Canadian Inflation: Staying Close to Home

Canadian consumer prices rose 0.3% in March (or flat in seasonally adjusted terms), much lower than expected and cutting the annual inflation rate 3 ticks to 2.3%. The pullback in headline inflation is a pleasant surprise, given that this month represents the full removal of the GST holiday (which was still in effect for half of February). The big story here was a steep drop in travel tour prices and a meaty drop in airfares from year-ago levels, as Canadians pulled back abruptly on U.S. travel in prime time. And while the overall result was helped by a modest 1.8% drop in gasoline prices, those pump costs are poised to plummet by more than 10% m/m in April, likely carving the headline inflation rate well below 2% a month from now.

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