Canada: Energy-driven resilience with limited core pass-through – RBC

Royal Bank of Canada (RBC) strategis Claire Fan and Abbey Xu expect Canada’s headline Consumer Price Index to remain at 3% year-over-year in September, supported by higher gasoline and furnace Oil prices. They see moderating food inflation and a dip in core CPI to 1.8%, with diffusion indices suggesting inflation pressures remain relatively narrow despite risks from industrial price broadening.

Headline steady, core seen easing

"We expect the headline Consumer Price Index in Canada to hold at 3% year-over-year in September for a third consecutive month."

"Excluding food and energy, core inflation is expected to have edged down to 1.8% in September from 2.1% in August."

"We continue to expect limited pass-through of energy inflation in core components outside of airfares, but will watch transportation categories closely since they are most at risk."

"Our CPI diffusion index— a gauge of the breadth of inflation pressures—hasn’t pointed to problematic broadening of scope so far."

"Still, the same diffusion index for industrial production prices has already pointed to a concerning spread, but there’s a long way to go before price increases get passed down production layers to reach consumer prices on store shelves."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)