Canada February CPI - Getting closer to target, but upside risks in March from energy
February Canadian CPI at 1.8% yr/yr from 2.3% has come in softer than expected with the assistance of the ending of a sales tax holiday a year ago, though BoC core rates point to underlying slowing. March data looks set to get a lift from energy prices, but the underlying picture is getting closer to target.
The sales tax holiday ran from mid-December in 2024 through mid-February in 2025, so there will be further dropping out effects in March, restraining the yr/yr rate even if likely to be offset by a bounce in gasoline prices. The data will please the Bank of Canada, and follows a weak employment report on Friday. However given current uncertainty over energy inflation we doubt this will prompt a Bank of Canada easing on Wednesday.
On the month in February CPI increased by 0.5% overall and ex food and energy, but these gains are seasonal. Seasonally adjusted the gains were modest at 0.1% overall and 0.2% ex food and energy, the latter in line with trend. Seasonally adjusted data shows transportation bouncing by 0.6% from a 0.5% decline in January, led by travel tours with air fares also firmer. However continued slippage in shelter (again by 0.1%) and household operations, furnishing and equipment, by 0.6% after a 0.4% decline in January. was seen.
The yr/yr rate ex food and energy fell to 2.0% from 2.4%, consistent with the Bank of Canada target but the BoC’s core rates remain a little stronger than 2.0%, if softening. CPI-Median fell to 2.3% from 2.5%, CPI-Trim to 2.3% from 2.4% and CPI-Common to 2.4% from 2.7%. Underlying trends appear to be heading towards target, even if headline CPI gets a near term lift from energy.
