For the week of August 20 – 24.
According to Statistics Canada, the Consumer Price Index in July had a strong gain of 3 percent year over year, beating expectations of 2.5 percent. The Headline CPI was also up 0.5 percent month over month versus estimates of 0.1 percent. Energy, travel services, and mortgage interest cost categories led the gains: gasoline prices were up 25.4 percent, airline tickets were up 28.2 percent in the past year, and interest rates for mortgages were 5.2 percent higher. Natural gas (-5.7 percent), telephone services (-5.1 percent), and traveller accommodation (-4.1 percent) led the price declines in July. The largest upside and downside contributor to monthly inflation was the recreation/education category and clothing/footwear category, respectively. Inflation expanded the fastest since 2011, which suggests Canada’s retaliatory tariffs had little impact on July CPI gains.
International investors bought $11.5 billion of Canadian securities in June, including a total of $11.7 of Canadian bonds. Meanwhile, Canadian investors had their largest investment in foreign securities since January 2018, adding $11.3 billion to their portfolios. As a result, international transactions in securities generated a net inflow of $256 million into the economy in June.
This week will be relatively quiet for Canada and US economic releases. We have wholesale trade sales and retail sales data coming out in the middle of the week. In the US, we have existing home sales, August 1st FOMC meeting minutes, Markit PMI data, and durable goods data to be released this week. The focus will be on central bank speak from Jackson Hole on Thursday and Fed Chair Powell’s keynote speech on monetary policy in a changing economy on Friday.
Both US and Canada government yields are trading flat to 1bps lower with S&P futures higher (+6.6). The Canadian dollar is currently trading 1.3071 against the US dollar, todays expected range is 1.3021 – 1.3121.