Canadian CPI Preview: Forecasts from five major banks, core inflation to stay high

Statistics Canada will release August Consumer Price Index (CPI) data on Tuesday, September 20 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.  

The August Canada inflation rate is expected to fall to -0.1% from 0.1% MoM, clocking in at 7.3% from 7.6% YoY. The Bank of Canada's Core CPI, which excludes volatile food and energy prices, is estimated to decline to 0.3% MoM, sitting at 6.0% on yearly basis from the 6.1% previous.

RBC Economics

“We look for a dip from 7.6% in July to 7.2% in August – down from a recent peak of 8.1% in June. But beneath the weakening headline number, some prices are still powering up. Food price growth likely accelerated again. And we look for the rate excluding food and energy products to hold steady at 5.5%. Alongside this, the Bank of Canada’s preferred core inflation measures also likely remained elevated. We continue to believe the headline inflation rate has hit its peak as lower commodity prices and easing global supply chain pressures lower growth in goods prices. But we don’t expect ‘core’ measures to peak until later this year when higher interest rates start to cut deeply into consumer demand.”

NBF

“If our forecasts materialize, annual inflation should have continued its downward trend to 7.0% last month (compared to 7.6% in July) due to a 0.4% MoM decline (NSA). It turns out that gasoline plunged another 9% in August, following a similar pullback in July. A negative contribution is also expected from air transportation, as a reversal is very likely after the staggering 26% increase the previous month. While price increases could still be sustained in the services sector, we expect goods prices to moderate due to lower transportation prices and easing supply chain issues. All in all, that should lead to a moderation in both CPI-Median (4.9% from 5.0%) and CPI-Trim (5.3% from 5.4%).”

TDS

“We look for a modest dip in headline CPI to 7.3% YoY as another large drop in energy drives a 0.1% MoM decline. Food, shelter, and travel-related components will provide a key source of strength to offset the drag from gasoline. We also look for core CPI measures to push higher, driven in large part by revisions to CPI-common, which will give a hawkish tinge to the report.”

CIBC

“The continued downtrend in gasoline prices will be key behind a 0.1% decline in CPI during August and a deceleration in the annual rate of inflation to 7.2%. However, the earlier US figure suggests that food and other goods prices, including autos, may have remained strong positive contributors to inflation, despite reductions in shipping costs and agricultural commodity prices suggesting that there may be some good news later in the year on these fronts. One difference between the US and Canadian figures that should bring a larger deceleration north of the border is the treatment of owned accommodation. Homeowners’ rebuilding costs should be broadly flat month-over-month, while the other owned accommodation category (largely real estate agents’ fees) should be a big negative again as it picks up the ongoing correction in house prices.”

Citibank

“Canada CPI NSA MoM (Aug) Citi: -0.1%, prior: 0.1%; CPI YoY – Citi: 7.3%, prior: 7.6%. Canada’s headline CPI should decline 0.1% MoM with shelter prices expected to continue to slow with a further moderation in home prices. However, market attention is likely to be more focused on core CPI and inflation expectations as key inputs into BoC’s assessment of how high rates need to rise. While there are some signs that core CPI could be moderating slightly by year-end, we see risks skewed towards core CPI remaining at an uncomfortably high level that keeps BoC raising rates for longer and/or by large amounts.”