The CPI in Canada picked up modestly in April, rising 0.3% after three successive weak months. A sharp rise in energy seems to be the main culprit. Food prices have been flat to down all year long and the core rate, as seen in the table, has little upward force.

While the surge in energy prices certainly pushed up Canadian inflation in April, the main aspect this move seems to highlight is the volatility in the energy sector. Wide swings, both up and down, have characterized these prices over the last several years. When these prices rise sharply, they often experience outright declines soon after. The current episode is characterized by especially large up and down moves in electricity and natural gas. Gasoline prices are volatile too, but not much more than they have been historically.

Other prices are moving in a narrow range. So far this year, food prices are down, and shelter costs are up slightly. Household operation had its first monthly increase in April since December. Clothing prices are falling sharply. Recreation, reading and cultural activities have flat prices of late. Thus, one possible implication of the volatility in the energy sector is that there is less time for higher energy costs to work their way into the pricing structure of other industries. To the extent this immunity holds, it can limit the reach of those very basic prices, reducing the probability that higher energy costs produce permanently higher core inflation.