Latest inflation data could point to 'mammoth' economic growth
Canadian inflation returned to positive territory in June on higher prices for gas, food and shelter.
The consumer price index climbed 0.7 per cent from the same month a year earlier, after two straight below-zero readings, Statistics Canada reported Wednesday from Ottawa. On a monthly basis, prices jumped 0.8 per cent. Increased gasoline costs, up 11 per cent from May after declining sharply, drove the gains.
Core inflation readings -- seen as a better measure of underlying price pressure -- also unexpectedly picked up, rising slightly to 1.7 per cent, from 1.6 per cent in May.
The numbers were stronger than most expected, but economists predict it will take a long time to get back to more normal levels of around two per cent, as sluggish demand limits the ability of companies to raise prices. A weaker outlook for inflation prompted the Bank of Canada this month to indicate it won’t raise borrowing costs for at least another two years.
“The bulk of core inflation’s adjustment to Q2’s economic contraction is likely still ahead of us and we still see core softening a bit further through end-2020,” Brett House, deputy chief economist at Bank of Nova Scotia, said in an email.
Economists in a Bloomberg survey predicted 0.2 per cent for annual inflation and 0.4 per cent for monthly.
The Canadian currency was little changed after the report, trading 0.2 per cent higher to $1.3437 against its U.S. counterpart at 9:13 a.m. Toronto time.
Electricity costs in Ontario, the country’s most-populous province, surged 17 per cent higher on the month, the most since 2003, the statistics agency reported.
Clothing prices rose one per cent in June, recovering some of the declines from a month earlier. Shelter costs were up 0.5 per cent in the month, while food climbed 0.3 per cent.
Food costs increased 2.7 per cent on the year, among the largest contributors to the annual CPI gain.