Canadian headline inflation slows down in June on falling energy prices

Canadian headline inflation decelerated in June. On a year-on-year basis, the consumer price inflation eased to 2 percent from May’s 2.4 percent. Sequentially, seasonally adjusted prices were down 0.1 percent.

The fall in headline figure was mainly driven by declining energy prices. Energy prices dropped 4.1 percent year-on-year and 0.1 percent sequentially. Gasoline prices dropped 9.2 percent. Stripping energy, inflation came in at 2.6 percent. Food price inflation remained same at 3.5 percent in the month.

Core inflation eased in the month. CPI-median remained at 2.2 percent, CPI-trim eased to 2.1 percent. The CPI-common measure remained the same for the fifth consecutive month at 1.8 percent. On average, the three core measures came in at 2 percent.

For the quarter as a whole, inflation averaged 2.1 percent, in line with the Bank of Canada’s updated projection. Base effects imply that headline inflation will ease further in the coming months, but core measures are expected to stay relatively close to the 2 percent mark, said TD Economics in a research report.

Data continue to indicate towards a sound recovery in Canadian economic activity in the second quarter of 2019. Along with encouraging data on wage growth and recovering housing activity, there is little obvious to point to in terms of domestic concerns.

“Still, risk management remains the name of the game. With trade tensions elevated and global central banks easing policy in response, the Bank of Canada is likely to remain on the sidelines and especially attentive to signs that global weakness is seeping into Canada”, added TD Economics.

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