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Inflation Monitor for February 22

Research & Strategy February 22, 2022
Research & Strategy February 22, 2022

 

Summary

  • Commodity prices test multi-year highs amid the Russia-Ukraine escalation. Canadian inflation hit a three-decade high on broadening price pressures.

Key Developments

  • Commodities from aluminum and nickel to wheat and corn forged higher on the Russia-Ukraine crisis. Meantime, lumber prices regained some vigor on surging demand and oil stayed elevated.

  • Canadian consumer prices jumped 5.1% y/y in January marking the fastest pace since 1991. Price pressures were broad-based. Food added to the sting as groceries surged 6.5% y/y, the fastest since 2009. Shelter costs also jumped above the 6%-mark for the first time since the housing bubble in the early 90s.

  • An extremely tight Canadian housing market pushed January home prices even higher. MLS home prices surged 28% y/y, the fastest in over 20 years of data. And, new home prices climbed 11.8% y/y, not too far from the annual growth rates seen in 2006.

  • U.S. inflation fired on all cylinders. Producer prices climbed 9.7% y/y in January. Import prices jumped 10.8% despite a strengthening U.S. dollar. The median price of detached homes climbed 15.9% from a year ago. Aside from the buying frenzy that pushed prices up last spring and summer, this was one of the largest annual home price gains in 54 years of data. Meantime, S&P Case-Shiller's national home prices rose 18.8% y/y in December.

  • Inflation in the U.K. hit a 30-year high of 5.5%, Finland was at 4.4%, Sweden at about 4%, and France at 3.3% (just off a 13½-year high). Spain and Greece were confirmed at 6%. And, South Korea import prices surged to a near-record 30.1% y/y.

  • On the flip side, China’s CPI remained muted in January, up 0.9% y/y, the slowest pace in nine months as pork costs plunged. Excluding food, CPI was up 2.0% (under the 3% target). Inflationary pressures have remained subdued with the government managing the availability of supplies. Japan's CPI slowed to +0.5% y/y. Excluding food and energy, prices fell 1.1%, marking the biggest drop since 2011. Special factors are at play, but the biggest one is that consumers have gotten used to very low inflation, with most businesses unable to pass on higher costs.

 

FULL REPORT

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