news-12102024-005411

Canadian inflation is expected to continue its decline below the Bank of Canada’s 2% target, with falling energy prices in September likely pushing it even lower than in August. Year-over-year headline CPI is predicted to ease to 1.8% in September from 2% in August, while the sub-index excluding food and energy components is expected to remain steady at 2.4%. The Bank of Canada’s preferred core inflation measures are also anticipated to decrease on a three-month annualized basis, indicating ongoing pressure on prices in line with a weak economic outlook.

In the housing market, activity in Canada’s largest markets continued to fluctuate in September, with a surge in new listings and inventory putting pressure on prices. The nationwide resale report is not expected to show a significant increase, with prices likely to remain below year-ago levels in September. This suggests a growing negative output gap and excess supply in the economy, leading to disinflationary pressures moving forward.

Governor Tiff Macklem expressed concerns about the economy’s performance, highlighting the need for stronger growth to prevent inflation from persistently dropping below the target range. The Bank of Canada may consider a bigger 50 basis point reduction in the overnight rate on Oct. 23 to address these challenges.

Looking ahead, data on core wholesale sales, manufacturing sales, and housing starts are expected to show declines in August. U.S. retail sales are likely to have accelerated in September, while industrial production may have remained flat. These indicators will provide further insights into the economic conditions in Canada and the United States.

Overall, the economic landscape remains uncertain, with inflationary pressures easing and growth concerns persisting. The need for proactive measures to support the economy and stabilize prices is becoming increasingly apparent. Investors and business persons should closely monitor upcoming data releases and policy decisions to navigate these challenging times effectively.