CIBC Private Wealth
July 17, 2024
Money Financial literacy Economy Professionals Commentary In the news NewsMorning Market Brief
Inflation has fluctuated in Canada from the start of 2024 through spring and into summer, oscillating between 2.9% and 2.7%. In June, inflation returned to the three-year low of 2.7% reached in April, suggesting that the trend of lower inflation has the potential to be extended. The Bank of Canada’s (BoC) consumer survey results released on Monday revealed pessimistic sentiment. However, from a price-setting perspective, fewer companies were expecting to make substantial price increases.
- Canada’s annual inflation slowed to 2.7% in June, according to Statistics Canada. The result was below economists’ expectations of 2.9% and slowed from the 2.9% increase in May.
- The easing was mainly due to slower gasoline price increases. Gas prices rose by 5.6% in May on an annual basis. This increase fell to 0.4% in June. The Organization of the Petroleum Exporting Countries and Russia are continuing to phase out production cuts.
- Mortgage interest and shelter costs declined but remained the highest components of annual inflation. Mortgage holders are continuing to renew mortgages at much higher rates. Rental demand remained strong amid sluggish new supply. Shelter inflation fell from 6.4% in May to 6.2% in June.
- Housing starts slow in June. A report from Canada Mortgage and Housing Corporation showed that housing starts declined by 9% in June compared to May. Higher interest rates weighed on construction activity.
The recent data trend signals that the “final mile” to bring inflation closer to the 2% target will likely be more challenging given stickier price growth and inflation expectations. The report was generally in line with expectations and supports the case for another interest-rate cut. The BoC will decide whether to make consecutive interest-rate cuts when it meets on July 24.
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