Canadian CPI Preview: Forecasts from six major banks

Statistics Canada will release June Consumer Price Index (CPI) data on Wednesday, July 20 at 12:30, and forecasts by the economists from six major banks regarding the upcoming Canadian inflation data shed light on the awaited reading.

The June Canada inflation rate is expected to rise by +0.9% MoM from +1.4% MoM, clocking in at +8.3% YoY from +7.7% YoY. The Bank of Canada’s Core CPI, which excludes volatile food and energy prices, is estimated to rise 0.5% MoM, surging to 6.7% on yearly basis from the 6.1% previous.

NBF

“The food component likely remained very strong given severe supply constraints globally and the increase in this segment may have been compounded by higher gasoline prices. As a result, headline prices could have increased 0.6% MoM before adjustments for seasonality, allowing the year-on-year rate to rise three ticks to 8.0%. The annual rate of common CPI, meanwhile, could move up from 3.9% to 4.2%.”

CIBC

“CPI inflation should have peaked in June at 8.5% year-over-year. While recent pullbacks in the prices of oil and some agricultural commodities should provide relief in the future, it will not be apparent in the June CPI data. There was a further increase in gasoline prices in the month relative to May, and with the long lag between changes in agricultural prices and food prices in stores, we are still living through the impact of past increases. But recent developments mean that we should start to see some relief in the months ahead. Outside of food and energy, we expect CPI inflation to have grown slower on the month and to be roughly stable at an annual rate. Prices linked to the housing market, though still increasing, are not exerting as much upward pressure on CPI as they were just a few months ago. Overall, while we see June as the peak, inflation should stay close to 8% through the summer months.”

Wells Fargo

“We expect Canada’s CPI release to show persistently high inflation yet again. We expect Canada’s headline CPI to quicken to 7.9% year-over-year and forecast inflation to average 6.6% in 2022.”

Citibank

“Canada June CPI NSA MoM (Jun) – Citi: 0.7%, prior: 1.4%, CPI YoY – Citi: 8.2%, prior: 7.7%. As in May data, inflationary pressures should be broad-based. The three core inflation measures averaged a very strong 4.7% in May and should also remain high and likely even climb higher in June.”

TDS

“We look for CPI to firm to a new high of 8.3% in June with prices up 0.8% MoM. Food and energy will provide the main drivers, led by gasoline (+6.8%). Shelter will provide another source of strength as higher rates feed through to mortgage payments, while seasonal headwinds to clothing will provide a slight drag. Core inflation should firm by 0.2pp to 4.9% on average.”

RBC Economics

“We anticipate Canada’s inflation rate will edge up to 8.0% from a year ago. That would be the highest since 1982. This continued acceleration was likely largely driven by higher food and energy prices – both of which have been boosted by global pressures. Oil prices rose another 4.8% from May and consumer food prices have been surging in part due to higher commodity prices and acute supply chain disruptions. Roughly half of inflation recently has been driven by forces beyond our borders by our count. Inflation pressures are unlikely to ease sustainably to the BoC’s 1% to 3% target range until the economy, and labour markets, have cooled substantially.”