Canada | Inflation across Canada, where it’s hot and where it’s not

Headline CPI inflation in Canada was up 3.1% y/y in June, and we expect that a transient release of pent-up demand, supply shortages, and other pandemic-related factors will keep it well above the Bank of Canada’s 2% target in the near term. But there are important regional differences, with y/y inflation in June ranging from a low of 1.8% in Saskatchewan to a high of 5.3% in PEI.

What you will learn:

• Inflation is currently stronger in the east than the west. This partially reflects base effects, as consumer prices fell more sharply in Atlantic provinces at the onset of the pandemic. But eastern provinces also saw faster rises in transportation costs than western provinces over the past year.
• Excluding the more volatile food and energy components of CPI, provincial core inflation rates are lower, and the gap between provinces shrinks considerably.
• Two-year average inflation rates are also more comparable across provinces than the current pandemic-affected y/y headline print, and all provinces have a two-year inflation rate well within the Bank of Canada’s 1-3% target range.