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 itā€™s really tricky to draw any conclusion from that alone. Even when you dig in the data, itā€™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 donā€™t know if itā€™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%. Thatā€™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.