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Loonie firms up after inflation comes in better than expected; M/M: -0.1% v -0.4% eyed

The Consumer Price Index (CPI) rose 2.0% on a year-over-year basis in December, following a 1.7% increase in November. Lower energy prices were offset by higher prices for various services, including air transportation, telephone services and travel tours. Excluding gasoline, the CPI rose 2.5% in December.

Chart 1 
The 12-month change in the Consumer Price Index (CPI) and the CPI excluding gasoline

Chart 1: The 12-month change in the Consumer Price Index (CPI) and the CPI excluding gasoline [1]

Component highlights

All eight major components rose year over year in December, with the shelter index (+2.2%) contributing most to the increase.

Chart 2 
Consumer prices increase in all major components

Chart 2: Consumer prices increase in all major components [2]

Consumer prices for services rose 3.5% on a year-over-year basis in December, following a 2.7% increase in November. A month-over-month increase in the air transportation index (+21.7%) reflected higher prices for travel during the holiday season. Consumers paid 6.1% more for telephone services compared with December 2017, when a series of industry-wide price promotions temporarily offered significantly lower prices. The travel tours index rose 6.6% year over year, following a 0.5% increase in November. Prices for passenger vehicle insurance premiums (+5.1%) continued to rise in December, extending a series of rate increases.

The price of energy products (-3.7%) continued to decline year over year in December. As crude oil prices continued to fall amid a global supply glut, consumers paid 8.6% less for gasoline in December compared with December 2017. Natural gas prices declined 4.1% year over year.

Regional highlights

Prices rose more on a year-over-year basis in seven provinces in December compared with the previous month. Prices for fuel oil and other fuels increased less on a year-over-year basis in December (+5.6%) than in November (+17.0%), reflecting lower crude oil prices. This deceleration in the fuel oil and other fuels index moderated growth in the all-items CPIin Atlantic Canada, where fuel oil is more commonly used for home heating.

Among the provinces, British Columbia (+3.0%) posted the largest year-over-year increase in the CPI in December. On a year-over-year basis, consumers in British Columbia paid more for gasoline in December (+1.7%) than in November (+0.8%) amid a supply disruption following a temporary pipeline closure. In all other provinces, gasoline prices declined year over year.

Consumer prices in Quebec rose 1.1% on a year-over-year basis, after a 0.9% increase in November. Among the provinces, prices for fresh vegetables (+20.7%) rose the most in Quebec.

Seasonally adjusted monthly Consumer Price Index

On a seasonally adjusted monthly basis, the CPI rose 0.2% in December, following a 0.1% decline in November. The food index (+0.6%) and the health and personal care index (+0.6%) posted the largest increases, while the transportation index (-0.1%) declined.

Statistics Canada [3]

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Ed Moya

Ed Moya [7]

Senior Market Analyst at OANDA
With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC, Fox Business, and Bloomberg. He is often quoted in leading print and online publications such as the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University. Follow Ed on Twitter @edjmoya ‏
Ed Moya