Canada July CPI +3.0% vs +2.5% y/y expected
Canadian inflation data for July 2018:
Core numbers y/y:
- Core common +1.9% vs 2.0% expected (and +1.9% prior)
- Core median +2.0% vs +2.0% prior
- Core trim +2.1% vs +2.0% prior
- Transportation index +8.1%
- Energy costs +14.2%
- Consumer prices for gasoline +25.4%
- Purchase of passenger vehicles +2.0% y/y vs +1.8% prior
- Services +3.2% y/y vs +2.2% prior
The story here is services. The energy stuff comes and goes but the services index jumped 1.1% m/m. Part of that is from travel-related stuff like tours and air transport, which could be fuel passing through but telephone services also rose (which could be a reversal of price promotions in May-June).
If you really wanted, you could probably explain this away as a series of one-off distortions and I'm somewhat sympathetic to that but the BOC is going to see a 3% number and rising services costs and err on the side of safety with a rate hike in Sept/Oct and potentially another one in December depending on how NAFTA negotiations go.