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Inflation Monitor – June 2022

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Published on June 7, 2022 PDF

This report provides current analysis of recent consumer price inflation data.

Highlights

  • Total CPI inflation has exceeded the 3 per cent upper bound of the Bank of Canada’s control range since April 2021. With a rate of 6.8 per cent recorded in April 2022, CPI inflation now sits at its highest level since the introduction of inflation targeting in 1991.

  • The ultimate impetus for the resurgence of high inflation can traced back to the COVID-19 pandemic. More recently, the Russian invasion of Ukraine has compounded inflationary pressures.

  • Relative to pre-pandemic (February 2020) levels, the increase in the CPI in April 2022 (of 9.0 per cent) is only slightly higher than the increase in average wages (8.6 per cent) over the same period and has outpaced the increase in the maximum OAS payment (of 5.7 per cent), due to the time lag in the indexation of monthly payments.

  • As inflation started to recover and rise above average levels in 2021, the dispersion of price changes spiked and has remained elevated near historical highs, suggesting that inflationary pressures have been concentrated across consumer expenditure items.

  • Our finding of “concentrated” inflation is consistent with the view that supply or sector-specific issues are a key driver of high inflation. A finding of broader-based inflationary pressures would be more consistent with stronger aggregate demand as the primary driver of high inflation.


Communications

Quotes

  • Total CPI inflation has exceeded the upper limit of the Bank of Canada’s 1%-3% control range since April 2021. At 6.8% in April 2022, CPI inflation now sits at its highest level since the introduction of inflation targeting in 1991.

  • Strong consumer demand for goods running into constrained supply—along with surging energy and food prices—have contributed to boosting goods CPI inflation from -2.8% in April 2020 to 9.1% in April 2022.

  • Financial market participants largely do not see the current high-inflation environment as permanent, with CPI inflation returning to the 2% target over the medium to long term. To date, wage settlements data also show little indication of higher observed and expected inflation feeding into wage negotiations in the unionized sector.

  • This finding is consistent with the view that supply or sector-specific issues are a key driver of high inflation. A finding of broader-based inflationary pressures would be more consistent with stronger aggregate demand as the primary driver of high inflation.

