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Economy in Brief

Canada's Mixed Inflation Picture...
by Robert Brusca January 26, 2009

While headline inflation continues to lose steam in Canada as it does everywhere else in the world, Canada’s core rate is not on that same page. Over three-months core inflation has escalated to a pace of +2.6% from under 2% over previous key horizons (see table). By comparison, Canada’s CPIx, that excludes eight volatile categories shows inflation remains steady at a pace of 2.2% to 2.4%. This is not a question about inflation spiking but a question about what sort of momentum inflation now has in Canada and what pressures the bank of Canada faces in setting policy. .

The headline rate points clearly lower, with inflation down by 6.1% over three months (annualized) or up by just 1.2% Yr/Yr. Both of those are good results. The dropping and negative three-month and six-month results suggest that there may be more relief in inflation to be passed on to core and nonvolatile items in the months ahead. But for now Canada’s main inflation trends as depicted by the core or CPIx are best viewed as moderate and steady.

Canada's CPI and Core Inflation
  % MO/MO % saar
  Dec-08 Nov-08 Oct-08 3-MO 6-MO 12-MO Yr Ago
All Items -0.5% -0.3% -0.8% -6.1% -2.1% 1.2% 2.4%
 
All Items SA -0.4% -0.3% -0.6% -5.1% -1.6% 1.4% 2.4%
  CPI Core 0.1% 0.5% 0.0% 2.6% 1.5% 1.6% 1.8%
All items Excl 8 Volatile (CPIx) -0.1% 0.6% 0.0% 2.2% 2.2% 2.4% 1.5%
RPIxseas food -0.3% 0.6% 0.2% 2.2% 3.9% 4.1% 4.3%
Food & Non Alcohol Bev 0.3% 1.0% 0.6% 7.7% 8.7% 7.2% 1.7%
Shelter 0.0% 0.2% 0.1% 1.0% 1.8% 3.5% 4.0%
Clothing & Footwear -0.3% 0.4% -0.9% -3.0% -3.0% -2.5% 0.1%
Education 0.2% 0.2% 0.7% 4.6% 3.8% 3.1% 3.1%
Health & Personal Care 0.2% 0.5% 0.1% 3.0% 3.4% 2.0% 1.3%
Transportation -0.6% -0.7% -0.8% -8.1% -3.8% 0.1% 2.6%
A RED highlight indicates inflation accelerating from pace of previous horizon
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