In a possible signal of inflation easing, Statistics Canada reports that prices for manufactured products and inputs eased in April.
The national statistical agency reported that its Industrial Product Price Index fell by 0.2% month over month and was down by 3.5% from April 2022.
At the same time, its Raw Materials Price Index was down by 10.8% year over year, even as it rose 2.9% on a monthly basis.
The data represents a “potentially encouraging development” on the inflation front, according to a research note from National Bank Financial Inc.
“Putting a less-crude spin on an old plumbing adage: ‘inflation relief runs downhill.’ Or at least it has tended to in the past, subject to something of a lag,” it said, noting that the index readings reveal “major relief in upstream industrial and raw material product price inflation.”
To some extent, that relief reflects “enormous base effects” given that raw materials prices were surging a year ago amid the fallout from Russia’s invasion of Ukraine, which “saw many prices skyrocket.”
A year on, those input inflation measures have turned negative, “yet consumer price inflation remains stubbornly high,” National Bank noted, with the latest CPI data revealing robust headline inflation.
However, it takes time for easing input prices to filter through to the consumer level, the report said, adding that consumer inflation has historically lagged raw materials prices by six to 10 months.
“In other words, ‘wait for it,’” it said. “To us, we don’t see a need for additional [Bank of Canada] rate tightening in order to secure a legitimate inflation victory in Canada.”
Last week, after April inflation data surprised to the upside, Scotiabank said it expects the Bank of Canada to resume hiking interest rates as early as next month.