Yves Giroux
Parliamentary Budget Officer

News Release

{"id":35,"created_at":"2022-06-02T07:43:01-04:00","updated_at":"2022-06-07T08:57:11-04:00","slug":"pbo-releases-inflation-monitor-june-2022-le-dpb-publie-le-rapport-surveillance-de-linflation-juin-2022","title_en":"PBO releases Inflation Monitor \u2013 June 2022","title_fr":"Le DPB publie le rapport Surveillance de l\u2019inflation \u2013 juin 2022","body_en":"The Parliamentary Budget Officer (PBO) today released Inflation Monitor \u2013 June 2022. This report provides current analysis of recent consumer price inflation data.\n\n\u201cTotal CPI inflation has exceeded the upper limit of the Bank of Canada\u2019s 1%-3% control range since April 2021. At 6.8% in April 2022, CPI inflation now sits at its highest level since the introduction of inflation targeting in 1991,\u201d says PBO Yves Giroux.\n\nThe report notes that the ultimate impetus for the resurgence of high inflation can traced back to the COVID-19 pandemic. More recently, the Russian invasion of Ukraine has compounded inflationary pressures.\n\u201cStrong consumer demand for goods running into constrained supply\u2014along with surging energy and food prices\u2014have contributed to boosting goods CPI inflation from -2.8% in April 2020 to 9.1% in April 2022,\u201d says Mr. Giroux.\n\nThe report finds that both consumers and businesses have revised their short-term inflation expectations upward. However, consumers\u2019 longer-term inflation expectations remain, for the time being, relatively stable and have trended lower during the pandemic period.\n\n\u201cFinancial market participants largely do not see the current high-inflation environment as permanent, with CPI inflation returning to the 2% target over the medium to long term. To date, wage settlements data also show little indication of higher observed and expected inflation feeding into wage negotiations in the unionized sector,\u201d adds Mr. Giroux.\n\nThe report also assesses the extent to which current high levels of inflation is broad based. Results indicate that the standard deviation of price changes across consumer expenditure items has remained elevated near historical highs, suggesting that inflationary pressures have been concentrated.\n\n\u201cThis finding is consistent with the view that supply or sector-specific issues are a key driver of high inflation. A finding of broader-based inflationary pressures would be more consistent with stronger aggregate demand as the primary driver of high inflation,\u201d says Mr. Giroux.","body_fr":"Le directeur parlementaire du budget (DPB) a publi\u00e9 aujourd\u2019hui le rapport Surveillance de l\u2019inflation \u2013 juin 2022. Ce rapport fournit une analyse actuelle des donn\u00e9es r\u00e9centes sur l\u2019inflation des prix \u00e0 la consommation.\n\n\u00ab L\u2019inflation de l\u2019IPC total a d\u00e9pass\u00e9 la limite sup\u00e9rieure de la fourchette de contr\u00f4le de 1 \u00e0 3 % de la Banque du Canada depuis avril 2021. Avec un taux de 6,8 % enregistr\u00e9 en avril 2022, l\u2019inflation de l\u2019IPC se situe maintenant \u00e0 son niveau le plus \u00e9lev\u00e9 depuis l\u2019introduction des cibles d\u2019inflation en 1991 \u00bb, affirme le DPB Yves Giroux.\n\nSelon le rapport, l\u2019impulsion finale de la r\u00e9surgence d\u2019une forte inflation peut \u00eatre attribu\u00e9e \u00e0 la pand\u00e9mie de COVID-19. Plus r\u00e9cemment, l\u2019invasion de l\u2019Ukraine par la Russie a aggrav\u00e9 les pressions inflationnistes.\n\n\u00ab La forte demande de biens de la part des consommateurs, qui se heurte \u00e0 une offre limit\u00e9e, ainsi que la flamb\u00e9e des prix de l\u2019\u00e9nergie et des denr\u00e9es alimentaires ont contribu\u00e9 \u00e0 faire passer l\u2019inflation de l\u2019IPC des biens de -2,8 % en avril 2020 \u00e0 9,1 % en avril 2022 \u00bb, souligne M. Giroux.\n\nLe rapport constate que tant les consommateurs que les entreprises ont revu \u00e0 la hausse leurs pr\u00e9visions d\u2019inflation \u00e0 court terme. Toutefois, les anticipations d\u2019inflation \u00e0 plus long terme des consommateurs restent, pour le moment, relativement stables et ont eu tendance \u00e0 baisser pendant la p\u00e9riode de pand\u00e9mie.\n\n\u00ab Les acteurs des march\u00e9s financiers ne consid\u00e8rent g\u00e9n\u00e9ralement pas que l\u2019environnement actuel de forte inflation est permanent; ils semblent toujours s\u2019attendre \u00e0 ce que l\u2019inflation de l\u2019IPC revienne \u00e0 l\u2019objectif de 2 % \u00e0 moyen et \u00e0 long terme. Les donn\u00e9es sur les r\u00e8glements salariaux montrent \u00e9galement que la hausse de l\u2019inflation observ\u00e9e et attendue n\u2019a, jusqu\u2019\u00e0 maintenant, gu\u00e8re influenc\u00e9 les n\u00e9gociations salariales dans le secteur syndiqu\u00e9 \u00bb, ajoute M. Giroux.\n\nLe rapport \u00e9value \u00e9galement la mesure dans laquelle la forte inflation actuelle est un ph\u00e9nom\u00e8ne g\u00e9n\u00e9ralis\u00e9. Les r\u00e9sultats indiquent que l\u2019\u00e9cart-type des variations de prix dans l\u2019ensemble des postes de d\u00e9penses de consommation est rest\u00e9 \u00e9lev\u00e9, proche des niveaux historiques, ce qui sugg\u00e8re que les pressions inflationnistes se sont concentr\u00e9es.\n\n\u00ab Ce r\u00e9sultat est conforme \u00e0 l\u2019opinion selon laquelle les probl\u00e8mes d\u2019approvisionnement ou sectoriels sont un facteur cl\u00e9 de la hausse de l\u2019inflation. La constatation de pressions inflationnistes \u00e9largies serait plus coh\u00e9rente avec une demande globale plus forte \u00bb, soutient M. Giroux.","release_date":"2022-06-07T09:00:00-04:00","is_published":"2022-06-07T08:57:11-04:00","internal_id":"COM-2223-035","permalinks":{"en":{"website":"https:\/\/www.pbo-dpb.ca\/en\/blog\/news-releases--communiques-de-presse\/pbo-releases-inflation-monitor-june-2022-le-dpb-publie-le-rapport-surveillance-de-linflation-juin-2022"},"fr":{"website":"https:\/\/www.pbo-dpb.ca\/fr\/blog\/news-releases--communiques-de-presse\/pbo-releases-inflation-monitor-june-2022-le-dpb-publie-le-rapport-surveillance-de-linflation-juin-2022"}},"pivot":{"publication_id":691,"news_release_id":35}}