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Canadian Inflation (May) -June 17, 2020

Posted by Ron Neal on Thursday, June 18th, 2020 at 1:15am.

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Canadian Inflation (May) -June 17, 2020

Canadian inflation, as measured by the Consumer Price Index (CPI) fell by 0.4 percent in May year-over-year. This was the second consecutive month of decline in the CPI since the summer of 2009. Transportation prices were the main drag on inflation due to lower gas prices compared to the same time last year. Rents also declined for the second consecutive month, as physical distancing measures and high unemployment dampened demand, while the conversion of short-term rentals to long-term rentals increased supply. Mortgage interest costs also declined as banks lowered rates in tandem with falling bond yields and a lower Bank of Canada policy rate. In contrast, food prices continued to increase in May (3.1%) due to beef plant closures related to COVID-19 and higher import prices from a weaker Canadian dollar. Excluding gas prices, the CPI rose 0.7%, the smallest increase since January 2013. The Bank of Canada's three measures of trend inflation fell 0.1 percentage points, averaging 1.7 percent in May. 

Regionally, the CPI was negative in all provinces except for Alberta. In BC, CPI fell by 0.2 percent in May year-over-year, following a flat showing in the previous month. Gas prices (-31%) were the main contributor to the year-over-year decline, while food prices (3.9%) saw the largest increase among the components.

The new Bank of Canada governor, Tiff Macklem, noted yesterday that the CPI uses a fixed-weight basket of goods, but spending patterns have drastically changed due to COVID-19. To adjust for this change, the Bank and Statistics Canada are developing a CPI measure that will better reflect present-day spending patterns, which will likely show stronger downward pressure on prices than what is currently being reported.  

For more information, please contact:

Brendon Ogmundson
Chief Economist
604.742.2796
bogmundson@bcrea.bc.ca 
Kellie Fong
Economist
778.357.0831
kfong@bcrea.bc.ca 

BCREA is the professional association for more than 23,000 REALTORS® in BC, focusing on provincial issues that impact real estate. Working with the province’s 11 real estate boards, BCREA provides continuing professional education, advocacy, economic research, and standard forms to help REALTORS® provide value for their clients.

To demonstrate the profession's commitment to improving Quality of Life in BC communities, BCREA supports policies that help ensure economic vitality, provide housing opportunities, preserve the environment, protect property owners and build better communities with good schools and safe neighbourhoods.

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The Neal Estate Team

The Neal Estate Team is your #1 source for all of your Victoria BC real estate needs. Get in touch with us online or by phone at (250) 386-8181 to speak with a Victoria real estate buying or selling expert today. With decades of experience as a top selling Victoria REALTOR® and ranked in top 1% globally with over 4,000 transactions and $1 Billion SOLD, Ron Neal & The Neal Estate Team have the industry experience and market knowledge to help you make smart and informed buying or selling decisions. 


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