Inflation has been increasing everywhere, which increases the cost of living. Canada has been a bit behind in this regard, but inflation is catching up with the US. CPI annualized inflation increased to 8.1% last month according to Statistics Canada, which is the fastest increase in the cost of living in nearly four decades.

Petrol was the biggest single contributor to the overall rate going up, as pump prices were up by 54.6% compared to the same month a year ago. If petrol is removed out, the inflation rate would be at 6.5%. Another major factor for inflation have been food prices, which rose by 8.8% in the past year.

USD/CAD Daily Chart

The 50 SMA acting as support again

That’s the same pace of increase seen the previous month, but economist Tu Nguyen with HR consultancy RSM Canada says it’s too soon to conclude that food prices may have reached a peak. “Part of that can be attributed to the fact that Canada consumes more domestically grown food in the summer, which helps keep costs down,” she said, so we might see an increase as we head to winter.

 Canada CPI Inflation Report for June

• Canada June CPI YoY+8.1% +% vs +8.4% expected
• The largest increase since 1983
• May CPI was 7.7%
• CPI MoM for June +0.7% vs +0.9% expected
• Prior CPI MoM reading was +1.4%
• CPI excluding gasoline Yoy +6.5% vs +6.3% prior
• Gasoline prices +6.2% vs +12.0% in May
• Average hourly wages YoY +5.2% vs +3.9% prior
• Energy prices +38.8% vs +34.8% prior
• Shelter costs +7.1% vs +7.4% prior
• Services YoY +5.2% vs +5.2%

Core Inflation Measures:

• BOC core CPI YoY 6.2% vs 6.1% prior
• Median CPI 4.9% vs 4.9% prior
• Trimmed mean CPI  5.5% vs 5.4% prior
• Common CPI 4.6% vs 4.2% expected (3.9% prior)

Canadian PPI Data

• Producer prices MoM -1.1% vs +1.8% prior
• Producer prices YoY +14.3% vs +15.0% prior (revised to 15.7%)

The Canadian dollar is a bit lower on this report but it comes at the same time as a dip in oil prices. However, with gasoline prices down around 10% in July, a negative reading is brewing this month and that could lead the BOC to signal that it sees the finish line. Currently, the market is pricing in 3.61% at year-end from 2.50% now. That may be too aggressive if inflation slows.

USD/CAD Live Chart