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Core Inflation Ticks Up in August

Sep 21, 2018

The Conference Board of Canada’s Principal Economist Alicia Macdonald offers the following perspectives/insights on today's release of Consumer Price Index and Retail Trade data from Statistics Canada:


“Today’s data releases show an uptick in core inflation as well as continued strength in retail spending. With the economy forecast to continue to do well over the coming months, the Bank of Canada is expected to raise its policy rate in October.”
—Alicia Macdonald, Principal Economist, The Conference Board of Canada.


  • Growth in consumer prices slipped to 2.8 per cent in August, compared to a 3.0 per cent gain in July. Much of the deceleration was due to a smaller year-over-year increase in gasoline prices. Excluding gasoline, inflation in July and August was 2.2 per cent.
  • Looking at the major components of the index, most categories showed faster price growth last month with decelerating growth only observed in transportation and shelter costs.
  • While overall price growth slowed, all of the Bank of Canada’s core measures pushed higher in August and are now averaging 2.1 per cent. CPI-common hit 2.0 per cent growth for the first time since early 2012 and is up notably relative to this time last year when it was posting growth of just 1.5 per cent.
  • Sales data released this morning shows retail spending edged up 0.3 per cent in July. In inflation adjusted terms, retail sales fell 0.1 per cent.
  • Excluding motor vehicles, retail sales were much stronger, coming in at 0.9 per cent. Vehicle sales had a banner year in 2017 and were fully expected to slow this year, a major factor behind the projected slowdown in consumer spending in our latest Canadian Outlook.
  • While the economy continues to face some significant risks on the trade and investment front, the domestic economy remains strong and that strength is continuing to put upward pressure on core inflation. Upward inflation pressures along with solid economic growth will allow the Bank of Canada to continue gradually raise interest rates with its next increase expected in October.

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