Data released on Wednesday, showed the Consumer Price Index in Canada dropped 0.6% in March and the annual rate ticked down to 0.9%, lower than market consensus. According to Kyle Dahms, analyst at National Bank of Canada notes it was was the sharpest contraction in year-over-year price growth since September 2006 and the lowest print since May 2015.
Key Quotes:
“The Canadian headline inflation numbers in March were below consensus expectations on both a monthly and annual basis. On a seasonally adjusted basis, headline CPI declined 0.9% in March, the single largest monthly drop since seasonally adjusted prices have been tracked (1992).”
“In March, a decline in gasoline prices (-17.8%) and food (-0.1%) were the main culprits for the decline as CPI excluding food and energy posted a 0.1% increase.”
“The outlook for inflation in Canada is highly uncertain as gasoline prices have essentially held steady since the end of March. A depreciated currency (via higher imported inflation) and shuttering of certain supply chains could lead to higher prices although a wholesale drop in demand should offset the latter. At
this point in time, there appears to be an overall downward pressure on prices due to the COVID-19 shock.”
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