Canada: Weak inflation in March - NBF

According to Matthieu Arseneau, National Bank of Canada’s analysts, weakness seen in the March inflation report, is not the beginning of a new trend. 

Key Quotes:

“Canada’s consumer price index rose just 0.1% (m/m) in March in seasonally adjusted terms but due to the base effect the year-on-year inflation rate increased one tick to 2.3% (strongest level since June 2014, top chart). This was below consensus expectations calling for a 2.4% annual rate. 

“Headline inflation was slightly below expectations in March. The strong rise in gasoline prices was offset by weaknesses elsewhere. Even if CPI excluding food and energy was relatively strong at 0.2% (m/m) in March, our in-house replication of CPI-Trim (flat) and CPI-median (+0.1%), which are considered preferable by the central bank, were rather weak.”

“We note that CPI services gathered steam over the past two years a development consistent with the improvement on the labour market. The increases in minimum wages combined with a record low unemployment rate in services in Q1 (5 tenths below its 2007 through) suggest that further acceleration in CPI services is not impossible.”