Canada's Inflation Stays Moderate

Canada's CPI rose by 0.1% in August as the core rose by 0.1% as well. Canada's inflation trends show moderate-to-low variability but not much sense of acceleration.

Inflation seems to be subdued with only a slight hint of acceleration for those who would be knit pickers. Right now, without any surge in spending here or on the horizon, it is hard to take any ‘uptick' in measured inflation too seriously.

We know that inflation is a statistic and like any statistic it is prone to some variation. It is probably not a good idea right now for monetary authorities to be too hair-triggered over every uptick in measured inflation given the weakness in spending and the sluggishness in global demand. What would spur inflation in a global economy like this one? Certainly with raw materials prices rising and Canada as a major raw materials producer there is some risk in that channel. But that effect appears to be absent in the current Canadian inflation data.

Canada and the US are economies closely linked by trade with similar cultures, language and proximity. Canadians and Americans mix in commerce freely. As result the two nations' trends tend to meld together to some extent. US headline inflation has been a touch more variable than Canada's but both are in the main well-behaved. US headline inflation has been about twice as variable as Canada's headline inflation. Both post very low variability metrics for core inflation. On balance the inflation picture appears to remain in good shape through August. While central banks will always look for the bogeyman, he is either well hidden in these reports or on vacation.

Canadian CPI Inflation Trends Canadian Inflation Compared to US Canada M/M Y/Y% CanCPI USCPI CanCore USCore Headline Core Aug-10 1.7% 1.2% 1.3% 1.0% 0.1% 0.1% Jul-10 1.9% 1.3% 1.3% 1.0% 0.6% 0.3% Jun-10 1.0% 1.1% 1.0% 1.0% -0.2% 0.1% May-10 1.4% 2.0% 1.0% 1.0% -0.2% 0.0% Apr-10 1.8% 2.2% 1.2% 1.0% 0.0% 0.3% Mar-10 1.6% 2.4% 0.9% 1.2% -0.1% -0.4% Feb-10 1.5% 2.2% 1.4% 1.3% 0.0% 0.3% Annualized rates of inflation 3-Mo 2.1% 1.8% 1.7% 1.3% -- -- 6-Mo 0.5% 0.7% 0.5% 1.1% -- -- 12-Mo 1.7% 1.3% 1.2% 1.0% -- -- Variability 1.1% 2.2% 0.3% 0.5% -- --