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Data released on Wednesday in Canada, showed the first annual decline since 2009 in the Consumer Price Index is April. According to Jocelyn Paquet, analysts at the National Bank of Canada, part of the current price weakness can be attributed to a sharp drop in the cost of energy – gasoline prices were down 39.3% on their level a year ago in April, the most on records going back to the 1950s.”

Key Quotes:

“Excluding energy, the CPI was still up a decent 1.6%. The core measures preferred by the Bank of Canada also seemed to be holding up relatively well since the imposition of strict lockdown measures across the country, the average of the three main gauges having slipped only three ticks since November (from 2.1% to 1.8%).”

“There was a steep decline in the price of clothing and footwear as retailers applied large discounts on online sales to avoid accumulating inventories of seasonal items. These atypical price behaviors make it difficult to predict the future course of inflation in Canada.”

“Low energy prices and a yawning output gap should put significant downward pressure on headline prices. But core indices should continue to be supported by a depreciated currency and the shuttering of certain supply chains, limiting the chances for a long stint into deflation.”