Canadian Core Consumer Price Index (CPI) MoM - Visual Analysis

Below you will find visual analysis for the Canadian Core CPI, MoM reading. It is widely believed that the Bank of Canada places more importance on the core reading than the raw CPI when considering interest rates. For this reason the Canadian Core CPI generates a high level of market volatility for the CAD (Canadian Dollar). The graph shows this month's figure along with the data from the previous 11 months. Full, historical data can be found in the table at the bottom of the page or by clicking here. You will also find up-to-date commentary including market expectations, traders' reaction to data and any implications on BOC interest rate decisions.

Canadian Core CPI MoM Reading

December 19 2008:	Canadian CPI Exceeds Expectations in November
November 21 2008:	Canadian CPI Eases Sharply in October
October 08 Update:	Post-release: Canadian CPI Beats Expectations but Begins to Slow
September 08 Update:	Post-release: Canadian Core CPI Beats Expectations in August
June 08 Update:	Post-release: As expected, Core CPI came in at 0.3% MoM which keeps the yearly rate unchanged at 1.5%. The fall in passenger vehicle prices has kept the Core rate from reacting to other upward pressures. Meanwhile the raw CPI figure exceeded analyst expectations and came in at 1.0% MoM, 2.2% YoY. The market had been expecting a 0.6% MoM climb, but this number failed to account for a 15% increase in gasoline prices over the year. YoY gasoline prices in April were up 11.6%. Pre-release: No surprises are expected for the June release of Canada’s Core CPI with a 0.3% MoM increase expected. This will keep the yearly rate unchanged at 1.5%. Economists have noted that the current drag on inflation is due to the discounting of auto prices. Traders will be looking for inflation in those goods that are purchased with recurring frequency to show signs of increasing consumer inflation over the months to come. Failing this there is scope for the BOC to reduce its interest rates below the current 3.00%.
May 08 Update:	Post-release: Canada’s Core CPI, used to measure the BOC’s inflation target rose 1.5% YoY, 0.3% MoM. The data came as a slight surprise to the market as consensus estimates had been for a 0.2% MoM increase. On closer inspection the core figure owes its better performance to a more gentle decrease in passenger vehicle prices. Pre-release: The markets are expecting Core CPI to increase by 0.2% MoM, identical to last months increase. This will give a second YoY reading of 1.3%. There is very little commentary concerning the core release with economists concentrating on the raw number. With gas prices climbing rapidly, some believe that a consensus estimate of 0.4% is rather modest. With increases in other components and seasonal factors a CPI reading of 0.6% is feasible.
April 08 Update:	Post-release: Core CPI failed to impress the market and fell short of economists’ expectations. The MoM rate was 0.2% which drags the YoY figure (the CPI reading that the BOC uses to set interest rates) down to 1.3%. This is well below the BOC target of 2.0%. Sluggish inflation data supports the dovish view on interest rates held by the Bank of Canada and is set to pave the way for further interest rate cuts. Pre-release: Canadian Core CPI is expected to read 0.3% higher in March, 1.4% YoY. Traders aren’t expecting the data to prevent a further interest rate cut from the BOC. It would seem that there is little or no risk from inflation as the BOC looks to cut rates and minimise the downside risk to Canadian economic growth. Like many other central banks the Bank of Canada’s inflation target is 2.0%. If the raw CPI comes in as expected at 0.5% MoM the YoY figure will drop to 1.5%. The fact is that seasonal rises in travel, clothing and other sectors aren’t as high as they were last year.
Mar 08 Update:	Post-release: Core CPI beats estimates and ends a 7 month losing streak as the core yearly rate ticks up to 1.5%, monthly up 0.5%. However this did little to stimulate the USDCAD with prices fixed firmly in a choppy range throughout the day. Traders will be focusing on the FOMC Interest Rate Statement later in the day to provide near term direction. Pre-release: Canadian Core CPI is expected to ease slightly in February as the strong CAD pressures retail prices and economic slowdown in the US creeps north. Although economists expect the core rate to appreciate by 0.3% in Feb from Jan’s 0.1% rise the increase won’t be as big as it was a year ago. This will bring the YoY figure down to 1.2%. So far this week the CAD is marginally lower against the USD, with the USDCAD currently sitting just below parity. Weakness in the CAD is surprising since the unexpected Fed Discount Rate cut and the JP Morgan acquisition of Bear Stearns sent US stocks sharply lower. Traders wait to see the full spillover effect into the Canadian economy but the CAD still has significant interest rate leeway with which to manage the situation.
Feb 08 Update:	Post-release: Canadian Core CPI MoM came out as expected at 0.1%. However, the raw CPI MoM figure disappointed at -0.2%. This brought the YoY figures from 2.4% and 1.5% to 2.2% and 1.4% for CPI and Core CPI respectively. Carney mentioned on Monday Feb 18th that "more persistent downward pressure on prices" is expected to materialise and this data would be seen to support his comments. The BOC is expected to cut Interest Rates in the near future in order to stimulate the economy. The post-release USDCAD price action was pretty much as expected. After an initial battle to push lower, the fundamentals prevailed pushing USDCAD to a daily high of 1.0162 before the US lunch session. This move was boosted by poor Wholesale Sales data (-2.9% vs -0.6% MoM expected). Pre-release: The Canadian Core CPI MoM will be released on Tuesday 19th Feb at 12:00 GMT. Market consensus is for a 0.1% reading after last months’ data came in at -0.3%. The BOC kept interest rates on hold in the January meeting so it will be interesting to see how a negative reading, should it arrive, will be digested by the new BOC Governor, Mark Carney. A better than expected figure is likely to ease the pressure on the CAD after Thursday 14th Feb’s trade surplus data which indicated the lowest surplus in some 9 years. The USDCAD closed the week in the 1.0060 zone and any daily break and close above 1.0126 could lead to a resumption of the bounce from the 0.9056 low. On the other hand, should we see a daily break and close below 0.9871 the short to medium term sentiment would become bearish.

Canadian Core CPI MoM
2008	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
Forecast	0.1%	0.3%	0.3%	0.2%	0.3%	0.2%	0.2%	0.1%	0.3%	0.0%	-0.2%	-0.3%
Actual	0.1%	0.5%	0.2%	0.3%	0.3%	0.1%	0.1%	0.3%	0.4%	-0.2%	0.7%	-0.4%
2007	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
Forecast	0.1%	0.2%	0.2%	0.1%	0.3%	0.1%	0.1%	0.1%	0.2%	0.1%	0.2%	-0.1%
Actual	0.1%	0.5%	0.3%	0.2%	0.3%	0.0%	0.1%	0.1%	0.4%	-0.2%	0.0%	-0.3%

* Please note that the date relates to the reporting period, not the release date. i.e. Data released in January is reporting CPI for the month of December, data released in February is the January number and so on. Therefore data will always appear to be one month ‘behind’.

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