As widely expected, most inflation measures in Canada’s July CPI report reflected a slowdown in price pressures during the month.
While the headline CPI showed a 0.4% monthly rebound as expected, the annual reading fell from a 2.7% year-on-year increase in June to just 2.5% in July — its lowest reading since March 2021.
The core CPI reflected a 0.3% monthly increase, but annual core inflation fell from 1.9% to 1.7% instead of remaining flat. Other inflation-related measures such as the deflator CPI and average CPI also pointed to weaker year-over-year gains:
- Core Monthly CPI: 0.4% (0.4% expected, -0.1% prior)
- Core CPI Annual: 2.5% (2.7% expected, 2.7% prior)
- Core CPI MoM: 0.3% (0.1% expected, -0.1% previously)
- Core CPI YoY: 1.7% (1.9% expected, 1.7% prior)
- CPI down: 2.7% YoY (2.8% expected, down from 2.9% to 2.8%)
- Average CPI: 2.4% YoY (2.5% expected, 2.6% previously)
- General CPI: 2.2% YoY (2.2% expected, 2.2% previous)
Link to Canada’s Consumer Price Index Report (July 2024)
The report’s components revealed that the decline in overall inflation was broad-based, led by lower prices for tours, passenger cars, and electricity.
Market Reactions
Canadian Dollar vs Major Currencies: 5 minutes
Canadian Dollar Overlay Against Major Currencies Chart by TradingView
The Canadian dollar, which had been trading mostly sideways ahead of the Canadian CPI release, turned lower after seeing last year’s readings in the red.
The Canadian dollar continued to fall, especially against the lower-yielding yen and franc, as risk flows took hold, before stabilizing against its other peers about two hours after the report. The Canadian dollar remained volatile against other commodity currencies for the rest of the session, but managed to hold steady against the greenback.