Canada: Current economic weakness will continue to put some downward pressure on prices – NFB

Data released on Wednesday in Canada showed that inflation came in below expectations. Matthieu Arseneau and Kyle Dahms, analysts at National Bank of Canada point out that despite the weak CPI reading, current economic conditions will continue to put downward pressure on prices. 

Key Quotes:

“Gasoline prices bounced back sharply (+17%) but weaknesses elsewhere pushed inflation downward.”

“Social distancing measures put in place by the government are deflationary both in the U.S. and Canada. CPI excluding food and energy (the metric closely watched in the U.S. for tracking underlying inflation), is down 1.2% on a three-month annualized basis this side of the border, the lowest since 2012.”

“Going forward, the current economic weakness will continue to put some downward pressure on prices. However, the shuttering of certain supply chains and rising operational costs due to social distancing could have the opposite effect. The prolonged period for CERB could also put some upside pressures on wages.”