CORY REDEKOP
Data for Business’ is an effort of the Langley Chamber, in partnership with the Canadian Chamber, to bring our members reports, stats, and analysis on economic and business data to help inform business and investment decisions. Read our latest update below:
LANGLEY – Canada’s headline inflation decelerated to 2.5% in July, in line with consensus (2.5%) on a year-over-year basis. This marks the slowest acceleration in inflation in 40 months, since March 2021. BC, however, bucked the national trend and had the second highest inflation in July, which represents an increase from 2.6% last month.
The Bank of Canada’s core measures grew at a slower pace, rising 2.6% year-over-year. Short-run core measures (3-month change annualized) increased 2.7%, which is on the stronger side in recent months, but remains within range. This continues a recent trend of lower rates of inflation.
The largest upwards contributors to inflation year-over-year were mortgage interest costs, rent, car insurance and property taxes. Highlighting the impact energy costs has on inflation, the price of energy was one item actually pushing inflation lower – excluding energy, July inflation would have been higher at 2.7%.
Goods inflation remains subdued, growing 0.3%, driven down by durable and semi-durable goods. This trend is likely to continue with monthly changes also showing negative growth. However, a lengthy rail shutdown due to the recent labour dispute could undue this and force prices higher. Services inflation made some progress in July, decelerating to 4.4% (previously 4.8%). This was led by travel tours and electricity costs decelerating, mainly due to base effects.
Bank of Canada and Interest Rates:
Markets are expecting rate cuts at each of the remaining meetings this year, including at the next one in September, and this data only provides further evidence for the Bank of Canada to make that move.
The Canadian economy isn’t as strong as the quarterly GDP data will have us believe. Recent weakness in manufacturing sales could be trouble for investment in the coming months. The July CPI release is a nod for lower rates, which is the medicine sorely needed in the coming months.
“Inflation seems like it will continue rolling down the hill. July’s deceleration is welcome news especially with some price relief on the services side of the economy. There’s more to go in terms of reaching price stability as Canadian feel the pinch and pull back on spending. But we think the Bank of Canada will continue their path of interest rate cuts and move again in September, prioritizing economic growth as inflation moderates. Interest rates remain too restrictive given soft underlying growth. The Bank’s necessary medicine for the economy is lower rates,” said Andrew DiCapua, Senior Economist of the Canadian Chamber of Commerce.
Cory Redekop is the CEO of the Langley Chamber
