Canadian CPI and Core CPI both exceeded analyst expectations for the month of November, Statistics Canada reported on Friday December 19th.

Core CPI increased by 0.7% MoM while the Consumer Price Index posted a drop of 0.3% over the same period. Expectations had been for a 0.2% drop in the Core number and a much sharper 0.7% fall in all-items consumer prices.

Despite the better than expected inflationary figures, the annual rate of inflation for the CPI all-items fell to 2.0% from 2.6% in October. A figure of 1.6% had been predicted. However, the closely watched Core CPI increased to 2.4% from 1.7% in the previous month. A slight decrease to 1.5% had been expected.

Core consumer prices is the BOC’s preferred indicator when considering interest rates and the sharp increase may complicate the Bank’s aggressive rate easing cycle. However, the need to stimulate the economy in the face of global recession is likely to take priority over inflationary worries. The BOC’s Overnight Rate currently stands at 1.50% after a cut of 75 basis points on December 9th.

The US CPI fell by 1.7% in November while Core CPI came in flat, the Bureau of Labor Statistics reported today. Expectations had been for a 1.2% drop in headline CPI and a 0.1% increase in the Core number.

The decline in headline CPI is the largest MoM decline since records began in 1947 and it drags the YoY figure to just 1.1%, the smallest rate of consumer inflation since June 2002. The biggest monthly price reductions were seen in transportation and energy, down 9.8 and 17.0 percent respectively. Incidentally, both of these sectors sit firmly in negative territory for the last year. Energy is down by 13.3% and transportation by 8.9% in the 12 months ending November.

Core CPI now stands at 2.0% YoY, lower than the 2.1% that had been expected and below October’s 2.2% reading. It remains to be seen whether the Fed has already priced this reduction in consumer prices into its upcoming Federal Funds Rate announcement. At present time the consensus estimate is for a 0.50 percent cut by the Fed which will take the Federal Funds Rate down to just half of one percent.

**In the last few minutes it has been announced that The Fed has cut the Federal Funds Rate by more than expected to 0.25%, a 0.75% cut.**

Next week will be the last of the calendar year without any holiday interruptions. We have a moderately busy economic calendar set out for us and it would not be unusual to see trading volume diminish significantly as the week wears on.

In particular traders will be watching CPI releases from major economies, Retail Sales and Interest Rate announcements from The Fed and BOJ.

Next Week
The first high volatility event is scheduled in the overnight session at 23:50 on Sunday. The Japanese Tankan Manufacturing Index is expected to deteriorate for the fourth quarter to -23. Third quarter data had seen the index slip into negative territory at -3.

Monday will be a fairly quiet day with just the one significant event scheduled. The US Treasury will release treasury International Capital, or TIC Long-Term Transactions for October. Expectations are for a fall in the net value of foreign investment in US securities to $40.0B from the $66.2B seen September.

In the early hours of Tuesday morning, at 00:30, the RBA will release its Monetary Policy Meeting Minutes from the December 2nd meeting. High volatility is expected as traders look for an insight into the 1.00 percent cut in the Cash Rate.

At 09:30 we have the first of the week’s Consumer Price Index releases. Yearly CPI from the UK is expected to continue its moderation, likely down to 3.9% in November from 4.5% in October.

The US will also be releasing CPI data for November. The Fed prefers the Core CPI rate and this number is expected to show a 0.1% rise following the surprise -0.1% in October.

At the same time (13:30) Building Permits will also be released. Expectations are for a fall in the annualized number of new residential permits issued during November to 700K. The number for October came in at 708K, a MoM drop of 12 percent.

Possibly the most highly anticipated event of the week will take place at roughly 19:15 on Tuesday. The FOMC Interest Rate Statement is expected to reveal a 0.50 percent cut in the Federal Funds Rate to 0.50%. Interest rate futures are currently pricing this move in at 100% with a 75% chance of a deeper 0.75% cut.

Wednesday will be dominated by news from the UK. At 09:30 we are due to see Claimant Count Change and the December 4th BOE MPC Meeting Minutes. The monthly change in people claiming unemployment benefit for November probably increased to 45K from 36.5K a month earlier.

The MPC Meeting Minutes are expected to reveal a unanimous decision to cut rates by 1.00% on December 4th. However, traders will be very keen to see whether a larger cut was considered.

Moving forward to 11:00 we will see the CBI Distributive Trades Survey, or Realised Sales. The Index is expected to have improved slightly, up to -41 from -46 over the since the last release on November 28th.

In typical fashion, Thursday will be a busy day. We begin at 02:00 with the NBNZ Business Outlook Survey. The Index came in at -43 for the month of November.

High volatility is expected from the Eurozone with the German Ifo Business Climate Survey at 09:00. Consensus estimates are for a number of 84.0 after the 85.8 seen in November.

UK Retail Sales for November will be released at 09:30. Coming into the busy festive period MoM sales are expected to have fallen by 0.6% after a 0.1% decline in October.

Canadian Core Retail Sales should produce high volatility at 13:30. After an increase by 0.8% in September, sales are expected to have fallen by 1.0% in October.

At the same time US Initial Jobless Claims will also be released. Last weeks number of 573K was a 26-year high but claims are expected to moderate this time around, down to 558K.

On Friday morning we will see the second central bank monetary policy announcement of the week. The BOJ will release its Overnight Call Rate and is expected to remain on hold at 0.30%. High volatility will likely be reserved for the BOJ Press Conference later in the day as traders look for an insight into the decision.

Rounding off the week we have the Canadian Core CPI. Core CPI in November is expected to show a monthly decline of 0.2%, equalling the 0.2% drop seen in October.

The US Consumer Price Index fell by the highest amount since monthly records began in 1947, the Bureau of Labor Statistics reported today.

