By Paul Vieira
OTTAWA -- Annual inflation in Canada rose in April at an identical pace from the previous month, while gauges of underlying, or core, price increases continued to exhibit softness -- likely reinforcing the Bank of Canada's view slack in the economy is weighing on inflationary pressure.
The all-items consumer-price index in April increased 1.6% from a year earlier, Statistics Canada said Friday, matching the price rise in March. Market expectations were for a 1.7% increase in April, according to economists at Royal Bank of Canada.
Gasoline prices and shelter costs were among the main contributors to the gain in annual headline inflation.
On a month-over-month basis, CPI in April rose 0.4%.
Two of the three gauges of core inflation also advanced at a slower pace compared with the previous month. All of them remain below the 2% mark -- in a range between 1.3% and 1.6%. The Bank of Canada sets rate policy to achieve and maintain 2% inflation.
Before the data release, TD Securities said the market would be eyeing any clues of continued softness in inflationary pressures. The readings on core inflation underscore that price pressures remain muted, and the Bank of Canada is expected to flag this when it releases its next rate-policy decision this coming Wednesday.
In its most-recent economic outlook, the Bank of Canada said economic slack, or unused production and labor capacity, remained at "material" levels -- underscored by data indicating average hourly wages for workers rose at a meager 0.7% in April from a year ago, or the slowest pace on record.
Bank of Canada expects annual inflation to return to the 2% level in the first half of 2018as spare capacity in the economy is gradually absorbed.
As for April's inflation report, six of the eight components Statistics Canada tracks recorded increases in prices.
Transportation costs rose 4.2% in April from a year ago, or slower than the 4.6% advance reported in the previous month. A 15.9% rise in the price of gasoline was a key contributor to the price gain.
Shelter costs also rose 2.2%. The homeowners' replacement cost -- or the price to maintain a residence at its current market value -- rose 3.9%.
Offsetting the price increases was a seventh-straight monthly decline in annual food prices. Food costs fell 1.1% in April, on declines in the cost of fresh fruit, down 6.2%; fresh vegetables, 5.9%; and meat, 2.1%.
Excluding food and energy, annual inflation rose 1.5% in April, the data agency said.
On a seasonally-adjusted basis, Canada's CPI rose 0.5% in April from the previous month.
Write to Paul Vieira at firstname.lastname@example.org
(END) Dow Jones Newswires
May 19, 2017 09:23 ET (13:23 GMT)
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