A couple of previews (in brief) for the CPI report due from Canada at 0830 Eastern time.
- one of two inflation reports that the Bank of Canada will have to consider before its next policy decision on October 25th
- estimated a headline rise of 0.3–0.4% m/m NSA that would lift the year-over-year rate from 3.3% in July to 4% in August
- Shifting base effects explain some of the expected rise in the year-over-year inflation rate to 3.6%
- Gas prices are expected to add to upside pressures
- What may add further upside could be potentially greater than usual gains in clothing and footwear prices as seasonal offerings change over and still firm contributions from service prices
- The main focus, however, will be upon the trimmed mean and weighted median measures of inflation that have been running far above the 2% headline target at the margin
- inflation jumps … from a combination of base effects and higher energy prices. Gasoline and other energy products will contribute ~0.2pp on the month or 0.1pp on a year-ago basis, with the latter improving from a 0.6pp drag in July.
- Setting aside the impact of higher energy prices, we expect the August report to show modest progress on the path to 2%. Seasonal headwinds should hold food prices to a minor increase,
- and we also look for another muted performance across core goods as households pare back discretionary spending. However, these improvements are unlikely to translate into softer core inflation pressures with CPI-trim/median expected to edge 0.05pp higher to 3.7% YoY (+0.1pp for CPI-trim). This would leave 3m rates of core inflation to persist in their recent (3.5-4.0%) range, although our forecast would see the ex. food/energy measure edge lower by 0.1pp to 3.3% YoY.