Canadian headline inflation slows down slightly in August on lower gasoline prices

Canadian headline inflation decelerated in August. On a year-on-year basis, the consumer price inflation eased to 1.9 percent from July’s 2 percent, coming in line with the consensus expectations. Sequentially, consumer prices came in flat after rising a strong 0.4 percent in July.

Slower price growth was mainly driven by lower gasoline prices, which fell 10.2 percent year-on-year in August, countered partially by higher natural gas prices. Food price growth also dropped in the month, falling 3.6 percent from July’s 3.8 percent. Meanwhile, air transportation prices rose 10.3 percent year-on-year, as compared with July’s 4.6 percent.

The CPI-median and CPI-trim core measures remained the same at 2.1 percent; however, the CPI-common measures reversed its July gain, dropping to 1.8 percent in July. The measures averaged 2 percent in the month.

“After a strong second quarter, the Canadian economy looks to slow to somewhere between 1 percent and 1.5 percent (annualized) in Q3. In and of itself, this may not be too concerning, but alongside still simmering trade disputes and signs that global growth continues to struggle, we would not be surprised to see the Bank take out some insurance in the form of a rate cut later this year, moving it closer to the majority of its advanced economy peers”, said TD Economics.