The CPI data for August offered no surprises. Same as in July, 8 of 10 provinces recorded a lower CPI from a year ago, although 2 provinces traded places with Québec now recording a CPI increase of 0.4% and Manitoba recording a CPI decrease of 0.4%. Price declines eased slightly in Ontario (from 1.2% to 1.0%), in the Atlantic region (from 0.8% to 0.6%), and more significantly so in B.C. (from 1.6% to 1.1%). B.C. shelter cost drops eased from 4.1% to 3.4%, while those at the national level accelerated slightly, from 2.0% to 2.2%.
CPI readings differ more than usual between Ontario and Québec. Higher inflation in Québec can be traced to shelter costs, which were 1.9% lower Y/Y in Ontario but only 0.3% lower Y/Y in Québec. While one would think this in turns reflects the fact the Québec's housing market has been more resilient, the difference is actually attributable to utility costs (water, fuel & electricity). The Y/Y decline in these prices came four months later to Ontario, which is now catching up. Québec utility prices are also less volatile, being more regulated.
Much like core inflation, nationwide inflation for non-food/energy items eased slightly to 0.9% from 1.0% in July. This was well reflected across the country as inflation for these items eased in all provinces without exception. Non-food/energy inflation eased the most in Manitoba (-0.6 ppts) and the Atlantic region (-0.4 ppts), but was also 0.2 ppts lower in Central Canada.
The number of provinces with non-food/energy inflation readings above 2.0% dropped from 4 in July to 1 (P.E.I.) in August. As economic growth is expected to resume across the country in the second half of this year, all regional economies should be in a goldilocks situation as non-food/energy inflation remains tame - yet positive - well into next year. This should give the Bank of Canada the time needed to ensure the recovery is sustained before signaling, and eventually start implementing, tighter monetary policy.
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