Loonie Spikes As Canadian Consumer Prices Soar Most Since 2011

Canadian Consumer Prices soared 3.0% YoY in July – well above 2.5% expectations – and the highest inflation rate since 2011.

  • Inflation for services in July was 3.2%, the fastest pace since 2008.
  • Goods inflation was 2.8%.

Gasoline prices – up 0.8% in July and 25.4% from a year earlier – have also been a main contributor to the recent acceleration in prices. Excluding gasoline, inflation would be 2.2 percent in July.

Loonie Spikes As Canadian Consumer Prices Soar Most Since 2011

Monthly inflation was up 0.5 percent in July, versus analyst expectations for a 0.1 percent gain. On a seasonally adjusted basis, inflation was also up 0.5 percent, the biggest increase since January.

As Bloomberg notes, the faster-than-expected gains will test Bank of Canada Governor Stephen Poloz’s resolve to raise interest rates gradually over the next year to avoid a disruption to the economy. Price gains have now reached the upper end of the central bank’s 1 percent to 3 percent inflation range.

And that has prompted an immediate reaction in the loonie – instant buying…

Loonie Spikes As Canadian Consumer Prices Soar Most Since 2011

Finally, we note that there was little discernable effect of higher tariffs on consumer prices in July. Statistics Canada released a report on the estimated impacts of Canada’s tariffs on U.S. metal and consumer products and found there would only be a small overall increase — with no more than a decimal point increase to inflation over a limited period of time.

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