Canada Inflation Accelerated in July--Update
18 August 2017 - 11:56PM
Dow Jones News
By Paul Vieira
OTTAWA -- Canada's annual inflation rate picked up steam in July
after slowing to a near two-year low in the previous month, as it
cost more to purchase gasoline and maintain a residence.
Pricing pressure remains tepid in Canada, although July's report
marks a possible turning point because it was the first time in six
months annual inflation accelerated from the previous month.
The all-items consumer-price index in July rose 1.2% from a year
earlier, Statistics Canada said Friday, following a 1% advance in
the previous month. July's advance matched market expectations,
according to economists at Royal Bank of Canada.
On a month-over-month basis, CPI was unchanged in July.
Meanwhile, the average annual rate of core inflation, based on
three gauges used by the Bank of Canada, rose 1.5% in July, versus
a 1.4% gain in the previous month. The three measures of core
inflation -- which aim to get a better read on underlying price
pressures in the economy -- ranged from 1.3% to 1.7%. Two of those
measures accelerated from the previous month.
The Bank of Canada sets rate policy to achieve and maintain 2%
inflation.
Central banks in the developed world are grappling with
relatively weak inflation, even though growth has improved. Sagging
inflation in the U.S. has triggered concerns among some senior
Federal Reserve officials about the timing of the next increase in
interest rates. According to minutes from the Fed's July 25-26
meeting, some officials argued against another rate rise until data
suggested inflation was on a clearer path toward 2%.
"Canadian inflation may still be modest, but is showing some
signs of moving in the right direction vis-à-vis the Bank of
Canada's inflation target," said Brian DePratto, economist at TD
Bank. "One month is hardly a trend, but the modest increases in the
Bank of Canada's core measures provides some hope that inflation
may have turned a corner."
Canada's central bank raised its benchmark interest rate last
month by a quarter-percentage point, to 0.75%, on improving
economic prospects, and signaled other increases could be in the
offing. The economy is close to hitting full capacity, the central
bank said, and that should lead to upward pricing pressure as more
people find work and have more money to spend on goods and
services.
Before the CPI release, economists noted July tends to be a soft
month for inflation, with clothing and health and personal care
falling on average over the past five years. The data agency said
clothing and footwear prices fell 0.1% in July from a year ago,
while health and personal-care products rose 2.2% during the same
period.
The main elements pushing the annual inflation rate upward were
the price of gasoline, up 4.6%, and the homeowners' replacement
cost, up 4.1%. The latter represents the price a homeowner has to
pay to maintain a residence at its current market value.
Meanwhile, food costs rose 0.6%, although mostly due to higher
prices charged by restaurants. Offsetting the price rises was a
9.1% decline in the cost of electricity, mostly due to measures
from the government of Ontario, Canada's most populous province, to
reduce homeowners' utility bills.
Overall, the Canadian data agency said the cost of goods edged
upward 0.1% in July from a year ago, while prices for services --
such as haircuts, accounting and legal advice -- rose 2.1%.
On a seasonally adjusted basis, Canada's CPI rose 0.2% in July
from the previous month.
Write to Paul Vieira at paul.vieira@wsj.com
(END) Dow Jones Newswires
August 18, 2017 09:41 ET (13:41 GMT)
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