Canadian CPI Shows Stability

Alan Penny

20 November 2019

3 min read

Canadian map and flag

  • Consumer Price Index as expected
  • Shows stability in Canadian economy
  • While slow, indicates signs of stabilization

During the trading session on Wednesday, the Canadian Consumer Price Index year-over-year was released. This is a measurement of inflation coming out of Canada, and while it was as expected, it suggests that the economy is still slightly underperforming when compared with what some people wanted for Canada.

The numbers

While Canada is well known for exporting crude oil, its economy is much more dynamic than that. One of the biggest helps for the Canadian economy is the fact that it is so highly levered and connected to the world’s largest economy and its southern neighbor, the United States. The numbers are parsed as a “backdoor” to the global economy, as a shrinking Canadian economy can be a sign of potential trouble in America.

The numbers that came out included the Consumer Price Index month-over-month, which was 0.3%, as expected.

Canada also features Common CPI, Median CPI, and Trimmed CPI, as opposed to just the CPI and Core CPI of many other countries. This breaks down the Consumer Price Index in a more specialized manner, giving a greater look into the inflation expectations of the Canadian economy. As it stands, all three of those numbers came out as anticipated.

Also released was Core CPI at 0.4%, which was as expected. It should be noted that Core CPI was 0.0% during the previous month, which shows that inflation has picked up a little. That being said, it is still very low, but recently the Bank of Canada suggested that rate cuts are not completely out of the question.

Going forward in Canada

The Canadian economy seems to be muddling through, much like the rest of the world. Canada is probably somewhat buffered due to the fact that the Canadians send well over 80% of their exports into the United States.

The US is still doing fairly well, especially in comparison to other economies around the world. Ultimately, while the Canadian dollar may suffer a bit, it should still outperform any other major currencies, just as the Toronto Stock Exchange should.

crude oil will have a massive influence on the currency and the stock market

As is usual, crude oil will have a massive influence on the currency and the stock market. At this point, it’s very possible that the market will give Canada a bit of a “pass” when it comes to comparing it with other economies. That’s especially when you look at the European Union, the United Kingdom, Australia, and surprisingly China.

With that being the case, the market looks highly likely to favor the United States over Canada. But that is quite often the case over the decades anyway.

The energy-related stocks on the TSX should continue to do fairly well into the future, if the crude oil markets can rally. Once the crude oil markets find a bit of a bounce for a longer-term move, investors will probably go looking towards Canada yet again.

Written By
Alan Penny

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