The seasonally adjusted CPI for All Urban Consumers (CPI-U) fell by 1.0% MoM in October, worse than the -0.8% economists had expected. This leaves the YoY number at 3.7%, down from the 4.9% seen in September. Incidentally the YoY growth of 3.7% in the smallest increase in a year.

Leading the index lower were Energy (-8.6% MoM) and Transportation (-5.5% MoM). The compound annual rate for the 3 months ending in October makes interesting reading for these two sectors. Transportation is down 26.2% while Energy has fallen a whopping 43.1%. On an annual basis these two components now stand at 4.2% and 11.5% respectively.

Elsewhere the Core Consumer Price Index came in worse than expected at -0.1%. Consensus estimates had been for a 0.1% MoM increase. The Core rate strips out the volatile Food and Energy sectors and is the Fed’s preferred inflationary indicator.

As you might expect, today’s number gave little encouragement for interest futures which continue to fully price in a 0.50% cut at the Fed’s December 16th meeting. This would take the Federal Funds Rate to 0.50% a full 4 percent lower than this time last year.

Canadian Core CPI and Headline CPI both beat analyst forecasts in September but overall inflation has begun to slow on a yearly basis, Statistics Canada reported today.

Headline Consumer Price Index came in at 0.1% MoM compared to the -0.1% that had been expected for September. This brought the yearly number to 3.4%, down from 3.5% in the previous month. August’s reading had been the highest in more than 5 years.

The slowing of prices was due in most part to Shelter (down 0.6% MoM), Clothing and Footwear (down 0.3% MoM) and Transportation (down 0.6% MoM) on a seasonally adjusted basis.

Core CPI, which strips out the most volatile items, increased by 0.4% MoM, better than the 0.3% that had been expected. On a yearly basis Core CPI now stands at 1.7%, unchanged from the previous month.

Will today’s data influence the BOC at their next interest rate meeting on December 9th? Probably not. The BOC’s primary concern is the dwindling economy and falling commodity prices. The Bank sees inflation falling below 1.0% over the coming year.

This week’s BOC Interest Rate Statement saw the Overnight rate cut by 0.25% to 2.25%. The USD CAD climbed to its highest level since May 2005 today, recording a high of 1.2841.

US Core CPI recorded its smallest MoM increase since February as it crept up by 0.1% in September, the Labor Department reported yesterday.

Core inflation, which strips out food and energy, had been expected to rise by 0.2% MoM. As it stands, third quarter Core CPI registered a 2.7% increase which leaves the un-adjusted 12 month rate at 2.5%.

Core CPI suffered from a 0.6% decline in transportation prices, and smaller declines of 0.1% in housing and apparel. Medical care, recreation and other goods and services registered 0.3, 0.2 and 0.2% gains respectively. The education and communication component was also up, by 0.1%.

Elsewhere the headline Consumer Price Index came in flat at 0.0% for the month of September. This is an improvement on August’s -0.1%. All items CPI still stands at an un-adjusted 4.9% YoY.

The energy index continued to decline in the month of September with a MoM decrease of 1.9%, better than August’s -3.1%. However the index is still up 23.1% on the year.

The cost of food continues to increase, up 0.6% MoM, 6.2% YoY. The food index was helped by food at home (up 0.6%); cereals and bakery products (up 1.1%) and meats, poultry, fish and eggs (up 1.0%).

Canadian Core CPI beat expectations for the month of August, Statistics Canada announced today.

Seasonally adjusted, the Core index increased 0.3% MoM in August, beating expectations of a 0.1% increase. This is also up from the 0.1% seen in July.

Today’s number hauls the yearly Core CPI up to 1.7%, better than the 1.6% expected and the 1.5% seen over the last four 12 month periods.

The headline Consumer Price Index, or raw number, came in slightly worse than expected on a MoM basis. A figure of -0.2% was reported in comparison to -0.1% expected. Overall, this brings the YoY number to 3.5%, up from 3.4% in July.

The Bank of Canada’s Core CPI excludes fruit, fruit preparations and nuts, vegetables and vegetable preparations, mortgage interest costs, natural gas, fuel oil and other fuels, gasoline, inner-city transportation and tobacco products and smokers’ supplies. This would account for the difference between headline and Core CPI.

Among the components weighing on the all-items CPI were transportation down 2.1% MoM and energy which registered -3.0% MoM. However, on a yearly basis transportation and energy are still up 5.8% and 20.2% respectively.

The Canadian Dollar’s reaction to the data was fairly tame, managing an intra-day low of 1.0303 in the USDCAD. However, traders are still very much preoccupied by the US Fed Wall Street bailout.

Core CPI increased 0.2% MoM seasonally adjusted, the Bureau of Labor Statistics reported today. This brings the un-adjusted 12-month number to 2.5%.

Core CPI is regarded by the Fed as the key indicator when setting the Federal Funds Rate, which is also set to be reported today. The 3-month annualized average has Core inflation at 3.4% which is above the Fed’s comfort zone. Although the recent crisis in the credit markets will probably prevent the Fed from increasing rates.

The headline CPI provided a slight shock today when it came in at -0.1% MoM. This represents the first decline in consumer inflation since October 2006 and brings the un-adjusted annual rate to 5.4%, below expectations of 5.5%.

This drop was due in part to the 3.1% fall in energy prices in August. However, energy is still up 27.2% over the last year. Transportation costs also weighed on the Index, down 1.5% MoM.

The increase in food costs continues; up 0.6% in August, 6.1% over the last 12 months.

Market reaction in the US Dollar is hard to judge due to other high volatility data, credit concerns and the forthcoming FOMC Interest Rate Statement. However, the US Dollar is trading slightly higher against the Euro and UK Pound on an intra-day basis.