FINWIRES · TerminalLIVE
FINWIRES

Inflation Still Bites in Canada Despite Levels Close to Target, Says BMO

By

-- Ahead of Tuesday's fiscal update by the federal government and Wednesday's Bank of Canada decision, Canadians aren't feeling a whole lot better about inflation, said Bank of Montreal (BMO).

That's despite most headline and core rates settling around 2%, noted the bank.

Price levels matter, and high levels for gasoline, groceries and rent continue to impact household psychology, stated BMO. While other categories, such as child care, telecom and some consumer goods, have seen prices well contained, that only helps if you don't need to eat, get to work and live somewhere.

April's gasoline tax cut will show up in next month's consumer price index reading, after the conflict-driven spike, pointed out the bank. Gasoline prices can quickly influence inflation expectations because most people see them every day.

Canada's central bank knows this, added BMO.

Food prices have been better behaved, but the level of prices at the grocery store is still about 35% higher than pre-COVID, according to the bank. Cooler inflation doesn't mean a cheaper grocery bag.

There is a risk that higher input costs put a floor under food inflation in the year ahead.

Related Articles

Equities

Sector Update: Energy

Energy stocks were higher premarket Tuesday, with the State Street Energy Select Sector SPDR ETF (XLE) gaining 1.4%.The United States Oil Fund (USO) rose 3.3%, while the United States Natural Gas Fund (UNG) was 1% higher.Front-month US West Texas Intermediate crude oil was up 3.5% to $99.66 per barrel at the New York Mercantile Exchange. Global benchmark North Sea Brent crude oil rose 2.4% to $104.20 per barrel, and natural gas futures were 0.6% lower at $2.71 per 1 million British Thermal Units.BP (BP) stock was more than 2% higher before the opening bell after the company reported higher Q1 underlying replacement cost profit and sales.

$BP$UNG$USO$XLE
International

February Case-Shiller US Home Price Index Rebounds From January Drop

The Case-Shiller National Home Price index rose by 0.3% in February before seasonal adjustment following a 0.2% decrease in January.The 10-city index rose by 0.6% in the month, while the 20-city index was up 0.4%.National home prices were up 0.7% year-over-year, down from a 0.8% annual gain in January."More than half of major U.S. metropolitan markets posted year-over-year price declines in February, signaling that the housing slowdown has broadened well beyond its Sun Belt origins," said Nicholas Godec, Head of Fixed Income Tradables & Commodities at S&P Dow Jones Indices.National home prices were up 0.1% month-over-month in February after seasonal adjustment, with the 10-city measure up 0.1% but the 20-city measure 0.1% lower.The monthly home price index report from S&P CoreLogic Case-Shiller measures single-family home prices across the US with a two-month lag, broken down by city, with combined measures of the 10 and 20 largest cities and a national index. Case-Shiller reports percentage gains both from the previous month and a year earlier.Higher home prices are inflationary and are usually negative for bonds. The possible outcome for housing-related stocks is mixed, as higher prices suggest strong demand, but prices that are accelerating too fast can also deter potential buyers.

International

February FHFA Home-Price Index Holds Steady, Below Expectations

The FHFA's measure of home prices held steady in February after an upwardly revised 0.2% increase in the previous month, below the 0.1% gain expected in a survey compiled by Bloomberg as of 7:30 am ET.Prices were up 1.7% from a year earlier in February.Sale prices were up in four of the nine regions from the previous month, down in four other regions and unchanged in the East North Central region.The monthly home price index report from the Federal Housing Finance Agency measures single-family home prices across the US with a two-month lag, broken down by region. The FHFA reports percentage gains both from the previous month and a year earlier.Higher home prices are inflationary and a negative for bonds. The outcome for housing-related stocks is mixed, as higher prices suggest strong demand, but prices that are accelerating too fast can also deter potential buyers.