The Median Consumer Price Index (Median CPI) is a measure of inflation that tracks the change in the prices of a median consumer good over time. It provides a more representative view of inflation compared to the overall consumer price index, which can be affected by significant changes in the prices of certain goods and services.
Here are some key points about the average consumer price index (CPI) y/y
· The CPI measures the average change in commodity prices at the fiftieth percentile of the distribution of price changes. This means that it represents the price change of the “average” consumer item, not the average across all the elements.
· The year-on-year change (y/y) in the average consumer price index (CPI) compares the average consumer price index (CPI) for the current month with the average consumer price index (CPI) from the same month in the previous year. This provides a gauge of core inflation trend over a 12-month period.
· The average CPI is generally considered a more robust indicator of underlying inflation trends than the headline CPI, as it is less affected by volatile food and energy prices.
In the US, the Federal Reserve is closely monitoring the average consumer price index along with other inflation measures to help guide monetary policy decisions.
If inflation figures in Canada disappoint in the upside, it could trigger a round of bare coverage to limit at least USD/CAD gains. If sentiment improves (expressed by rising indices and gold falling), it could help the USD/CAD pair to fall.
As of August 2023, the latest available CPI figure y/y was 4.1%, indicating that the prices of medium consumer goods had increased by 4.1% over the previous 12-month period.
In March, Canadian CPI data focused amid expectations of interest rate cuts
With the prospects of a Fed cut this year now at risk, it is now up to the Bank of England, the European Central Bank, or the Bank of Canada to take the title as “the first to start easing.” This puts the Canadian CPI data into focus today for CAD traders.
Last week, the Bank of Canada (BOC) kept interest rates at 5% for the seventh consecutive meeting. Although the statement and press conference provided evidence that the central bank is close to easing.
The statement pointed to slower growth and weak labor market conditions, along with signs that “wage pressures are trending towards moderation.” Comments about inflation were also encouraging for the dove camp, where “easing price pressures has become more extensive across goods and services,” even if the CPI remains “very high” and upside risks remain. But what really stole the spotlight was the comment of Governor MaClem who said “yes, the June rate cut is within the range of possibilities” as “inflation has fallen.”
The story of inflation in Canada is considered one of the most compelling stories regarding doves. The core CPI is only 0.1 points above its median target of 2.1%, having fallen from a peak of 6.2% in July 2022. Apart from that, the Bank of Canada could put its finger on the cut button, but I suspect they would at least want to. See the average and mean CPI decline within the target range by 1-3%, which is 3.2% y/y and 3.2%y/y, respectively. This is not impossible with the annual rate slowing by -0.2 and -0.3 over the past two months.
Ultimately, the greater the drop from upper 3% range, the greater the odds of the Bank of Canada’s cut. But with Bank of Canada having time to present another inflation report,
Canadian CPI Analysis: Inflation slows in April 2024
The Consumer Price Index (CPI) rose 2.7% year-on-year in April, down from gains of 2.9% in March. The broad-based slowdown in the headline CPI was driven by prices for food, services and durable goods.
The slowdown in the CPI was mitigated by gasoline prices, which rose faster in April (+6.1%) compared to March (+4.5%). Excluding gasoline, the CPI for all items slowed to a 2.5% year-on-year increase, down from a gain of 2.8% in March.
On a monthly basis, the consumer price index rose 0.5% in April, mainly driven by gasoline prices. On a seasonally adjusted monthly basis, the CPI rose 0.2% in April.
The growth in food prices purchased from restaurants also slowed year-on-year, rising by 4.3% in April 2024 after a 5.1% increase in March. The index was unchanged month-on-month in April, however, the 0.8% monthly increase since April 2023 broke with the 12-month movement and pressured the index lower.
Statistics Canada uses the strongest available nutritional data for the CPI
Food is the second largest major component of the Consumer Price Index (CPI). Based on expenditures for 2022, Canadians directed 16.65% of their household budget to food purchases, with food purchased from stores accounting for 11.04% of household budgets. Reflecting this importance, food price data is subject to a rigorous review process. Statistics Canada works with price experts and other national statistical organizations to ensure that the methods used to calculate the CPI are in line with international standards and better Practices.
Grocery prices are mostly determined using scanner data, also known as point-of-sale data, which is received directly from grocery retailers. Data scanner is the highest quality price data available and the gold standard for price collection. The CPI measures price changes based on a fixed basket of goods and services
