This blog's content was taken from episode 274, "The 20 Largest Stocks are Pushing the S&P 500 higher".  

You can go check out the whole episode here:

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Our neighbors south of the border released their CPI figures and the headline number came below expectations at 4.9%. The month over month change was 0.4% which was higher than the previous month over month change.

Granted, the headline number was decent but it’s really tricky to draw any conclusion from that alone. Even when you dig in the data, it’s often pretty hard to draw any kind of conclusion.

Having said that, let's have a look at some of the important numbers.

  • Food was up 7.7% but it was flat month/month
  • Energy as a whole was down 5.1% but up 0.6% m/m
    • Gas was down 12.2% but up 3% m/m
  • Services which have been especially sticky were up 6.8%
  • Used vehicles were down 6.6% but up 4.4% m/m
  • New vehicles were up 5.4% but down 0.2% m/m 
    • I don’t know if it’s anecdotal to the new car dealerships I see frequently over in Ottawa but I have noticed that the lots are now full with new cars. Whereas last year at this time, inventory was still in short supply.
  • Shelter costs were up 8.1% and 0.4% m/m
  • Core CPI rose 5.5% and 0.4% m/m
    • Core CPI strips out food and energy prices

Now on to Canada:

  • Headline number was 4.4% and it was up 0.7% m/m which is pretty significant
    • March was 4.3% and was up 0.5% m/m
  • Food like we saw in the US was up pretty big at 8.3%
    • It was up 0.4% m/m again more than in March
  • Shelter was up 4.9% and 0.6% m/m
  • Energy as a whole was down 4.2% but up 3.4% m/m
    • Gas was down 7.7% but up 6.3% m/m
  • Service inflation still seems to be pretty sticky here as well with 4.8% and 0.5% m/m
  • The 3 core inflation measures are sitting at 5.7%, 4.2% and 4.2%. That’s slightly down from March but still pretty sticky.

There are two big takeaways for me here.

  1. Although I'm probably stating the obvious here, energy costs have a significant impact on the CPI. The biggest unknown for future inflation is that, if energy prices continue to decline, the CPI as a whole and food prices will follow suit. If the opposite occurs, inflation will resume.
  2. For this reason, I believe it is way too early to predict a return to 2-3%. I am aware that the BoC predicts that we will be at about 3% this summer, but I believe it is a very large leap of faith. Perhaps, but a lot of conditions must be met for that to occur.