1.5% from 1.9% but is not one of the BoC’s three core rates.
The latter were also softer, CPI-Common at 2.5% from 2.6%, CPI-Median at 2.1% from 2.3%, and CPI-Trim at an on-target 2.0% from 2.2%. The data will leave the BoC comfortable that it can look though energy strength for now. The BoC has suggested that continued strength in energy could force tightening later in the year, but if core data remains as soft as in recent months, the BoC could remain on hold even with further strength in energy.
